    [Senate Hearing 109-269]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-269

                     NOMINATION OF JANICE B. GARDNER TO BE
                    ASSISTANT SECRETARY OF THE TREASURY FOR
                           INTELLIGENCE AND ANALYSIS

    =======================================================================

                                    HEARING

                                   before the

                        SELECT COMMITTEE ON INTELLIGENCE
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 16, 2005

                                   __________

          Printed for the use of the Select Committee on Intelligence

     Available via the World Wide Web: http://www.access.gpo.gov/Congress/
                                     Senate

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                        SELECT COMMITTEE ON INTELLIGENCE

               [Established by S. Res. 400, 94th Cong., 2d Sess.]

                         PAT ROBERTS, Kansas, Chairman
              JOHN D. ROCKEFELLER IV, West Virginia, Vice Chairman
    ORRIN G. HATCH, Utah                 CARL LEVIN, Michigan
    MIKE DeWINE, Ohio                    DIANNE FEINSTEIN, California
    CHRISTOPHER S. BOND, Missouri        RON WYDEN, Oregon
    TREN LOTT, Mississippi               EVAN BAYH, Indiana
    OLYMPIA J. SNOWE, Maine              BARBARA A. MIKULSKI, Maryland
    CHUCK HAGEL, Nebraska                JON S. CORZINE, New Jersey
    SAXBY CHAMBLISS, Georgia

                       BILL FRIST, Tennessee, Ex Officio
                         HARRY REID, Nevada, Ex Officio
                                  ----------
                 Bill Duhnke, Staff Director and Chief Counsel
                   Andrew W. Johnson, Minority Staff Director
                        Kathleen P. McGhee, Chief Clerk

                                C O N T E N T S

                                  ----------
    Hearing held in Washington, DC:
        June 16, 2005................................................     1
    Statement of:
        Roberts, Hon. Pat, Chairman, a U.S. Senator from the State of
          Kansas.....................................................     1
        Rockefeller, Hon. John D. IV, Vice Chairman, a U.S. Senator
          from the State of West Virginia............................     2
        Bond, Hon. Christopher S., a U.S. Senator from the State of
          Missouri, prepared statement...............................     3
    Testimony of:
        Gardner, Janice B., Nominee to be Assistant Secretary for
          Intelligence and Analysis, U.S. Department of the Treasury.     4
        Prepared statement...........................................     3
    Supplemental Materials:
        Questionnaire for Completion by Presidential Nominees........    17
        Additional Pre-hearing Questions for Janice B. Gardner.......    37
        Letter to the Honorable Pat Roberts, Chairman, Senate Select
          Committee on Intelligence, from Kenneth R. Schmalzbach,
          Assistant General Counsel (General Law & Ethics) and
          Designated Agency Ethics Official..........................    44
        Letter to Marilyn L. Glynn, Acting Director, U.S. Office of
          Government Ethics, from Kenneth R. Schmalzbach, Assistant
          General Counsel (General Law & Ethics) and Designated
          Agency Ethics Official.....................................    45
         Letter to the Honorable Pat Roberts, Chairman, Select
          Committee on Intelligence, from Marilyn L. Glynn, Acting
          Director, U.S. Office of Government Ethics.................    46
        Public Financial Disclosure..................................    47
        Letter to Kenneth R. Schmalzbach, Assistant General Counsel
          (General Law & Ethics) and Designated Agency Ethics
          Official, from Janice B. Gardner...........................    53

       NOMINATION OF JANICE B. GARDNER TO BE ASSISTANT SECRETARY OF THE
                     TREASURY FOR INTELLIGENCE AND ANALYSIS

                                  ----------

                            THURSDAY, JUNE 16, 2005

                                   U.S. Senate,
                      Select Committee on Intelligence,
                                                        Washington, DC.
        The Select Committee met, pursuant to notice, at 3:22 p.m.,
    in room SDG-50, Dirksen Senate Office Building, the Honorable
    Pat Roberts (Chairman of the Committee) presiding.
        Present: Senators Roberts and Rockefeller.

