Network Analysis of Global Banking Systems and Detection of Suspicious Transactions

Abstract

A novel network-based approach is introduced to analyze banking systems, focusing on two main themes: identifying influential nodes within global banking networks using Bank for International Settlements data and developing an algorithm to detect suspicious transactions for anti-money laundering. Leveraging the concept of adversarial networks, we examine Bank for International Settlements data to characterize low-key leaders and highly-exposed nodes in the context of financial contagion among countries. Low-key leaders are nodes with significant influence despite lower centrality, while highly-exposed nodes represent those most vulnerable to defaults. Separately, using anonymized transaction data from Rabobank, we design an anti-money laundering algorithm based on network partitioning via the Louvain method and cycle detection, identifying unreported transaction patterns indicative of potential money laundering. The findings provide insights into system-wide vulnerabilities and propose tools to address challenges in financial stability and regulatory compliance.

Figures (9)

• Figure 1: A visualization of a community from the Rabobank banking network, with transactions taken in the same year and average under $10,000.
• Figure 2: Low-Key Leader (or LKL) strength in the BIS network for March 2006. Countries with high positive LKL strength (such as the United States) maintain significant influence while mitigating exposure to financial contagion. In contrast, highly-exposed leaders, such as Germany and Japan, exhibit negative LKL strength, indicating heightened risk due to their extensive lending portfolios.
• Figure 3: Evolution of PageRank, CON Score, LKL strength, and GDP for the United States in the BIS network. The PageRank (computed on the reversed-edge network) reflects the extent to which the U.S. banking system is a major lender, while the CON Score indicates its shared debt obligations with other countries. The LKL strength highlights periods when the United States exerted significant influence with relatively lower direct exposure to contagion risk. GDP is included for comparison, demonstrating how financial integration and systemic risk evolved alongside economic performance.
• Figure 4: Evolution of PageRank, CON Score, LKL strength, and GDP for Mexico in the BIS network.
• Figure 5: Evolution of PageRank, CON Score, LKL strength, and GDP for the United Kingdom in the BIS network.