Semiannual Report to Congress

Message From the Inspector General

After 45 years of service in the oversight community working to ensure integrity and accountability in government and to protect the American taxpayer, I have decided to retire. Reflecting on my 14 years as inspector general of the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau, I am incredibly proud of the work we have accomplished. Our office evolved over my tenure as we met added oversight responsibilities associated with the CFPB, established field offices to extend the reach and effectiveness of our criminal investigators, and created our Office of Information Technology to conduct audits of critical Board and CFPB systems, among many other developments. Throughout these changes, however, our mission, vision, and values have remained unchanged.

Over the past 6 months, we continued to fulfill our critical mission of providing independent and objective oversight of the Board and the CFPB. Our independent oversight delivers results that promote agency excellence while also preventing and detecting fraud, waste, and abuse.

During this reporting period, we issued five reports related to the programs and operations of the Board. We completed our annual audit of the Board as required by the Federal Information Security Modernization Act of 2014 (FISMA); while the Board's information security program remains effective as a whole, we made nine new recommendations to strengthen the program. Another report assessed the timeliness of the Board's revised review process for fair lending matters and found that the Board and the Federal Reserve Banks generally met their revised timing goals. In another report, we made two recommendations to enhance the effectiveness of the Board and Reserve Banks' Bank Exams Tailored to Risk process, which allows Reserve Bank examination staff to tailor their supervisory activities. And finally, we contracted with an independent public accounting firm to complete the annual financial statement audits for the Board and the Federal Financial Institutions Examination Council.

We issued three reports related to the programs and operations of the CFPB. We completed our annual audit of the CFPB's information security program pursuant to FISMA; although the CFPB's information security program remains effective as a whole, we made eight new recommendations to strengthen the program. In another report, we analyzed the CFPB's process for onboarding depository institutions that cross the $10 billion asset threshold and therefore transition to CFPB oversight; we made four recommendations to improve this onboarding process. And in a third report, we made one recommendation to help the CFPB strengthen guidance on cost-increase modifications to ensure that the CFPB maximizes value from its contracting activities.

Our Office of Investigations continues to send a strong message that those who commit wrongdoing against the Board or the CFPB will be held accountable. In December, for instance, a former bank general counsel in Connecticut pleaded guilty to offenses stemming from a decade-long, $7.4 million embezzlement scheme. Additionally, in January, American Express agreed to pay $108.7 million to settle allegations that it deceptively marketed credit card and wire transfer products and used falsified account information.

Investigators also continue to track down those who defrauded pandemic relief programs. In November, for example, the cofounders of Blueacorn, a Paycheck Protection Program lender service provider, were charged in connection with a scheme to fraudulently obtain COVID-19 relief money, and in January, a California husband and wife who received nearly $1.4 million in loans were sentenced to 36 months and 27 months of imprisonment, respectively, for defrauding the Paycheck Protection Program.

Our Office of Investigations also investigated multiple cases involving former employees of the agencies we oversee. In January, a former senior adviser for the Board was indicted on charges that he passed sensitive financial information to the Chinese government. And in March, a former senior manager of the Federal Reserve Bank of Richmond who had access to confidential supervisory information was sentenced for insider trading and making false statements.

Overall, in the past 6 months, our Office of Investigations closed 33 investigations and resolved 241 hotline complaints. Our work resulted in 9 referrals for criminal prosecution; 23 arrests; 13 indictments; 13 criminal informations; 19 convictions; and nearly $204 million in criminal and civil monetary recoveries.

I'd like to thank the Office of Inspector General staff, who have continuously impressed me every day with their talent, determination, expertise, creativity, and teamwork. They have also demonstrated exceptional professionalism, extraordinary resilience, and an unwavering commitment to our mission throughout the years of my service. I am profoundly grateful that they have dedicated their careers to the important work of improving economy, efficiency, and effectiveness and preventing and detecting fraud, waste, and abuse. I wish the OIG staff all the best in the years to come. I'll forever be cheering them on!

Sincerely,

/signed/
Mark Bialek
Inspector General
March 31, 2025

Highlights

We continued to promote the integrity, economy, efficiency, and effectiveness of the programs and operations of the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau. The following are highlights, in chronological order, of our work during this semiannual reporting period.

The Board’s Information Security Program
The Board’s information security program continues to operate effectively at a level-4 (managed and measurable) maturity. However, the Board can strengthen its information security program in eight distinct areas.

The CFPB’s Information Security Program
The CFPB’s information security program continues to operate effectively at a level-4 (managed and measurable) maturity. However, the CFPB can strengthen its information security program in six distinct areas.

The Board’s Financial Statements Audit
The independent public accounting firm we contracted with found that the Board’s financial statements presented fairly, in all material respects, the financial position of the Board as of December 31, 2024 and 2023, and the results of its operations and its cash flows for those years in conformity with U.S. generally accepted accounting principles. The auditors also found that the Board maintained, in all material respects, effective internal control over financial reporting and found no instances of noncompliance with laws, regulations, contracts, or other matters.

The CFPB’s Transitioning of Depository Institutions
The CFPB did not timely or effectively complete most of the transitions of institutions to its oversight that we reviewed, in some cases taking over a year to complete key onboarding steps. The agency also took varying approaches to coordinating with the prudential regulators.

The Federal Financial Institutions Examination Council’s Financial Statements Audit
The independent public accounting firm we contracted with found that the Federal Financial Institutions Examination Council’s (FFIEC) financial statements presented fairly, in all material respects, the financial position of the FFIEC as of December 31, 2024 and 2023, and the results of operations and cash flows for those years in accordance with U.S. generally accepted accounting principles. The auditors did not identify any deficiencies in internal control over financial reporting; any instances of noncompliance with laws, regulations, contracts, and grant agreements; or any other matters.

Former Board Senior Adviser Indicted on Charges of Economic Espionage
John Harold Rogers, a former senior adviser in the Board’s Division of International Finance, allegedly passed trade-secret information to Chinese government officials posing as graduate students and made false statements about his activities to our investigators. He faces up to 15 years in prison and a $5 million fine for conspiracy to commit economic espionage and up to 5 years in prison for making false statements.

Former Senior Manager of the Federal Reserve Bank of Richmond Sentenced for Insider Trading and Making False Statements
Robert Brian Thompson, a former Federal Reserve Bank of Richmond (FRB Richmond) employee, was sentenced to 24 months in prison with 24 months of supervised release and ordered to pay a $200 assessment and $771,678 in asset forfeiture. Thompson pleaded guilty to misappropriating confidential information to execute trades in publicly traded financial institutions. He concealed his scheme—and over $771,000 in personal profits—by falsely representing his assets on his annual financial disclosures. He faces up to 20 years in prison for insider trading and up to 5 years in prison for making false statements.

Former Bank General Counsel Pleaded Guilty in $7.4 Million Embezzlement Scheme
James Blose, who held high-ranking positions at several banks, pleaded guilty in Connecticut to bank fraud, which carries up to 30 years in prison, and engaging in illegal monetary transactions, which carries up to 10 years in prison, stemming from a decade-long embezzlement scheme through which he stole about $7.4 million from the banks he worked for.