MH-DRNN: An intelligent approach in financial fraud detection and prevention

Financial fraud detection requires models capable of identifying subtle and evolving anomalies within large-scale transaction streams. Existing deep learning and anomaly-detection techniques struggle with sparse fraud patterns, nonlinear feature interactions, and limited memory for rare events. To address these gaps, this study proposes a hybrid MH-DRNN framework that integrates Kernel PCA–based nonlinear feature extraction, LOF-based anomaly pre-screening, Modern Hopfield Networks for associative memory retrieval, and Deep Recurrent Networks for temporal sequence modelling. Using a benchmark Kaggle financial-transaction dataset containing 10,000 records, the model achieved 98.5% accuracy, 98% recall, 97% precision, and a 97% F1-score. These improvements exceed the performance of IF-AE, CNN, and CNN-GRU-Attention models. The results demonstrate that the combined associative-memory and sequential-learning architecture enhances the model’s ability to capture sparse, complex, and evolving fraud behaviour. The study also discusses data-privacy implications of AI-based fraud detection and highlights the importance of reliable, high-quality datasets for secure financial analytics.

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Publication Details

Journal
Systems and Soft Computing
Published
2026-04-01
DOI
https://doi.org/10.1016/j.sasc.2026.200483
Primary Topic
Financial Distress and Bankruptcy Prediction
Type
article
Field-Weighted Citation Impact
0.00
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article

MH-DRNN: An intelligent approach in financial fraud detection and prevention

Liming Wang
Systems and Soft Computing
Financial Distress and Bankruptcy Prediction
article

MH-DRNN: An intelligent approach in financial fraud detection and prevention

Liming Wang
article en

Abstract

Financial fraud detection requires models capable of identifying subtle and evolving anomalies within large-scale transaction streams. Existing deep learning and anomaly-detection techniques struggle with sparse fraud patterns, nonlinear feature interactions, and limited memory for rare events. To address these gaps, this study proposes a hybrid MH-DRNN framework that integrates Kernel PCA–based nonlinear feature extraction, LOF-based anomaly pre-screening, Modern Hopfield Networks for associative memory retrieval, and Deep Recurrent Networks for temporal sequence modelling. Using a benchmark Kaggle financial-transaction dataset containing 10,000 records, the model achieved 98.5% accuracy, 98% recall, 97% precision, and a 97% F1-score. These improvements exceed the performance of IF-AE, CNN, and CNN-GRU-Attention models. The results demonstrate that the combined associative-memory and sequential-learning architecture enhances the model’s ability to capture sparse, complex, and evolving fraud behaviour. The study also discusses data-privacy implications of AI-based fraud detection and highlights the importance of reliable, high-quality datasets for secure financial analytics.

Systems and Soft Computing
Shanxi Science and Technology Department (CN)
Peace, Justice and strong institutions
Openalex Percentile: Top 5%
Financial Distress and Bankruptcy Prediction
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MH-DRNN: An intelligent approach in financial fraud detection and prevention — Liming Wang · Systems and Soft Computing (2026) | TGRS Research Map | TGRS