A Federal Reserve Board employee triggered hundreds of data-loss-prevention alerts before retiring in July 2024, but the alerts do not establish how many files were sensitive or confirm that classified information was disclosed. In a September 24, 2026 management alert, the Board’s Office of Inspector General (OIG) criticized inconsistent controls and weak follow-up across divisions. The OIG’s investigative office found insufficient basis to pursue a misconduct investigation, and the broader offboarding audit was still underway.
What the watchdog found
The OIG began auditing the Board’s offboarding process in March 2025. Its review covered records management, security debriefings, and the return or deactivation of personal identity verification cards for employees—including interns—who left during 2024. In a test of 26 information-removal requests or notifications, it found gaps across multiple divisions in identifying and responding effectively to removal activity. The sample was not a count of all removal events at the Board.
The OIG issued its September 2026 management alert while the larger audit remained in progress. It selected one employee’s case as an example of inconsistent security controls, inadequate response protocols, and broader information-security governance concerns. The OIG said it would resume broader fieldwork and issue a separate report. Read the OIG management alert.
What happened before the employee retired
The employee worked in the Board’s Division of International Finance, announced plans to retire in July 2024, and expressed a desire to remove files. The OIG described earlier episodes involving potential information removal:
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- In 2021, the employee copied hundreds of Federal Open Market Committee (FOMC) files to an unencrypted USB device.
- In 2023, an attempt to send classified FOMC information to a personal email account was blocked.
- Later in 2023, system alerts flagged a potential transfer of 83 files to an unencrypted USB device. The division said the files were publicly available and the alerts were false positives; the OIG said it did not review the files to verify that explanation.
During the employee’s final 90 days, the data loss prevention (DLP) system generated 279 alerts. The OIG report says the system flagged activity that included printing, copying information to a notepad application, sending potentially sensitive information to personal email addresses, and transfers to an unencrypted USB device.
What the alert counts do—and do not—show
| OIG-reported figure | What it means |
|---|---|
| 279 alerts in the employee’s final 90 days | System detections, not 279 confirmed disclosures or verified sensitive files. |
| 111 alerts potentially involving sensitive FOMC information | A potential classification assigned by the DLP tool, not confirmation that the information was exposed. |
| 40 alerts potentially involving Restricted FR material | Also a potential tool classification, not a verified count of exposed records. |
| 227 alerts in June 2024, including 192 three days before a trip to a country the Board designated restricted | Alert totals and timing reported by the OIG; they do not by themselves establish what information was removed or why. |
Many alerts were later found to be false positives, and the available records did not clearly establish what information was actually removed. The OIG also said it did not have access to the former employee’s storage devices, and most removed records no longer existed or could not be located. As a result, the alert totals should not be read as a confirmed tally of sensitive files taken or disclosed.
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Did the employee take or leak classified files?
The public record does not establish exactly what the employee removed. The OIG said the information-removal incident was not fully resolved and the removed information was not fully retrieved. Its investigative office found insufficient basis to pursue a misconduct investigation, in part because records did not clearly show what was removed and many alerts were false positives.
“Classified” needs care here: the OIG explicitly said the information discussed in its report was unclassified for national-security purposes. Some alerts concerned FOMC information with an internal classification, which is distinct from national-security classification. The report does not establish theft, espionage, or a confirmed disclosure of classified files.
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Where the OIG said the controls failed
The watchdog’s main criticism was not simply that the system generated alerts. It was that the response to removal activity was inconsistent and did not match the accumulating risks. The OIG wrote: “The failures in this situation were not limited to one division. The failures involved a collective lack of action across multiple divisions, and the limited follow-up activities that did occur were not commensurate with the accumulation of risks in this situation.”
The case highlights a gap between detecting activity and resolving an incident: alerts need timely human review, clear escalation, documented decisions, and a way to establish whether information was removed and retrieve it when appropriate. The OIG said the Board’s standard requires sensitive Board and FOMC information to be stored only on encrypted trusted mobile storage devices; the episodes involving unencrypted USB storage illustrate the importance of that requirement.
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What happens next
The OIG management alert is an interim product, not the final account of every part of the Board’s 2024 offboarding process. FedScoop reported that the Board agreed with all nine OIG recommendations. The broader audit’s additional fieldwork could add to or revise the findings in the alert. FedScoop’s report on the findings and recommendations.
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