           OPENING STATEMENT OF SENATOR PAT ROBERTS, CHAIRMAN

        Chairman Roberts. The Committee will come to order.
        The Committee meets today to consider the nomination of
    Janice Bradley Gardner to serve as Assistant Secretary of the
    Treasury for Intelligence and Analysis. Ms. Gardner, the
    Committee welcomes you here today and we thank you for your
    commitment and for your contributions up to this point on
    behalf of our country.
        If confirmed, Ms. Gardner will be the first person to serve
    in this position since it was created by Congress in the
    Intelligence Authorization Act for Fiscal Year 2004. That
    legislation also established the new Office of Intelligence and
    Analysis--OIA--to replace the Treasury Department's Office of
    Intelligence Support--OIS. So, I guess you're leading off with
    the alphabet instead of down toward the end.
        In creating this new office and position, the House and
    Senate conferees sought to ensure full, appropriate and timely
    sharing of information and analysis with regard to financial
    networks associated with international terrorism. Thus, the OIA
    is intended to streamline and to centralize the U.S.
    Government's capabilities to track terrorist financing networks
    all across the globe.
        In fulfilling this goal, the Office of Intelligence and
    Analysis has two primary functions--first, the creation and
    maintenance of a robust analytical capability to provide the
    OIA with in-depth analysis to target and attack the financial
    infrastructure of terrorist groups; and, second, to provide an
    enhanced intelligence liaison for Treasury's senior leadership
    with respect to the full range of international economic and
    political issues.
        Now, given these functions, we fully expect the OIA to be
    treated as a full partner--a full partner--in the intelligence
    community, receiving all intelligence, law enforcement and
    other information necessary for it to fulfill its mission. The
    Vice Chairman and I call that information access.
        While the funding and personnel levels of the Office of
    Intelligence and Analysis are classified, the fiscal year 2006
    budget request for OIA reflects, I think, the significant
    expansion of Treasury's role within the intelligence community.
    If confirmed, Ms. Gardner will be responsible for managing
    these resources in such a way as to ensure the fulfillment of
    the intent of Congress in creating the OIA. I hope that she
    will work closely with us as we exercise oversight of the OIA
    and its work as part of the intelligence community.
        Ms. Gardner comes to this task with an impressive
    background of public service in the intelligence community. She
    is an analyst by training. She has served in a variety of
    positions within the community, including the Office of the
    Director of Central Intelligence, the National Security
    Council, the Office of the Vice President and, most recently,
    the Treasury Department.
        Ms. Gardner, the Committee looks forward to hearing your
    views about the issues, tasks and challenges that will confront
    the OIA as well as your plans to address them.
        Before hearing from the nominee, I'm happy to recognize the
    distinguished Vice Chairman for any remarks that he might wish
    to make.
        Senator Rockefeller.

                         OPENING STATEMENT OF
             SENATOR JOHN D. ROCKEFELLER IV, VICE CHAIRMAN

        Vice Chairman Rockefeller. Thank you, Mr. Chairman.
        We meet today to consider the nomination of you, Ms. Janice
    Gardner, to serve as the first Assistant Secretary of the
    Treasury for Intelligence and Analysis, and it is a historic
    occasion. I rarely come to this room. This is only the second
    hearing I've ever been to in this room. It's the first time
    that an intelligence official from the Treasury Department has
    come before this Committee for a confirmation hearing. And,
    interestingly, it's also the hearing room that accommodated the
    Church Committee, which I did not know, and then in turn became
    the original committee space for the Intelligence Committee
    before our current offices were constructed in the Hart
    Building.
        I am pleased that the new Treasury Department Office of
    Intelligence and Analysis, to be headed by the Assistant
    Secretary, will not only expand Treasury's role in the
    intelligence community, but will play an important role in
    enhancing the intelligence community's ability to address
    terrorist finance issues, which our former Chairman, Bob
    Graham, keeps calling me about and wondering why we're not
    making more progress.
        In the post-9/11 security environment, there are few more
    important intelligence priorities than being able to
    successfully collect against and analyze how terrorist
    organizations such as al-Qa'ida fund their operations. The
    intelligence community must be able to gain a thorough
    understanding of terrorist financing from the banking and
    mainstream financial sector. In addition, we must be able to
    understand and monitor alternative terrorist financing
    mechanisms--for example, the trade in commodities such as gold
    or diamonds.
        The Treasury Department's expertise in this area should
    significantly improve the intelligence community's ability to
    understand and ultimately disrupt the financial lifeline that
    supports terrorist groups around the world.
        The nominee seems well qualified for this important
    position. Ms. Gardner, I join the Chairman in welcoming you to
    the Committee today and am anxious to listen to what you have
    to say.
        Thank you, Mr. Chairman.
        [The prepared statement of Senator Bond follows:]

