Detecting illicit transactions in bitcoin: a wavelet-temporal graph transformer approach for anti-money laundering

Anti-money laundering (AML) remains a critical challenge in cryptocurrency ecosystems, where blockchain’s transparency paradoxically coexists with pseudonymity. Traditional methods often fall short in modeling the temporal and structural complexity of transaction networks. This paper introduces ChronoWave-GNN, a graph neural framework designed from the theoretical perspective of time-frequency representation learning. By combining wavelet-based frequency decomposition with temporal encoding, our model captures nonstationary and multi-scale patterns inherent in illicit financial activity. This dual-domain perspective enhances the expressive capacity of graph representations without relying on modular patching. We validate our approach on the Elliptic dataset, where ChronoWave-GNN achieves a test accuracy of 0.9802 and F1-score of 0.9799, surpassing prior state-of-the-art results. These findings suggest that unifying temporal dynamics and spectral compression offers a principled and effective pathway for robust AML in decentralized financial systems.