By Michael S. Derby
Sept 28 (Reuters) - The Federal Reserve’s in-house watchdog said on Monday that a retiring staff member was caught multiple times trying to remove confidential central bank information as this employee exited the central bank, while noting this apparent breach did not ultimately trigger a formal misconduct finding.
The Fed’s Inspector General said the departing employee served in the central bank’s Division of International Finance and retired from the central bank in July 2024.
The Fed’s IG did not respond to a request to provide the identity of the employee flagged in the IG report. The Fed’s Board of Governors did not immediately respond to a request for comment.
The IG said that despite the “potential severity” of the incident, its internal investigators “reviewed this matter for potential misconduct and determined that there was not a sufficient basis to pursue this incident as a misconduct investigation.”
That’s because “available records did not provide a clear indication of what information the employee had removed before their departure” and “many” of the alerts involving the information “were, in fact, false positives,” the IG said.
“The specific details regarding this incident help to illustrate the systemic concerns” about how the Fed manages the exit process of central bank employees with access to confidential policymaking information, the IG report said. Breakdowns in the process highlighted by the “potential incident” involving the retiring employee require “the Board's immediate attention so that it can take appropriate corrective actions.”
INFORMATION EXFILTRATION
The IG report recounted a series of incidents involving the employee as the staffer headed to retirement and flagged alerts involving information handling that occurred “three days before the employee took what we understood to be a personal trip to a restricted country, which was followed by a separate personal month-long international trip.”
The IG said it became aware of the issues around the retiring employee in July 2025. The report says this employee was first flagged for copying confidential Federal Open Market Committee files to an unencrypted USB drive in 2021, and that the employee claimed this had been done mistakenly.
In 2023, this employee attempted to email to a personal address more confidential FOMC files, which the employee claimed was “inadvertent.” In 2023 the employee was again flagged for copying classified files to an unencrypted USB drive.
Before leaving, the IG said the retiring employee had generated a series of alerts “because of printing, copying data to a notepad application, sending potentially sensitive information in emails to multiple personal email addresses, and transferring potentially sensitive files to a Board-issued unencrypted USB device.”
The employee removed the information without seeking approval and “despite previously being informed of the offboarding information removal procedures, prior counseling about bulk information transfers, and prior verbal counseling about using unencrypted storage devices,” the IG said.
The Fed IG investigates internal issues faced by the central bank and has played a prominent role in recent years in probing trading activity by a range of Fed policymakers. The IG warned in a report in June that the Fed needed to take greater care in protecting confidential information during staff international travel.
The IG is currently engaged in a high-profile investigation into cost overruns incurred as part of the renovation of the central bank’s Washington headquarters. President Donald Trump, who has repeatedly attacked the Fed, had tried to use the renovations issue as an avenue to fire then-Fed Chair Jerome Powell, who now serves as a governor with Trump-installed Kevin Warsh as the current central bank leader.
(Reporting by Michael S. Derby; Editing by Nick Zieminski and Andrea Ricci )
