Predicting mobile money transaction fraud using machine learning algorithms

Abstract

AbstractThe ease with which mobile money is used to facilitate cross‐border payments presents a global threat to law enforcement in the fight against money laundering and terrorist financing. This paper aims to utilize machine learning classifiers to predict transactions flagged as a fraud in mobile money transfers. The data for this study were obtained from real‐time transactions that simulate a well‐known mobile transfer fraud scheme. Logistic regression is used as the baseline model and is compared with ensemble and gradient descent models. The results indicate that the logistic regression model still showed reasonable performance while not performing as well as the other models. Among all the measures, the random forest classifier exhibited outstanding performance. The amount of money transferred emerged as the top feature for predicting money laundering transactions in mobile money transfers. These findings suggest that further research is needed to enhance the logistic regression model, and the random forest classifier should be explored as a potential tool for law enforcement and financial institutions to detect money laundering activities in mobile money transfers.