Graph convolution network for fraud detection in bitcoin transactions

Anti-money laundering has been an issue in our society from the beginning of time. It simply refers to certain regulations and laws set by the government to uncover illegal money, which is passed as legal income. Now, with the emergence of cryptocurrency, it ensures pseudonymity for users. Cryptocurrency is a type of currency that is not authorized by the government and does not exist physically but only on paper. This provides a better platform for criminals for their illicit transactions. New algorithms have been proposed to detect illicit transactions. Machine learning and deep learning algorithms give us hope in identifying these anomalies in transactions. We have selected the Elliptic Bitcoin Dataset. This data set is a graph data set generated from an anonymous blockchain. Each transaction is mapped to real entities with two categories: licit and illicit. Some of them are not labeled. We have run different algorithms for predicting illicit transactions like Logistic Regression, Long Short Term Memory, Support Vector Machine, Random Forest, and a variation of Graph Neural Networks, which is called Graph Convolution Network (GCN). GCN is of special interest in our case. Different evaluation parameters such as accuracy, ROC and F1 score are analyzed for different models. Our experimental results show that the proposed GCN model gives the accuracy [Formula: see text], the AUC 0.9444 and the RMSE 0.1123, which concludes that our GCN is better than the existing models, in particular with the model proposed in Weber et al. (Anti-money laundering in bitcoin: experimenting with graph convolutional networks for financial forensics, 2019. http://arxiv.org/abs/1908.02591 ).