RGH-GNN : Risk-Gated Heterogeneous Graph Neural Network for Financial Fraud Detection

Mythreyee Hari, Subin Sahayam, Vegesna S M Srinivasavarma

Credit card fraud is a significant problem for financial institutions, resulting in substantial monetary loss each year. Fraud patterns and methods are continuously evolving, with fraudulent transactions often disguised to resemble legitimate activity. Real world transaction data for fraud detection is severely affected by class imbalance making it harder to detect these transactions. Fraudulent transactions are rarely isolated. Accounts, devices, and other common attributes are often shared across fraudulent activity, revealing relational patterns that individual transaction features alone cannot capture. Graph-based approaches model these relationships explicitly. However, standard graph neural networks aggregate neighbourhood information uniformly, which can dilute the already scarce signal carried by fraudulent transactions and limit detection of camouflaged fraud. This work presents RGH-GNN, a heterogeneous graph neural network that addresses this limitation by incorporating transaction-level risk scores, generated by a supervised LightGBM classifier as edge weights. It is used to guide message passing through a learnable risk-gated aggregation mechanism. It ensures that…