arXiv AI By Paul Vautravers, Oliver Chalkley, Gabriel Downer, Kate S, Damian Ruck

Quantifying System-Level Harms from AI Adoption in Complex Sociotechnical Systems

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The paper proposes a framework that connects structured hazard analysis, component-level testing, and probabilistic system modelling to assess system-level harms from AI in complex sociotechnical systems. It demonstrates the approach using the UK's Real Time Gross Settlement system, showing how adversarial inputs to LLM-based trading can shift AI behaviour, reduce system resilience, and increase the likelihood of cascading bank failures. The framework aims to provide a traceable pathway from model behaviour to systemic outcomes, enabling evidence-based governance of AI in critical infrastructure.

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arXiv AI
Sep 11

Cyber-Financial Contagion: Modeling the Propagation of an AI Vendor Compromise Through the Banking System

The paper examines how a breach of a single AI vendor—used by banks for fraud screening, credit decisions, AML triage, customer analytics, and internal support—can spread through operational, informational, and financial links, ultimately causing losses that resemble a traditional banking crisis. It introduces a four‑layer heterogeneous network linking AI vendors, banks, interbank exposures, and customer accounts, and presents CFC‑Prop, a stochastic epidemic‑and‑clearing model that reproduces heavy‑tailed loss distributions and sensitivity to patch latency on a synthetic dataset of 60 vendors, 220 banks, and 1,400 interbank exposures. Additionally, the authors develop CFC‑GNN, an early‑warning graph‑based model that predicts high‑cascade‑risk vendors with AUROC 0.82 and AUPRC 0.60, and they release all code, data, and scripts for reproducibility.

By Alex Leytes