         Prepared Statement of Hon. Christopher S. Bond, U.S. Senator
                                 from Missouri

        Ms. Gardner, it was a pleasure meeting you last week and having the
    opportunity to hear about the several successful programs that Treasury
    is pursuing in support of the Global War on Terrorism. As we discussed,
    it is imperative that the Intelligence Community and the Treasury
    Department, as our lead organization in this part of the fight,
    continue to stay hot on the trails of money used by those who would do
    us harm by striking the homeland and attacking U.S. soldiers, citizens
    and our interests abroad. I commend both you and your colleagues at
    Treasury for the work you've done, and that you do, every day.
        I intend to support fully your confirmation as Assistant Secretary
    for Intelligence and Analysis at Treasury. You are impressively
    qualified for this position. Your experience as a manager and analyst
    at the Central Intelligence Agency, a forward-deployed analyst with the
    State Department, as well as service at the National Security Council
    and in the Vice-President's Office make you an ideal nominee. While you
    understand the craft of intelligence, because you've practiced it, and
    in the field, you also have a very solid policy background which an
    Assistant Secretary for Intelligence and Analysis will undoubtedly
    need.
        Further, you have a proven track record at Treasury. As the Deputy
    Assistant Secretary for Intelligence and Analysis, you have been a key
    player in standing up the Office of Intelligence and Analysis (OIA).
    You drafted OIA's strategic plan, created new intelligence products and
    most importantly, have helped translate that intelligence into action
    by the Treasury Department. Treasury will face challenges, as do all
    members of the Intelligence Community, in fighting and working against
    existing enemies whose tactics invariably change and new ones looming
    over the horizon. Meeting these challenges and defeating our enemies
    requires solid leadership and vision along with a commitment to
    action---qualities you have demonstrated to possess.
        And so, I look forward to your continued efforts to enhance
    Treasury's intelligence capabilities and to produce more and more
    authoritative intelligence products in support of the Department's and
    United States government's counter-terrorism and law enforcement
    efforts. Thank you for your continued service to our country. I wish
    you success during the confirmation process.

        Chairman Roberts. I thank the Vice Chairman for his
    comments.
        Ms. Gardner, you may begin. Welcome to the Committee.
        [The prepared statement of Ms. Gardner follows:]

       Prepared Statement of Janice B. Gardner, Nominee to be Assistant
        Secretary for Intelligence and Analysis, U.S. Department of the
                                    Treasury

