  The recent decade witnessed a surge of increase in financial crimes across
the public and private sectors, with an average cost of scams of $102m to
financial institutions in 2022. Developing a mechanism for battling financial
crimes is an impending task that requires in-depth collaboration from multiple
institutions, and yet such collaboration imposed significant technical
challenges due to the privacy and security requirements of distributed
financial data. For example, consider the modern payment network systems, which
can generate millions of transactions per day across a large number of global
institutions. Training a detection model of fraudulent transactions requires
not only secured transactions but also the private account activities of those
involved in each transaction from corresponding bank systems. The distributed
nature of both samples and features prevents most existing learning systems
from being directly adopted to handle the data mining task. In this paper, we
collectively address these challenges by proposing a hybrid federated learning
system that offers secure and privacy-aware learning and inference for
financial crime detection. We conduct extensive empirical studies to evaluate
the proposed framework's detection performance and privacy-protection
capability, evaluating its robustness against common malicious attacks of
collaborative learning. We release our source code at
https://github.com/illidanlab/HyFL .
