A Compression and Simulation-Based Approach to Fraud Discovery

Abstract

With the uptake of digital services in public and private sectors, the formalization of laws is attracting increasing attention. Yet, non-compliant fraudulent behaviours (money laundering, tax evasion, etc.)—practical realizations of violations of law—remain very difficult to formalize, as one does not know the exact formal rules that define such violations. The present work introduces a methodological framework aiming to discover non-compliance through compressed representations of behaviour, considering a fraudulent agent that explores via simulation the space of possible non-compliant behaviours in a given social domain. The framework is founded on a combination of utility maximization and active learning. We illustrate its application on a simple social domain. The results are promising, and seemingly reduce the gap on fundamental questions in AI and Law, although this comes at the cost of developing complex models of the simulation environment, and sophisticated reasoning models of the fraudulent agent.