        Chairman Roberts, Ranking Member Rockefeller and distinguished
    Members of this committee, it is an honor for me to appear before you
    today. It is a privilege to have been nominated by President Bush to be
    the first Assistant Secretary of the Treasury for Intelligence and
    Analysis. I thank him, Secretary John Snow and DNI Negroponte for their
    confidence in recommending me for this important position. If
    confirmed, I look forward to working closely with this Committee, the
    U.S. Senate and your colleagues in the House of Representatives to
    disrupt financing for terrorism and other national security threats.
        I'd also like to thank my friends and colleagues who are here with
    me today. This work is truly a team effort, and I greatly appreciate
    their support. Although my parents are not here today, I'd also like to
    thank them for all their encouragement and support over the years.
        I am a career intelligence professional with over 20 years of
    experience. I first came to the Department of the Treasury in November
    2002 as the Secretary's intelligence briefer and senior liaison
    officer. When the Office of Terrorism and Financial Intelligence (TFI)
    was created last year, I became the Deputy Assistant Secretary for the
    new Office of Intelligence and Analysis (01A). Over the past year, I
    have helped Under Secretary Levey lead the effort to set up the new
    office.
        I've been fortunate to have a variety of challenging analytical and
    managerial assignments throughout my career. I started as an
    intelligence analyst working on East Asia, primarily Japan and Korea. I
    served on a rotation to the State Department as an economic officer in
    the U.S. Embassy in Tokyo. My first management assignment came in 1993
    as chief of the Persian Gulf Branch in the Office of Near East and
    South Asian Analysis. I have also served in some key staff positions,
    including the executive assistant in the Office of the Director of
    Central Intelligence, the DCI representative to the National Security
    Council and staff officer in the Vice President's office. Prior to
    being assigned to the Treasury Department, I served as Deputy Director
    of the Foreign Broadcast Information Service, where I oversaw roughly
    1,000 U.S. and foreign national staff and independent contractors.
        Mr. Chairman, if confirmed, I would focus on five key strategic
    areas:
         For the first time, the Department's intelligence office
    is producing all-source intelligence analysis on terrorist financing
    and other national security threats. Prior to the creation of OIA, the
    intelligence office served primarily as a liaison office for senior
    policymakers in the Department. The new office is now working to
    provide insightful intelligence analysis that is focused on supporting
    the full range of Treasury's authorities to cutoff illicit financing.
    While the office has already developed a current intelligence process,
    if confirmed, I would build a capability to produce strategic
    intelligence analysis that supports long-term policy development
    directed at national security threats to the financial system.
         The Office is also working to enhance intelligence support
    to the Department on the full range of political and economic issues.
    As a member of the National Security Council, Treasury needs timely
    intelligence on fast-breaking events, as well as in-depth analysis from
    experts from the intelligence community. Thus, if confirmed, I would
    work to better integrate intelligence into the policy process and
    improve support to all aspects of the Department's mission.
         As a member of the Intelligence Community, the Department
    needs to reinvigorate its relationship with the rest of the community.
    The Secretary has already met with the new Director of National
    Intelligence, and, if confirmed, I plan to devote much of my focus and
    energy to re-engage Treasury in IC forums. As you know, our office is
    the smallest component in the IC, but I believe that it can make a
    significant contribution to the community on both collection and
    production issues.
         Under the Treasury Order that created the Office of
    Terrorism and Financial Intelligence, the Office of Intelligence and
    Analysis was designated to coordinate and oversee all intelligence
    analysis within the Department. The Department houses the bulk of the
    financial information in the U.S. Government, as well as expertise on
    the global financial system. OIA will serve as the focal point that
    fuses financial data from the Office of Foreign Assets Control (OFAC)
    and Financial Crimes Enforcement Network (FinCEN), as well as the
    Intelligence Community.
         As a new office, OIA must make a significant investment in
    its future, particularly in its human resources and information
    technology infrastructure. I've been spending a large portion of my
    time as the Deputy Assistant Secretary trying to ensure that we have
    the capability to produce the kind of sophisticated analytical products
    that OIA is uniquely positioned to provide. If confirmed, I will work
    closely with Under Secretary Levey, the Assistant Secretary for
    Management and the Chief Information Officer to ensure that the office
    has the tools necessary to get the job done.
        Mr. Chairman, Senator Rockefeller, I am grateful for this
    opportunity to appear before you today. I would be pleased to answer
    any questions you and the other Members of the Committee may have.

      STATEMENT OF JANICE B. GARDNER, ASSISTANT SECRETARY OF THE
                TREASURY FOR INTELLIGENCE AND ANALYSIS-
                               DESIGNATE

