# FedGraph-VASP: Privacy-Preserving Federated Graph Learning with Post-Quantum Security for Cross-Institutional Anti-Money Laundering

arXiv: https://arxiv.org/abs/2601.17935 · HTML: https://mlsanity.com/paper/2601.17935/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 10 of its 18 references that are in the map.
- First posted on arXiv 25 Jan 2026.

## Builds on (most cited first, 10 of 10)

- [Semi-Supervised Classification with Graph Convolutional Networks](https://mlsanity.com/paper/1609.02907/) (2016)
- [Communication-Efficient Learning of Deep Networks from Decentralized Data](https://mlsanity.com/paper/1602.05629/) (2016)
- [Inductive Representation Learning on Large Graphs](https://mlsanity.com/paper/1706.02216/) (2017)
- [Membership Inference Attacks against Machine Learning Models](https://mlsanity.com/paper/1610.05820/) (2016)
- [Deep Leakage from Gradients](https://mlsanity.com/paper/1906.08935/) (2019)
- [EvolveGCN: Evolving Graph Convolutional Networks for Dynamic Graphs](https://mlsanity.com/paper/1902.10191/) (2019)
- [Anti-Money Laundering in Bitcoin: Experimenting with Graph Convolutional Networks for Financial Forensics](https://mlsanity.com/paper/1908.02591/) (2019)
- [Subgraph Federated Learning with Missing Neighbor Generation](https://mlsanity.com/paper/2106.13430/) (2021)
- [Federated Graph Neural Networks: Overview, Techniques and Challenges](https://mlsanity.com/paper/2202.07256/) (2022)
- [PQS-BFL: A Post-Quantum Secure Blockchain-based Federated Learning Framework](https://mlsanity.com/paper/2505.01866/) (2025)

## Abstract (arXiv)

Virtual Asset Service Providers (VASPs) face a fundamental tension between regulatory compliance and user privacy when detecting cross-institutional money laundering. Current approaches require either sharing sensitive transaction data or operating in isolation, leaving critical cross-chain laundering patterns undetected. We present FedGraph-VASP, a privacy-preserving federated graph learning framework that enables collaborative anti-money laundering (AML) without exposing raw user data. Our key contribution is a Boundary Embedding Exchange protocol that shares only compressed, non-invertible graph neural network representations of boundary accounts. These exchanges are secured using post-quantum cryptography, specifically the NIST-standardized Kyber-512 key encapsulation mechanism combined with AES-256-GCM authenticated encryption. Experiments on the Elliptic Bitcoin dataset with realistic Louvain partitioning show that FedGraph-VASP achieves an F1-score of 0.508, outperforming the state-of-the-art generative baseline FedSage+ (F1 = 0.453) by 12.1 percent on binary fraud detection. We further show robustness under low-connectivity settings where generative imputation degrades performance, while approaching centralized performance (F1 = 0.620) in high-connectivity regimes. We additionally evaluate generalization on an Ethereum fraud detection dataset, where FedGraph-VASP (F1 = 0.635) is less effective under sparse cross-silo connectivity, while FedSage+ excels (F1 = 0.855), outperforming even local training (F1 = 0.785). These results highlight a topology-dependent trade-off: embedding exchange benefits connected transaction graphs, whereas generative imputation can dominate in highly modular sparse graphs. A privacy audit shows embeddings are only partially invertible (R^2 = 0.32), limiting exact feature recovery.