Tuesday, March 19

China tried to obtain internal info, build a network of informants inside Federal Reserve, says new GOP report


The Chinese government tried to obtain sensitive internal information and build a network of influence and informants inside the Federal Reserve, according to a new report released Tuesday by Republican staff on the Senate’s Committee on Homeland Security and Governmental Affairs.

The report from the committee staff of Ohio Sen. Rob Portman, the ranking member, did not conclude whether the attempts, which included the detention of one Federal Reserve employee, were successful.

Since at least 2013, the report found, China has targeted the Federal Reserve System and sought to recruit US-based economists to share information in exchange for money and other benefits. Thirteen Federal Reserve employees working across eight of the Fed’s twelve locations were identified as the “P-Network” by a Federal Reserve analysis that deemed those employees of being of potential concern, according to the report.

One of the members of the “P-Network” was detained four times on a 2019 trip to Shanghai and his family was threatened, according to the report. The Federal Reserve employee’s phones, computers and contact information were all hacked during his trip to China and contact information of other Federal Reserve officials was copied by Chinese officials, the report said.

The Senate committee obtained the Federal Reserve’s counterintelligence analysis on the P-Network in 2020, but said the central bank now disputes many of the results findings. At least one of the employees of the network was fired for “violating certain (Federal Reserve System) rules” according to the analysis obtained by the committee. NBC News has not reviewed the original Federal Reserve analysis.

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The report also found what it called close ties between Federal Reserve employees and the People’s Bank of China, Chinese media outlets and the Chinese Thousand Talents Program, which US intel officials say encourages economic espionage.

At least one Federal Reserve employee attempted to transfer large volumes of data in an unapproved transfer to an external site after having “continuous contacts with Chinese nationals and universities,” according to the report. It is not clear from the report whether the transfer was successful.

The Senate committee’s staff criticized the Federal Reserve for not doing a better job policing its own employees, citing a “lack of internal counterintelligence competence at the Federal Reserve or sufficient ongoing cooperation with federal law enforcement and intelligence agencies.”

The Federal Reserve recently told the committee that some of the information it provided in its counterintelligence analysis reports from 2015-2020 can no longer be verified, according to a source familiar with the Senate investigation.

The source also said the Federal Reserve has been resistant to security measures, like reporting foreign contacts, that could mitigate some threats. The FBI made 70 recommendations for better security measures and to date the Fed has only implemented one or possibly two, the source said.

Two weeks ago the Committee got a classified briefing from the FBI on this that backed up a lot of information on this threat to the Fed, according to an official familiar with the investigation.

Federal Reserve Chairman Jerome Powell strongly pushed back against the report in a letter to Portman, citing “strong concerns about assertions and implications in the report.”

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“We are deeply troubled by what we believe to be the report’s unfair, unsubstantiated, and unverified insinuations about particular individual staff members,” Powell said. “We are confident that Federal Reserve staff understand their obligations and are committed to maintaining both he confidentiality of sensitive information and the integrity of our workforce.”

The Chinese government, the FBI, the Federal Reserve did not immediately respond to requests for comment.

Courtney Kube contributed.


www.nbcnews.com

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