        Ms. Gardner. Thank you very much. Chairman Roberts, Ranking
    Member Rockefeller, it is really an honor for me to appear
    before you today. It's a privilege to be nominated by President
    Bush to be the first, as you mentioned, Assistant Secretary of
    the Treasury for Intelligence and Analysis. And I also thank
    Secretary Snow for his confidence in recommending me to this
    important position. I met with Ambassador Negroponte and
    General Hayden yesterday, and I also greatly appreciate their
    support for me in this position.
        If confirmed, I look forward to working closely with this
    Committee, the Senate, as well as your colleagues in the House
    of Representatives to disrupt financing for terrorism and other
    national security threats.
        As you noted, I'm a career intelligence professional with
    over 20 years of experience. I first came to Treasury as the
    Secretary's intelligence briefer in 2002 and the senior liaison
    officer. When the Office of Terrorism and Financial
    Intelligence was created last year, I became the Deputy
    Assistant Secretary for the new Office of Intelligence and
    Analysis, and over the past year I've been helping Under
    Secretary Levey stand up this new office.
        I've been fortunate to have a variety of challenging
    analytical and managerial positions throughout my career. I
    started as an intelligence analyst working on East Asia,
    primarily Japan and the Koreas. I've served in some key staff
    positions, as you noted, including executive assistant in the
    Office of the DCI, served as the DCI rep at the National
    Security Council, and also worked in the Vice President's
    office. So I've been very lucky to have these good
    opportunities.
        Mr. Chairman, if I'm confirmed, I would focus on five
    strategic areas. First, as you noted, for the first time the
    Department's intelligence office will be producing all-source
    intelligence. Before this office was created, we were primarily
    a liaison shop, which was passing both raw and finished
    intelligence to the senior policymakers in the building. While
    the office has already developed some processes for the current
    intelligence process, if confirmed I would build a capacity to
    produce strategic intelligence analysis that supports long-term
    policy development directed at national security threats to the
    financial system.
        Second, the office is also working to enhance the existing
    function that we had in terms of the full range of political
    and economic support for the Department. As you know, the
    Treasury Department is also a member of the National Security
    Council, and the senior policymakers need just-in-time
    intelligence for fast-breaking items, as well as in-depth
    analysis from the intelligence community. So, if confirmed, I
    would work to better integrate intelligence into the policy
    process and improve all aspects of support to the Department's
    mission.
        Third, as a member of the intelligence community, the
    department really needs to reinvigorate its relationship with
    the rest of the intelligence community. The Secretary has
    already met with DNI Negroponte and, if confirmed, I would plan
    to devote a lot of my time and energy to re-engage Treasury in
    IC forums. As you know, our office is the smallest of the
    intelligence components, but I believe that it can make a
    significant contribution in terms of both collection and
    production issues.
        Fourth, the Office of Intelligence and Analysis has been
    designated as the office that will coordinate and oversee all
    intelligence analysis throughout the Department. The Department
    houses the bulk of financial information across the board in
    the U.S. Government, as well as expertise in the global
    financial system. If confirmed, I will work closely with the
    Directors of the Office of Foreign Asset Control, OFAC, as well
    as the Financial Crimes Enforcement Network, called FinCEN, to
    build a broad analytical capacity within the Department.
        And finally, as a new office, OIA must make significant
    investments in its future and as a new office that's primarily
    human resources as well as information technology
    infrastructure. I've been spending a major part of my time as
    the Deputy Assistant Secretary trying to ensure that we have
    the capability to produce the kind of sophisticated analytical
    products that I believe OIA is uniquely positioned to provide.
    If confirmed, I would work closely with Under Secretary Levey,
    the chief information office, as well as the Assistant
    Secretary for Management, to ensure that the office has the
    tools necessary to get the job done.
        So, Mr. Chairman and Senator Rockefeller, I am grateful for
    this opportunity to appear before you today, and I'd be pleased
    to answer any questions that you may have.
        Chairman Roberts. I have some questions for you that are
    routine but, nevertheless, are very important and I will
    proceed with those at this time.
        Does the nominee agree to appear before the Committee here
    or in other venues when invited?
        Ms. Gardner. Yes, I do.
        Chairman Roberts. Ms. Gardner, do you agree to send
    Treasury intelligence officials to appear before the Committee
    and designated staff, when invited?
        Ms. Gardner. Yes.
        Chairman Roberts. Do you agree to provide documents or any
    materials requested by the Committee so that it can carry out
    its oversight and legislative responsibilities?
        Ms. Gardner. Yes.
        Chairman Roberts. Will you ensure that all Treasury
    Department entities provide such material to the Committee,
    when requested?
        Ms. Gardner. Yes, I do.
        Chairman Roberts. Do you agree to provide such other
    information that the Committee may require so that it can carry
    out its oversight and legislative responsibilities?
        Ms. Gardner. Yes, I do.
        Chairman Roberts. I thank you for your responses.
        My first question is in regard to the focus of your
    enhanced analysis capability. Before the creation of the OIA,
    the Department's intelligence office did not produce any
    analytical products. The former Office of Intelligence Support
