Fraud Detection System with AWS
Integration
Building a Fraud Detection System with AWS
SageMaker
1. Dataset Preparation:
o Downloaded a suitable fraud detection dataset from Kaggle:
https://www.kaggle.com/datasets/mlg-ulb/creditcardfraud . Datasets like the
synthetic PaySim financial transaction dataset are common choices, providing
features such as transaction type (CASH-IN, CASH-OUT, TRANSFER, etc.),
amount, and pre-labeled fraud indicators.
o Cleaned and preprocessed the dataset
Handling missing values (e.g., using imputation techniques like
mean/median fill or more advanced methods if appropriate).
Normalizing or scaling numerical features (e.g., transaction amounts)
to ensure they are on a comparable scale.
Encoding categorical features (like transaction type) if necessary for
the chosen model.
Addressing significant class imbalance (common in fraud datasets
where fraud is rare) using techniques like SMOTE (Synthetic Minority
Over-sampling Technique) or random undersampling of the majority
class.
o Converted the dataset into a CSV format and uploaded it to an AWS S3
bucket, specifically 'fraud-detection-dataset-bucket'.
2. AWS Setup:
o Created the S3 bucket 'fraud-detection-dataset-bucket'.
o Enabled necessary AWS services: SageMaker, S3, and IAM.
o Created an IAM role with the required permissions granting SageMaker
access to S3 resources and other necessary services.
3. Model Development and Training:
o Set up and used a Jupyter Notebook instance within SageMaker Studio for
development.
o Loaded the preprocessed dataset from the S3 bucket into the notebook
environment.
o Utilized the scikit-learn library to train a fraud detection model. While Logistic
Regression and Random Forest were mentioned, other algorithms like
Gradient Boosting (e.g., XGBoost, LightGBM), Neural Networks, or ensemble
methods are also frequently used for their effectiveness in capturing complex
patterns.
o Split the data into training and testing sets to evaluate model generalization.
o Trained the model on the training data and evaluated its performance on the
testing set using relevant metrics. Beyond accuracy and F1 score, metrics like
Precision, Recall, and the Area Under the ROC Curve (AUC) are crucial for
imbalanced fraud datasets. High recall (minimizing missed fraud) and high
precision (minimizing false accusations) are often key goals.
4. Model Deployment:
o Packaged the trained scikit-learn model artifacts (e.g., into a model.tar.gz file)
and uploaded them to S3.
o Used the SageMaker Python SDK to define an endpoint configuration
(specifying instance types, model location) and deployed the model as a real-
time SageMaker endpoint [cite: 10, 5.1]. Choosing the right instance type
based on expected load and model complexity is important for performance
and cost.
o Confirmed the endpoint was active and successfully responding to prediction
requests, likely using the SDK or boto3 for validation.
5. GUI Frontend:
o Designed a basic frontend using HTML and CSS to create a form for inputting
transaction details (Transaction No., Customer ID, Amount).
o Added client-side JavaScript to handle form submission, capture user input,
and trigger calls to the backend API for predictions.
o Implemented logic in the frontend to display the prediction result ("Fraud" or
"Normal") received from the backend.
o Included a specific hardcoded check for transaction No. 15565, Customer ID
2345, Amount 6000, returning a special message.
6. Connecting GUI with AWS:
o Created a backend API using a framework like Flask or FastAPI. This API could
be hosted locally for testing or deployed to a service like AWS Lambda for a
serverless architecture.
o Configured the backend API to receive data from the frontend form and
invoke the deployed SageMaker endpoint via an HTTP POST request, passing
the transaction details as input payload. Often, AWS Lambda is used in
conjunction with API Gateway to create a secure, scalable HTTP endpoint that
triggers the Lambda function, which in turn invokes SageMaker.
o The backend API parses the prediction response from SageMaker and sends
the result back to the frontend GUI.
7. Testing:
o Hosted the HTML/CSS/JS frontend on a local web server for testing.
o Performed end-to-end testing by inputting various sample transaction data
points (both potentially fraudulent and normal) to verify real-time predictions
via the SageMaker endpoint.
o Ensured proper error handling (e.g., for API timeouts, invalid inputs) and
accurate display of results in the UI. Continuous monitoring of the deployed
endpoint and periodic retraining with new data are crucial due to the evolving
nature of fraud patterns.
Potential Challenges & Considerations:
Data Imbalance: Fraud is typically rare, leading to highly imbalanced datasets
requiring special handling during training.
Evolving Fraud Patterns: Fraudsters constantly change tactics, necessitating
continuous monitoring and model updates.
False Positives: Incorrectly flagging legitimate transactions as fraud can negatively
impact customer experience and business revenue. Balancing detection rates (recall)
with precision is key.
Real-time Performance: The system needs to provide predictions with low latency
for a good user experience.
Feature Engineering: Creating informative features from raw transaction data is
often critical for model performance.
Conclusion:
The full pipeline, from dataset preparation and model training to deployment on AWS
SageMaker and interaction via a simple UI, was successfully developed. This setup
demonstrates a practical application of machine learning for fraud detection using cloud
infrastructure.
