Explainable Graph Neural Networks for Interbank Contagion Surveillance: A Regulatory-Aligned Framework for the U.S. Banking Sector

Anomaly detection in dynamic graphs underpins financial fraud analysis, intrusion detection, and platform integrity, where automated decisions require human-interpretable justifications. StrGNN, the strongest performer in recent benchmarks, produces no explanation: when an edge is flagged, the analyst receives only a score. Explanation metrics are undefined for StrGNN because no attribution vector exists. This paper closes that gap. We present X-StrGNN, a post-hoc explanation layer that wraps a trained, frozen StrGNN and emits, for every flagged edge, dual attributions: a structural attribution identifying which contextual interactions in the enclosing subgraph drove the decision, and a temporal attribution identifying which historical snapshot carried the signal. Both attributions are multiplicative masks identically one in the unexplained pass, so the layer is an exact pass-through: detection is preserved to machine precision, verified rather than asserted (Delta AUC = 0.0000, Delta AP = 0.0000, Delta P@100 = 0.0000). Attribution costs 0.66 ms per edge, making explanation of an entire alarm list feasible. We conduct the first controlled design study of attribution strategies for this architecture, comparing gradient attribution, per-instance mask optimisation, and amortised parameterisation under one protocol, one budget, and three seeds. X-StrGNN attains the highest stability (0.913) at 268x lower cost than per-instance optimisation, and its temporal attribution (1.601 against a measured random floor of 0.973) is separably better than its ablated control, while per-instance optimisation - the most expensive strategy - falls below that floor. Code, protocol, and per-seed measurements are released.

The U.S. financial system processes approximately 1.3 million interbank transactions daily, yet no system in the reviewed literature models fraud propagation across the interbank network using fraud co-occurrence edge features. Prior interbank GNN architectures model credit contagion using credit distress supervision signals, producing systems misaligned for fraud forensics. No existing system generates SAR narratives with per-assertion forensic traceability to specific numerical detection outputs, creating regulatory auditability gaps in FinCEN-submitted reports. This paper introduces SCAFDS (Systemic Contagion-Aware Fraud Detection System), a seven-stage integrated surveillance pipeline addressing five structural limitations of prior art: (1) fraud-specific interbank topology encoding using fraud co-occurrence frequency metrics f(u,v,t) derived from FinCEN SAR registry records; (2) edge-feature-informed graph attention where coefficients are computed from both node representations and fraud co-occurrence edge features; (3) bilinear fraud co-occurrence risk fusion producing institution-level systemic fraud risk scores; (4) attribution-conditioned SAR narrative generation with per-assertion significance thresholds ensuring each FinCEN SAR assertion is traceable to a specific numerical pipeline output; and (5) topology-aware adaptive forensic feedback updating graph attention weights from regulatory dispositions. Experiments on the IEEE-CIS Fraud Detection Dataset (590,540 transactions) and a synthetic FDIC-aligned interbank network (8,103 institutions, 169,800 edges) show SCAFDS achieves AUPRC=0.515+/-0.032 and AUROC=0.802+/-0.018, representing +15.9pp and +13.7pp improvements over GraphSAGE-AML. Partial validation on FDIC enforcement action records (n=4,279) confirms consistent model ranking. USPTO Provisional Patent Application No. 64/061,083, filed May 8, 2026.

The interconnected nature of global financial systems makes them vulnerable to systemic risks, where the failure of a few institutions can trigger catastrophic cascading defaults. Traditional risk models often fail to capture the complex, non-linear dynamics of these networks. While Graph Neural Networks (GNNs) have shown promise in modeling relational data, they primarily learn correlative patterns and function as black boxes, offering little insight into the causal mechanisms of shock propagation. This limitation is critical for regulators who require explainable models to perform stress tests and devise effective interventions. We introduce CausalGraphX, a novel framework that integrates GNNs with counterfactual reasoning to provide explainable assessments of systemic risk. CausalGraphX employs a Graph Attention mechanism to learn representations of institutional vulnerability and uses an adversarial regularization technique to ensure these representations capture causal drivers rather than spurious correlations. Furthermore, we propose an optimization-based approach to generate counterfactual explanations, answering questions such as, "What minimum capital injection would have prevented Bank A's default under a specific stress scenario?" We validate CausalGraphX on large-scale synthetic financial networks. Our results demonstrate that CausalGraphX significantly outperforms traditional and deep learning baselines in predicting cascading defaults while providing sparse, plausible, and actionable counterfactual explanations.