What Is Anomaly Detection in Machine Learning?

Anomaly detection is one of the most common use cases of machine learning. Finding and identifying outliers helps to prevent fraud, adversary attacks, and network intrusions that can compromise your company’s future.

In this post, we will talk about how anomaly detection works, what machine learning techniques you can use for it, and what benefits anomaly detection with ML brings to a business.

What is an anomaly?

Before talking about anomaly detection, we need to understand what an anomaly is.

Generally speaking, an anomaly is something that differs from a norm: a deviation, an exception. In software engineering, by anomaly we understand a rare occurrence or event that doesn’t fit into the pattern, and, therefore, seems suspicious. Some examples are:

  • sudden burst or decrease in activity;
  • error in the text;
  • sudden rapid drop or increase in temperature.

Common reasons for outliers are:

  • data preprocessing errors;
  • noise;
  • fraud;
  • attacks.

Normally, you want to catch them all; a software program must run smoothly and be predictable so every outlier is a potential threat to its robustness and security. Catching and identifying anomalies is what we call anomaly or outlier detection.

For example, if large sums of money are spent one after another within one day and it is not your typical behavior, a bank can block your card. They will see an unusual pattern in your daily transactions. This anomaly can typically be connected to fraud since identity thieves try to steal as much money as they can while they can. Once an anomaly is detected, it needs to be investigated, or problems may follow.

Types of anomalies

Types of anomalies

Now let’s see what kinds of anomalies or outliers machine learning engineers usually have to face.

Global outliers

When a data point assumes a value that is far outside all the other data point value ranges in the dataset, it can be considered a global anomaly. In other words, it’s a rare event.

For example, if you receive an average American salary to your bank accounts each month but one day get a million dollars, that would look like a global anomaly to the bank’s analytics team.

Global outliers

Contextual outliers

When an outlier is called contextual it means that its value doesn’t correspond with what we expect to observe for a similar data point in the same context. Contexts are usually temporal, and the same situation observed at different times can be not an outlier.

For example, for stores it’s quite normal to experience an increase in customers during the holiday season. However, if a sudden boost happens outside of holidays or sales, it can be considered a contextual outlier.

Contextual outliers

Collective outliers

Collective outliers are represented by a subset of data points that deviate from the normal behavior.

In general, tech companies tend to grow bigger and bigger. Some companies may decay but it’s not a general trend. However, if many companies at once show a decrease in revenue in the same period of time, we can identify a collective outlier.

Collective outliers

Why do you need machine learning for anomaly detection?

This is a process that is usually conducted with the help of statistics and machine learning tools.

The reason is that the majority of companies today that require outlier detection work with huge amounts of data: transactions, text, image, and video content, etc. You would have to spend days going through all the transitions that happen inside a bank every hour, and more and more are generated every second. It is simply impossible to drive any meaningful insights from this amount of data manually.

Moreover, another difficulty is that the data is often unstructured, which means that the information wasn’t arranged in any specific way for the data analysis. For example, business documents, emails, or images are examples of unstructured data.

To be able to collect, clean, structure, analyze, and store data, you need to use tools that aren’t scared of big volumes of data. Machine learning techniques, in fact, show the best results when large data sets are involved. Machine learning algorithms are able to process most types of data. Moreover, you can choose the algorithm based on your problem and even combine different techniques for the best results.

Machine learning used for real-world applications helps to streamline the process of anomaly detection and save the resources. It can happen not only post-factum but also in real time. Real-time anomaly detection is applied to improve security and robustness, for instance, in fraud discovery and cybersecurity.

What are anomaly detection methods?


There are different kinds of anomaly detection methods with machine learning.


In supervised anomaly detection, an ML engineer needs a training dataset. Items in the dataset are labeled into two categories: normal and abnormal. The model will use these examples to extract patterns and be able to detect abnormal patterns in the previously unseen data.

In supervised learning, the quality of the training dataset is very important. There is a lot of manual work involved since somebody needs to collect and label examples.

Note: While you can label some anomalies and try to classify them (hence it’s a classification task), the underlying goal of anomaly detection is defining “normal data points” rather than “abnormal data points”. So in real world applications with very few anomaly samples labelled, it’s almost never regarded as a supervised task.


This type of anomaly detection is the most common type, and the most well-known representative of unsupervised algorithms are neural networks.

Artificial neural networks allow to decrease the amount of manual work needed to pre-process examples: no manual labeling is needed. Neural networks can even be applied to unstructured data. NNs can detect anomalies in unlabeled data and use what they have learned when working with new data.

The advantage of this method is that it allows you to decrease the manual work in anomaly detection. Moreover, quite often it’s impossible to predict all the anomalies that can occur in the dataset. Think of self-driving cars, for example. They can face a situation on the road that has never happened before. Putting all road situations into a finite number of classes would be impossible. That is why neural networks are priceless when working with real-life data in real-time.

However, ANNs almost rocket science level of complexity. So before you try out those, you might want to experiment with more conventional algorithms like DBSCAN, especially if your project is not that big.

