Collaborative Synthetic Data for Privacy-Preserving Financial Fraud Detection Across Organizational Silos
cs.LG, cs.AI
Submitted: 2026-09-27
Updated: 2026-10-03
Comments: Accepted for publication at the International Conference on Information Systems (ICIS) 2026
Code: https://github.com/SimeonAllmendinger/collafuse-for-fraud-detection
License: http://creativecommons.org/licenses/by-nc-nd/4.0/
The gist: Organizations seek analytical value from AI, yet relevant data are often fragmented across organizations and constrained by privacy.
Terminology
Abstract
Organizations seek analytical value from AI, yet relevant data are often fragmented across organizations and constrained by privacy. This is acute in financial fraud detection, where rare fraud cases and imbalanced local datasets limit decision-relevant analytics. Federated learning enables collaboration without direct data sharing but does not resolve minority-class scarcity. Synthetic data generation can help, yet lightweight methods are interpolation-bound, while generative models require substantial data and computation. Existing collaborative generative approaches often rely on federated learning, imposing considerable organization-side training burdens. In this paper, we examine CollaFuse as a collaborative diffusion-based alternative for fraud detection and evaluate it across five fraud datasets. Compared with classical oversampling, local generative baselines, and centralized diffusion benchmarks, CollaFuse does not achieve the highest local fidelity but improves downstream fraud detection more consistently across most datasets. These findings suggest that synthetic data create analytical value less through local realism than through transferable cross-organizational structure.
Sources
- Communication-Efficient Learning of Deep Networks from Decentralized Data
- New Money: A Systematic Review of Synthetic Data Generation for Finance
- Anti-Money Laundering in Bitcoin: Experimenting with Graph Convolutional Networks for Financial Forensics
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