A Privacy-Preserving Federated Framework with Hybrid Quantum-Enhanced Learning for Financial Fraud Detection
Abhishek Sawaika,
Swetang Krishna,
Tushar Tomar,
Durga Pritam Suggisetti,
Aditi Lal,
Tanmaya Shrivastav,
Nouhaila Innan and
Muhammad Shafique
Papers from arXiv.org
Abstract:
Rapid growth of digital transactions has led to a surge in fraudulent activities, challenging traditional detection methods in the financial sector. To tackle this problem, we introduce a specialised federated learning framework that uniquely combines a quantum-enhanced Long Short-Term Memory (LSTM) model with advanced privacy preserving techniques. By integrating quantum layers into the LSTM architecture, our approach adeptly captures complex cross-transactional patters, resulting in an approximate 5% performance improvement across key evaluation metrics compared to conventional models. Central to our framework is "FedRansel", a novel method designed to defend against poisoning and inference attacks, thereby reducing model degradation and inference accuracy by 4-8%, compared to standard differential privacy mechanisms. This pseudo-centralised setup with a Quantum LSTM model, enhances fraud detection accuracy and reinforces the security and confidentiality of sensitive financial data.
Date: 2025-07
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