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

Abstract

The banking system now depends on a small set of shared artificial intelligence vendors for fraud screening, credit decisioning, anti-money-laundering triage, customer analytics, and internal decision support. This paper studies how a compromise inside one of those vendors can propagate along a chain of operational, informational, and financial linkages until it triggers losses that look, from the outside, like a classical banking crisis. We build a four-layer heterogeneous network that couples AI vendors, financial institutions, interbank exposures, and customer accounts, and we propose CFC-Prop, a stochastic epidemic-and-clearing model that runs on that network. On a synthetic dataset with 60 vendors, 220 banks, roughly 2,500 vendor-bank service edges, and 1,400 interbank exposures, CFC-Prop reproduces the heavy-tailed loss distributions and the sharp dependence on patch latency that are consistent with prior cyber-financial evidence. We also train an early-warning model, CFC-GNN, that uses vendor-side incident telemetry and graph structure to flag high-cascade-risk vendors before impact. Across four baselines the proposed model reaches AUROC 0.82 and AUPRC 0.60 while keeping calibration errors bounded. We release the full code, synthetic data, and reproducible scripts. The results argue that cyber concentration among AI vendors is a first-order financial-stability problem and give supervisors a concrete quantitative tool for reasoning about it.

Authors 1

Alex Leytes

Specification

Official page: arxiv.org/abs/2609.10350
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
Arxiv announce type: new
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
arXiv id: 2609.10350
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
Categories: cs.AI, cs.CY, cs.LG
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
PDF: arxiv.org/pdf/2609.10350
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
Primary category: cs.AI
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh
Published: 11 Sept 2026
Source:arXiv (Atom API + RSS)T1observed 2 h agohigh

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9

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T19

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2 h ago

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Authors: Alex Leytes

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Claim history · Official page

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Claim history for Official page
Value	Valid from → to	Status	Source	Confidence	Extractor
https://arxiv.org/abs/2609.10350	11 Sept 2026 21:03 UTC → current	current	arXiv (Atom API + RSS)T1	high	deterministic

Claims are temporal and append-only: a new observation closes the previous claim (valid_to) instead of overwriting it. Conflicting claims from different sources are kept side by side and flagged — never averaged. Methodology →

11 Sept 2026
New paperPaperCyber-Financial Contagion: Modeling the Propagation of an AI Vendor Compromise Through the Banking System
New paper: Cyber-Financial Contagion: Modeling the Propagation of an AI Vendor Compromise Through the Banking System
arxiv
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Source documents
Source	Document	Type	Tier	Last observed	Snapshots
arXiv (Atom API + RSS)	rss.arxiv.org/rss/cs.AI	feed	T1· Official	48 min ago	1

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