On Thursday, July 16, the Office of Inspector General of the Federal Reserve issued a stern warning that more measures are needed to protect sensitive economic information, as foreign hostile forces are eyeing these classified data.
The warning was included in the latest report from the internal watchdog institution of the Federal Reserve.
On Wednesday, a former senior advisor to the Federal Reserve, 64-year-old John Harold Rogers, was sentenced to over three years in prison for lying to federal investigators. Investigators are looking into whether he shared confidential data from the Federal Reserve with Chinese intelligence operatives.
The Inspector General’s office pointed out in the report that the Federal Reserve’s risk management mechanisms failed to identify threats to its proprietary data and information, and lacked processes to identify key assets and internal risks.
The office also found that the Federal Reserve did not establish appropriate training or information-sharing processes.
“The Federal Reserve’s proprietary economic information is highly attractive to foreign hostile forces seeking to weaken US competitiveness and harm national security,” the report stated. “Risks may also come from within – for example, employees intentionally or unintentionally sharing sensitive information with foreign agents.”
The Inspector General’s office provided nine recommendations on how the Federal Reserve can better protect itself, including defining the board’s key assets and assessing risks.
Rogers served as a senior advisor at the Federal Reserve’s Division of International Finance from 2010 to 2021, where he had long-term access to confidential information related to monetary policy and the Federal Open Market Committee.
Prosecutors revealed that since 2017, Rogers had established secret contacts with Chinese intelligence operative Hummin Lee. They met at a conference in China.
Over the following years, under the guise of giving academic lectures, Rogers made several trips to China where he met with Lee and her associates in hotel rooms, providing Federal Reserve-related information as instructed.
Rogers was known to bring printed confidential documents to China, remove the classified markings, forward them to personal email accounts, and before meeting with Lee, disseminate sensitive data to a professor at Fudan University in China.
Prosecutors stated that Rogers was well aware that Lee would use this information to write reports for the Chinese government and gain an advantage in advance knowledge of Federal Reserve interest rate decisions, profiting from trading about $1.5 trillion in US Treasury bonds.
In return, Rogers received significant economic benefits himself and secured a university teaching position and other privileges with Lee’s and Chinese universities’ assistance. He even admitted to investigators that he owed everything to Lee.
In February 2020, when questioned by investigators from the Federal Reserve’s Inspector General’s office, Rogers was directly asked if he had ever shared restricted information with external parties. His response was, “Never.”