# A Regulatory Governance Framework for AI-Driven Financial Fraud Detection in U.S. Banking: Integrating OCC, SR 11-7, CFPB, and FinCEN Compliance Requirements for Model Development, Validation, and Monitoring Lifecycles

arXiv: https://arxiv.org/abs/2605.04076 · HTML: https://mlsanity.com/paper/2605.04076/

## Key facts

- Cited by 2 papers in the map (data through 14 Oct 2026).
- Builds on 5 of its 26 references that are in the map.
- First posted on arXiv 14 Apr 2026.

## Builds on (most cited first, 5 of 5)

- [Attention Is All You Need](https://mlsanity.com/paper/1706.03762/) (2017)
- [A Unified Approach to Interpreting Model Predictions](https://mlsanity.com/paper/1705.07874/) (2017)
- [Inductive Representation Learning on Large Graphs](https://mlsanity.com/paper/1706.02216/) (2017)
- [Explainable Artificial Intelligence (XAI): Concepts, Taxonomies, Opportunities and Challenges toward Responsible AI](https://mlsanity.com/paper/1910.10045/) (2019)
- [The relationship between trust in AI and trustworthy machine learning technologies](https://mlsanity.com/paper/1912.00782/) (2019)

## Built on by (most cited first, 2 of 2)

- [From Complaint Narratives to Monetary Relief: A Hybrid Machine Learning Framework for CFPB Consumer Complaints](https://mlsanity.com/paper/2606.22664/) (2026)
- [ZK-SR117: A Chunked Zero-Knowledge Attestation Design for Aggregated Fair-Lending Metrics, with a Control Mapping toward Full SR 11-7 Coverage](https://mlsanity.com/paper/2608.02664/) (2026)

## Abstract (arXiv)

U.S. financial institutions deploying AI-based fraud detection face a fragmented compliance landscape spanning four regulatory frameworks -- OCC Bulletin 2011-12, SR 11-7, the CFPB AI circular, and FinCEN BSA/SAR requirements -- with no integrated governance life cycle connecting these requirements to model development, validation, and monitoring practice. This paper presents the Regulatory Governance Framework for AI-Driven Financial Fraud Detection (RGF-AFFD), a three-tier governance architecture empirically anchored in a multi-study empirical program. Using the IEEE-CIS dataset (590,540 transactions) and ULB benchmark (284,807 transactions), we benchmark six architectures including an LSTM+XGBoost ensemble, and conduct ablation, temporal drift, SHAP interpretability, and BISG fairness analyses. The LSTM+XGBoost ensemble achieves ROC-AUC of 0.9289 (F1: 0.6360) with a benefit-cost ratio of 6:1. XGBoost demonstrates the strongest temporal stability (delta-AUC = -0.0017 versus -0.0626 for LSTM). The RDT-FG Regulatory Digital Twin meta-model translates metrics into four regulator-specific health scores and a composite Regulatory Fitness Index for continuous compliance monitoring. The RGF-AFFD is the first integrated deployment blueprint to simultaneously satisfy OCC, SR 11-7, CFPB, and FinCEN requirements, supported by a community bank implementation vignette and four evidence-based policy recommendations.