Moreover, the architecture of neural networks is a black box. We often don’t know what kinds of events neural networks will label as anomalies, moreover, it can easily learn wrong rules that are not so easy to fix. That is why unsupervised anomaly detection techniques are often less trustworthy than supervised ones.


Semi-supervised anomaly detection methods combine the benefits of the previous two methods. Engineers can apply unsupervised learning methods to automate feature learning and work with unstructured data. However, by combining it with human supervision, they have an opportunity to monitor and control what kind of patterns the model learns. This usually helps to make the model’s predictions more accurate.

Machine learning algorithms for anomaly detection

Multiple machine learning algorithms can be used for anomaly detection depending on the dataset size and the type of the problem.

Local outlier factor (LOF)

Local outlier factor is probably the most common technique for anomaly detection. This algorithm is based on the concept of the local density. It compares the local density of an object with that of its neighbouring data points. If a data point has a lower density than its neighbours, then it is considered an outlier.

K-nearest neighbors

kNN is a supervised ML algorithm often used for classification. When applied to anomaly detection problems, kNN is a useful tool because it allows to easily visualize the data points on the scatterplot and make anomaly detection much more intuitive. Another benefit of kNN is that it works well on both small and large datasets.

Instead of learning ‘normal’ and ‘abnormal’ values to solve the classification problem, kNN doesn’t perform any actual learning. So when it comes to anomaly detection, kNN works as an unsupervised learning algorithm. A machine learning expert defines a range of normal and abnormal values manually, and the algorithm breaks this representation into classes by itself.

Support vector machines

Support vector machine (SVM) is also a supervised machine learning algorithm often used for classification. SVMs use hyperplanes in multi-dimensional space to divide data points into classes.

SVM is usually applied when there are more than one classes involved in the problem. However, in anomaly detection it’s also used for single class problems. The model is trained to learn the ‘norm’ and can identify whether unfamiliar data belongs to this class or represents an anomaly.



This is an unsupervised ML algorithm based on the principle of density. DBSCAN is able to uncover clusters in large spatial datasets by looking at the local density of the data points and generally shows good results when used for anomaly detection. The points that do not belong to any cluster get their own class: -1 so they are easy to identify. This algorithm handles outliers well when the data is represented by non-discrete data points.


This algorithm is based on the use of artificial neural networks that encode the data by compressing it into the lower dimensions. Then, ANNs decode the data to reconstruct the original input. When we reduce the dimensionality, we don’t lose the necessary information because the rules have already been identified in the compressed data. Now we can already discover outliers.

Bayesian networks

Bayesian networks enable ML engineers to discover anomalies even in high-dimensional data. This method is used when the anomalies that we’re looking for are more subtle and harder to discover and visualizing them on the plot might not produce the desired results.

What is anomaly detection used for?

Now let’s see how anomaly detection can be used in practice.

Intrusion detection

Cybersecurity is key for many companies that work with confidential information, intellectual property, and private data of their employees and clients. Intrusion detection systems monitor the network to detect and report potentially malicious traffic. IDS software notifies the team if suspicious activity is detected. Some examples are software by Cisco Systems and McAfee.

Find out how Serokell can help you improve the security of your software systems as part of our complex machine learning services.

Fraud detection

Fraud detection with machine learning helps to prevent activities aimed at obtaining money or property unlawfully. Fraud detection software is used by banks, credit organizations, and insurance companies. For example, banks check loan applications before making a decision. If the system detects that some of the documents are fraudulent, for example, that your tax number doesn’t exist in the system, it will notify the bank employer.

Health monitoring

Anomaly detection systems are incredibly helpful in healthcare. They help doctors with diagnosis detecting unusual patterns in MRI and test results. Usually, neural networks that have been trained on thousands of examples are applied here, and sometimes they give a more accurate diagnosis than doctors with 20 years of experience.

Defect detection

Manufactures can lose millions in lawsuits supplying their clients with mechanisms or mechanism details that have defects. One detail that doesn’t correspond to the production standards can cause a plane to crash, thus, killing hundreds of people.

Anomaly detection systems that use computer vision can detect if the detail has a defect even among thousands of other similar details on the beltline. Moreover, anomaly detection systems can be connected to the mechanisms to monitor internal systems such as engine temperature, fuel levels, and other parameters.


Anomaly detection is identifying data points in data that don’t fit the normal patterns. It can be useful to solve many problems including fraud detection, medical diagnosis, etc. Machine learning methods allow to automate anomaly detection and make it more effective, especially when large datasets are involved. Some of the common ML methods used in anomaly detection include LOF, autoencoders, and Bayesian networks.

If you want to learn more about machine learning, artificial intelligence, and data analysis, continue reading our blog posts:

Banner that links to Serokell Shop. You can buy cool FP T-shirts there!
More from Serokell
machine learning testing thumbnailmachine learning testing thumbnail
Top 10 machine learning project ideasTop 10 machine learning project ideas
Classification algorithms; classification in machine learningClassification algorithms; classification in machine learning