Similarity in many decision systems is governed not by distance alone but by interactions among variables. In fraud and anomaly detection, small local perturbations can cross interaction-sensitive decision boundaries while leaving ambient distance almost unchanged. Motivated by this setting, we introduce a thin-slab interaction model and an interaction-driven quantum kernel constructed from entangled Pauli-string feature maps. The feature map explicitly encodes sparse high-order block interactions. We show that the resulting fidelity kernel is positive semidefinite, admits an exact block-factorized formulation, and induces a geometry sensitive to changes in interaction regime. Across balanced and imbalanced synthetic experiments spanning third-, fourth-, sixth-, and eighth-order interactions, the proposed kernel consistently outperforms linear, radial basis function, Laplacian, and polynomial kernels, as well as an engineered-interaction linear baseline supplied with the planted block products. On real fraud-detection benchmarks, it achieves the highest mean accuracy and F1 on Credit Card Fraud Detection and ranks second on IEEE-CIS Fraud Detection. These findings show that quantum-kernel performance depends on alignment between feature-map geometry and the underlying predictive structure, rather than on Hilbert-space dimension alone. Because the prescribed block-factorized kernel can also be evaluated exactly on a classical computer, the results establish predictive and representational value rather than computational quantum speedup.
Cheque fraud is a material risk in after-hours business deposit operations because funds may be released within one business day, while cheque clearing takes several days. This timing gap creates a fraud exposure window for financial institutions. Prior mitigation relies on static, deposit-level checks and therefore miss historical client behavior and evolving patterns. To address this gap, we propose a multi-view ensemble ML framework that combines: Extreme Gradient Boosting (XGBoost) for known fraud patterns, Isolation Forest for label-free anomaly detection, and Graph Sample and Aggregate (GraphSAGE) for relational patterns associated with transaction activities. We then combine the three outputs into a single client-level risk score. Under stable conditions, performance is comparable to XGBoost; under a targeted distribution shift, our framework performs best (F1: 83.77%, FPR: 0.69%) versus XGBoost (F1: 82.77%, FPR: 0.72%). These results indicate improved robustness to distribution shift while preserving interpretability through plain-language explanations grounded in behavioural, anomaly, and relational evidence.
A total of seven categorical encoding methods were tested on the IEEE-CIS fraud benchmark dataset (590,540 records, 3.5% positives, 8 high-cardinality columns). The encoders were evaluated using a stratified 5-fold cross-validation (CV) with three repetitions. Five of the encoders had identical frozen LightGBM learners in the downstream phase, allowing for controlled comparisons of their performance to each other. CatBoost and TabNet were included as comparisons across paradigms using different learners. The entity embeddings produced the highest AUC-ROC (0.9612), with a statistically significant tie with that of CatBoost (0.9602) and statistically superior to tier group encoding (0.9548), whereas target encoding was only 0.0023 worse than tier group encoding and the auditor-friendly tier boundaries were maintained. Off-the-shelf TabNet did not outperform tree-based pipelines and collapsed under data scarcity. On AUC-PR, CatBoost leads (0.822 vs. 0.793); no encoder dominated both metrics. Per-column analysis confirmed the embedding advantage arises from joint multi-column representation.
Kees Jan de Vries, Mustafa Radha, Mathijs de Jongcs.LG cs.AI
Many machine learning applications rely on heterogeneous event streams to make predictions, either causally as events arrive or bidirectionally over complete sequences. We propose SOHET (Sequence Of Heterogeneous Events Transformer), a hierarchical architecture combining event-type-specific tabular encoders with temporal and type embeddings, processed by a causal or bidirectional transformer. We introduce three self-supervised pre-training objectives for the causal setting. On a proprietary large-scale real-world Booking.com fraud detection task with 17 event types, SOHET outperforms FlexTPP, NAPPT, and CIPPT by 5.8%. Pre-training yields an additional 2.6% gain and 2.4% faster convergence. On the EBES benchmark, bidirectional SOHET matches or exceeds the published best on 6 out of 8 tasks.
Principal Component Analysis (PCA) preserves variance, not the information needed to detect rare catastrophic events. This paper proves the existence of a {\it Risk Shadow}: PCA can retain over 99.9999 percent of total variance while completely erasing all signal about rare, high-impact failures. When this happens, even the best possible classifier operating on the PCA representation reduces to a constant predictor. The root cause is a fundamental mismatch between variance maximization and tail risk awareness. To break the shadow, we introduce Expectile PCA (ExPCA) and Tail-Preserving PCA (TP-PCA), two methods that reweight the data covariance toward high-impact events. We prove theoretically that ExPCA strictly outperforms PCA in retaining rare-event information, and we validate our claims on synthetic data and a real-world credit card fraud detection benchmark. Our results call for a fundamental rethinking of variance-based dimensionality reduction in high-stakes decisions.
Credit-card fraud detection is difficult because fraudulent transactions are rare, costly, and unevenly distributed. Strong gradient-boosted tree models already perform well on structured transaction data, so the value of another fusion method is not obvious. This paper examines whether Combinatorial Fusion Analysis (CFA), which searches over model subsets and rank-score fusion rules, can still add value on the IEEE-CIS Fraud Detection benchmark. Using a leakage-free 60/20/20 train/validation/test protocol, we evaluate 480 fusion configurations built from seven base classifiers. The best test-set result comes from diversity-weighted score fusion of Random Forest, XGBoost, and LightGBM (DEF WtScore), with AUC-ROC = 0.9405, AUPRC = 0.6699, and F1 = 0.6373. Bootstrap confidence intervals from 1,000 resamples show that the gains over the strongest single model exclude zero for all three metrics. CFA matches soft voting on AUC-ROC, improves AUPRC and F1, and outperforms stacking in this setting. A CTGAN augmentation experiment gives a negative result: synthetic fraud samples degrade both individual models and CFA. Overall, CFA is most useful here not as a way to combine every classifier, but as a validation-stage method for choosing a small, complementary subset and assigning diversity-aware weights.
Yinan Cheng, Chi-Hua Wang, Vamsi K. Potluru +2cs.LG cs.AI
Devising procedures for downstream task-oriented generative model selections is an unresolved problem of practical importance. Existing studies focused on the utility of a single family of generative models. They provided limited insights on how synthetic data practitioners select the best family generative models for synthetic training tasks given a specific combination of machine learning model class and performance metric. In this paper, we approach the downstream task-oriented generative model selections problem in the case of training fraud detection models and investigate the best practice given different combinations of model interpretability and model performance constraints. Our investigation supports that, while both Neural Network(NN)-based and Bayesian Network(BN)-based generative models are both good to complete synthetic training task under loose model interpretability constrain, the BN-based generative models is better than NN-based when synthetic training fraud detection model under strict model interpretability constrain. Our results provides practical guidance for machine learning practitioner who is interested in replacing their training dataset from real to synthetic, and shed lights on more general downstream task-oriented generative model selection problems.