Improvement of Bank Fraud Detection Through Synthetic Data Generation with Gaussian Noise

Bank fraud detection faces critical challenges in imbalanced datasets, where fraudulent transactions are rare, severely impairing model generalization. This study proposes a Gaussian noise-based augmentation method to address class imbalance, contrasting it with SMOTE and ADASYN. By injecting controlled perturbations into the minority class, our approach mitigates overfitting risks inherent in interpolation-based techniques. Five classifiers, including XGBoost and a convolutional neural network (CNN), were evaluated on augmented datasets. XGBoost achieved superior performance with Gaussian noise-augmented data (accuracy: 0.999507, AUC: 0.999506), outperforming SMOTE and ADASYN. These results underscore Gaussian noise’s efficacy in enhancing fraud detection accuracy, offering a robust alternative to conventional oversampling methods. Our findings emphasize the pivotal role of augmentation strategies in optimizing classifier performance for imbalanced financial data.