The paper introduces a causal mediation framework to separate direct discrimination from structural inequality in AI-driven credit decisions. Using Pearl’s natural direct and indirect effects, it presents an identification strategy under treatment‑induced confounding and proposes a doubly‑robust estimator with efficiency guarantees. Empirical analysis of 89,465 mortgage applications shows that about 77% of racial denial disparities stem from financial mediators, while the remaining 23% represents a conservative lower bound on direct discrimination.
By Duraimurugan Rajamanickam
arXiv:2607. 05101v1 Announce Type: new Abstract: The application of machine learning-based predictive algorithms to Anti-Money Laundering (AML) has grown rapidly, driven by the vast volume of financial transaction data available to banks.
By Lea Multerer, Michele Inchingolo, David Kletz, Adrian Cosma, Alessandro Antonucci, Martina Gogova
The study investigates whether Large Language Models (LLMs) can translate technical explanations from credit risk models into stakeholder-friendly narratives. Using Freddie Mac loan data, the authors compare standard tabular models (XGBoost + SHAP) with alternative data pipelines (GNN + GNNExplainer and a bimodal mix) and generate explanations with three LLM configurations: a small fine‑tuned Gemma 3 4B, a large fine‑tuned DeepSeek R1 70B, and a zero‑shot Gemini 2.5. Findings show that the quality of explanations is more dependent on the evidence representation than on the LLM, that narratives reliably identify influential factors but are less consistent about the direction of influence, and that credit professionals demand higher evidentiary standards than non‑professionals.
By Sahab Zandi, Noah Kostesku, Christophe Mues, Mar\'ia \'Oskarsd\'ottir, Cristi\'an Bravo
The paper introduces Governance-Aware Federated Learning (GAFL), a framework that enhances traditional federated learning with independent governance verification, fairness and explainability assessment, anomaly detection, policy enforcement, and tamper‑evident audit logging. In a cross‑silo prototype with 10 participants, GAFL successfully identified all falsified‑evidence participants and intervened on affected participants across various threat scenarios, achieving macro‑F1 scores between 0.7520 and 0.7733. The added governance processing time per round was 173.67 ± 26.94 ms, compared to 3.82 ± 0.79 ms for standard FedAvg, highlighting a trade‑off between fairness policy enforcement and utility.
By Kiranmayee Janardhan, Karthick S, Madhusmita Panda, Bharathi Vokkaliga Ganesh, Syed Ahmed
arXiv:2607. 21806v1 Announce Type: new Abstract: Predictive machine learning (ML) models are increasingly used to aid human decision-makers across various high-risk domains such as healthcare and criminal justice.
By Jonathan Zhang, Erik Skalnes, Jacob Chen, Michael Oberst
The paper introduces FAPE, a four‑stage framework for evaluating the post‑processing fairness intervention ThresholdOptimizer across eight diverse domains, including criminal justice, finance, healthcare, and education. It reports that the intervention reduces disparity in most high‑disparity cases but can worsen fairness when baseline disparities are low, and that a single deployment‑time audit is unreliable without continuous monitoring and baseline‑disparity screening.
By Nithin Raghava Ramachandra Narla