Introducing a new method for the fusion of fraud evidence in banking transactions with regards to uncertainty

Abstract

Detection of fraudulent transactions is a vital factor for financial institutions, and finding more effective and accurate methods is of tremendous importance. The use of supervised data mining techniques is not feasible in many cases due to the lack of access to labeled data. Fraud detection is a complex task, and unsupervised methods like clustering and outlier detection techniques employed alone do not yield satisfactory results. Another issue is epistemic uncertainty due to the absence of sufficient information on the behavioral aspects of different customers, which also leads to poorer results for fraud detection and makes the fraud detection system inapplicable in real world environment. In this paper, using multi criteria decision method, intuitionistic fuzzy set, and evidential reasoning, a new method for detection of fraud was introduced, which infuses several behavioral evidence of a transaction concerning the effect of uncertainty for them. Transactional behavior was modeled by considering the trends of different main and aggregated variables at different periods and the extent of deviation of the new arrived transaction from each of these trends were considered as behavioral evidence. The final belief, which is the result of the combination of much evidence using the proposed method, will determine the originality of a newly arrived transaction. Finally, using a real world dataset, the results of the new method were compared with the results of Dempster–Shafer method in terms of the number of frauds discovered and the number of erroneous alerts they issued. The findings showed that the method introduced in this study has higher accuracy and lower false alarms compared to Dempster–Shafer method while the computational complexity of this method makes its implementation time longer.