Who Audits the Auditor? Tamper-Proof Fraud Detection with Blockchain-Anchored Explainable ML

AI systems are increasingly used to assist consequential decisions in regulated domains such as auditing, finance, and healthcare. This creates a recurring obligation: an organization must be able to reconstruct, after the fact, which evidence informed a given conclusion, and to show that the record of that reasoning was not altered. Existing tools address related but distinct problems - model observability, drift monitoring, governance reporting - and are built for the machine-learning engineer operating a system, not the reviewer who must trace one specific conclusion back to its supporting evidence. We present AuditWeave, a lightweight Python library, with no runtime dependencies, that records the steps of AI-assisted and data-transformation workflows into a single append-only, hash-chained ledger. A small, system-agnostic event vocabulary spans both retrieval-augmented generation (RAG) pipelines and tabular/lakehouse transformations, so a conclusion that draws on both can be traced end-to-end through one record. Within a sealed ledger, any modification, reordering, insertion, or deletion of events is detectable through chain verification. We describe the design and evaluate recording overhead, scalability, and tamper-detection correctness on the reference implementation. The integrity guarantees cost tens of microseconds per event, and, as the hash-chain construction implies, verification flagged every injected mutation across four mutation classes over 2,000 randomized trials.

Fraud detection systems must scale with rising transaction volume while remaining explainable and reviewable. We study a layered pipeline on the PaySim dataset that combines a gradient-boosted classifier, graph-derived structural features, an autoencoder-based anomaly signal, TreeSHAP explanations, and a bounded LLM investigation agent applied to cases the classifier scores uncertainly. Before any model comparison, we identify and remove a simulator-specific balance shortcut that would otherwise inflate baseline performance. After this correction, neither the graph features nor the anomaly signal improves Average Precision on the full test set. Both, however, rank fraud better within the subset of cases receiving intermediate baseline scores. In a controlled experiment with injected multi-account fraud rings, engineered structural features recover all injected test transactions, while the tabular baseline misses roughly a quarter of them. The investigation agent underperforms direct thresholding of the classifier it relies on, reaching 65.0% accuracy against 71.7% on a balanced 60-case sample, despite having access to model explanations, graph context, and retrieved reference cases. Of the eight decisions the agent changed, six replaced correct classifier outputs with errors, and it produced a coherent written rationale in each case. An exploratory disagreement-based escalation rule flagged two of these agent errors for human review without flagging any correct decision. We conclude that each component of a layered fraud system contributes only under specific conditions, and that a plausible rationale from an investigation agent is not evidence of a better decision.

Money mule accounts are critical facilitators of financial fraud, yet detecting them at scale remains challenging due to the heterogeneous nature of transactional and behavioural data. We present an end-to-end pipeline for customer-level mule detection comprising three stages: (1) a LightGBM classifier trained on 280 engineered features spanning transaction patterns, account demographics, network topology, and temporal behaviour; (2) a TreeSHAP attribution layer that decomposes each prediction into feature contributions; and (3) a large language model (LLM) module that converts SHAP attributions into analyst-facing natural-language narratives. We evaluate across three open-weight LLM families and assess explanation quality through analyst feedback. In a live production deployment, the system achieves a yield rate of 89%, up from 61% under the incumbent rule-based system, with monthly alert volume expanding from 211 to 302, reflecting broader true-positive coverage rather than increased noise. This corresponds to a 60% incremental adverse detection beyond existing review workflows, substantially outperforming the rule-based approach. Qualitative feedback from analysts indicates that LLM-generated narratives reduce cognitive load during alert triage. We further discuss implications of deploying LLM-augmented explainability in regulated financial environments.