FD4QC: Application of Classical and Quantum-Hybrid Machine Learning for Financial Fraud Detection A Technical Report

Abstract: The increasing complexity and volume of financial transactions pose significant challenges to traditional fraud detection systems. This technical report investigates and compares the efficacy of classical, quantum, and quantum-hybrid machine learning models for the binary classification of fraudulent financial activities. As of our methodology, first, we develop a comprehensive behavioural feature engineering framework to transform raw transactional data into a rich, descriptive feature set. Second, we implement and evaluate a range of models on the IBM Anti-Money Laundering (AML) dataset. The classical baseline models include Logistic Regression, Decision Tree, Random Forest, and XGBoost. These are compared against three hybrid classic quantum algorithms architectures: a Quantum Support Vector Machine (QSVM), a Variational Quantum Classifier (VQC), and a Hybrid Quantum Neural Network (HQNN). Furthermore, we propose Fraud Detection for Quantum Computing (FD4QC), a practical, API-driven system architecture designed for real-world deployment, featuring a classical-first, quantum-enhanced philosophy with robust fallback mechanisms. Our results demonstrate that classical tree-based models, particularly \textit{Random Forest}, significantly outperform the quantum counterparts in the current setup, achieving high accuracy ((97.34\%)) and F-measure ((86.95\%)). Among the quantum models, \textbf{QSVM} shows the most promise, delivering high precision ((77.15\%)) and a low false-positive rate ((1.36\%)), albeit with lower recall and significant computational overhead. This report provides a benchmark for a real-world financial application, highlights the current limitations of quantum machine learning in this domain, and outlines promising directions for future research.