Minority sample selection in fraud detection with classifier-based reinforcement learning

Abstract Substantial financial losses due to fraud drive the need for accurate detection algorithms. However, machine learning classifiers frequently show bias towards non-fraudulent classes due to class imbalance, where fraudulent instances occur much less frequently. Current oversampling techniques, such as the Synthetic Minority Oversampling TEchnique and Generative Adversarial Networks, generate noisy samples, produce suboptimal proportions of minority classes, and neglect majority class distributions, leading to degraded classifier performance. To address these limitations, this study investigates the feasibility of reinforcement learning (RL) for selecting generated minority samples. This study proposes a general-purpose RL-based sample selection method that is agnostic to both oversampling technique and classifier, which dynamically filters the generated minority samples using classifier feedback and information from minority and majority neighborhoods. The investigation reveals technical challenges, including sparse reward and high computational cost, which must be addressed for RL to become a practical solution for minority sample selection.