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Detecting Fraud in Financial Networks: A Semi-Supervised GNN Approach with Granger-Causal Explanations

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Listed:
  • Linh Nguyen
  • Marcel Boersma
  • Erman Acar

Abstract

Fraudulent activity in the financial industry costs billions annually. Detecting fraud, therefore, is an essential yet technically challenging task that requires carefully analyzing large volumes of data. While machine learning (ML) approaches seem like a viable solution, applying them successfully is not so easy due to two main challenges: (1) the sparsely labeled data, which makes the training of such approaches challenging (with inherent labeling costs), and (2) lack of explainability for the flagged items posed by the opacity of ML models, that is often required by business regulations. This article proposes SAGE-FIN, a semi-supervised graph neural network (GNN) based approach with Granger causal explanations for Financial Interaction Networks. SAGE-FIN learns to flag fraudulent items based on weakly labeled (or unlabelled) data points. To adhere to regulatory requirements, the flagged items are explained by highlighting related items in the network using Granger causality. We empirically validate the favorable performance of SAGE-FIN on a real-world dataset, Bipartite Edge-And-Node Attributed financial network (Elliptic++), with Granger-causal explanations for the identified fraudulent items without any prior assumption on the network structure.

Suggested Citation

  • Linh Nguyen & Marcel Boersma & Erman Acar, 2025. "Detecting Fraud in Financial Networks: A Semi-Supervised GNN Approach with Granger-Causal Explanations," Papers 2507.01980, arXiv.org.
  • Handle: RePEc:arx:papers:2507.01980
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    References listed on IDEAS

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    1. Billio, Monica & Getmansky, Mila & Lo, Andrew W. & Pelizzon, Loriana, 2012. "Econometric measures of connectedness and systemic risk in the finance and insurance sectors," Journal of Financial Economics, Elsevier, vol. 104(3), pages 535-559.
    2. Babaei, Golnoosh & Giudici, Paolo & Raffinetti, Emanuela, 2022. "Explainable artificial intelligence for crypto asset allocation," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Catayoun Azarm & Erman Acar & Mickey van Zeelt, 2024. "On the Potential of Network-Based Features for Fraud Detection," Papers 2402.09495, arXiv.org, revised Feb 2024.
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