    served primarily in a liaison function, ensuring that the
    products of other intelligence community components were
    disseminated to the principals in the Department. Explain in
    brief how you plan to expand the range of analytical products
    that the Office of Intelligence and Analysis will produce.
        Ms. Gardner. The vision for the office is to create a
    center of expertise for terrorist financing as well as the
    financial underpin-
    nings of other national security threats. Like INR, our office
    is largely a departmental intelligence shop, basically taking
    intelligence from throughout the intelligence community and
    making it actionable intelligence. I know that's somewhat of an
    overused phrase, but what we're doing is trying to take the
    intelligence that comes into the building and apply the full
    range of Treasury authorities that we could use against them.
        So the current intelligence process is just making sure
    that when we get the information that we're able to give it to
    the policymakers, who can then assign an action and we can
    ensure follow-up.
        We're also trying to build a strategic intelligence
    capacity, looking at systemic issues. I think that other
    organizations are very good at being experts on the terrorist
    group itself, but I think we are very well positioned to
    provide unique information in the Treasury Department because,
    as I mentioned, it houses the bulk of the financial information
    from throughout the world.
        For example, the private sector. We have an excellent
    relationship with the banking community, the financial sector,
    and we do get suspicious activity reporting through the FinCEN,
    which is the Financial Crimes Enforcement Network.
        We also have access within the department to a wide range
    of expertise on the global financial network. We also have
    relationships with finance ministries across the world, which
    is very unique and provides information that I think we
    couldn't get elsewhere. We also have access to information from
    financial intelligence units, about 100 of them, throughout the
    world, also through FinCEN.
        So what we'd like to do is fuse all of the open source
    information that we're getting from FinCEN, which is a major
    open source collector on financial data, as well as the
    intelligence information and being able to provide that to look
    at targets for action short-term by the Department and looking
    at longer-term systemic trends such as how are bad guys moving
    money. Based on the information that we are seeing every day,
    we would look at trends and patterns of how money is being
    moved across, whether it's the formal financial sector or the
    informal sector.
        Chairman Roberts. Well, I thank you for that comprehensive
    answer. This is going to be, I suppose, some could say an
    unfair question, but what would you say would be your highest
    analytical priority? You mentioned the bad guys. I'm assuming
    that you would probably say that.
        Ms. Gardner. I think that our key priorities are in this
    order--al-Qa'ida and its affiliates and their financial
    networks. What we're trying to get is not just the key nodes,
    individuals or groups, but looking at the entire network,
    because, as you know, you shut down one node and another node
    pops up. And also the way that al-Qa'ida is becoming kind of
    more decentralized, looking at not just al-Qa'ida but all its
    affiliate groups. So that would be our No. 1 priority.
        But also, following closely behind that is financing for
    the Iraqi insurgency. We spend a lot of our analytical capacity
    on that.
        And more broadly, as I mentioned before, the financial
    underpinnings of broader national security threats. You can
    think about some of the countries, the rogue countries that I'm
    referring to, but if a National Security Council question is
    how do we deal with country X, Treasury can come to the table
    with unique tools and authorities--sanctions, a broad range of
    instruments. So we're looking at broader national security
    threats.
        We're also looking at financial networks of proliferators.
    That's a new area for us. And then down lower on the list would
    be issues such as keptocrats.
        Chairman Roberts. To what extent, if any--I'm going to
    switch subjects on you now--has the Office of Intelligence and
    Analysis provided any input into the developing regulations as
    Congress goes through the re-authorization of the USA PATRIOT
    Act?
        Ms. Gardner. As the Office of Intelligence, we have not
    been directly involved in the framing of the regulations. Our
    umbrella office, the Office of Terrorism and Financial
    Intelligence, and FinCEN and others are taking the lead on
    that.
        Chairman Roberts. So if I ask how has the PATRIOT Act
    helped the Treasury Department's Office of Terrorism and
    Financial Intelligence address the terrorist finance issue,
    that's a little premature or can you answer that?
        Ms. Gardner. Well, more broadly speaking, we are a
    beneficiary of information from the PATRIOT Act. For example,
    the Bank Secrecy Act, which was amended within the PATRIOT Act,
    that relates to FinCEN and they are the large collector of that
    information--the suspicious activity reporting, the currency
    trade, the CTRs. We are a beneficiary of that information, but
    we're not the actual collector. We're primarily the analytical
    arm of the Treasury Department.
        Chairman Roberts. You've talked a lot about being an equal
    partner in the interagency discussions in regard to terror
    financing. In your experience as Acting Assistant Secretary,
    has the OIA received the quality and quantity of intelligence
    it needs from other agencies to execute its mission?
        Ms. Gardner. We actually have an excellent relationship
    with the rest of the intelligence community on terrorist
    financing. We have a very well-established policy coordinating
    committee that meets almost weekly. We just met yesterday. And
    what we try to do is systematically look at the threats, look
    at the whole range of what can CIA bring to the table, FBI,
    DHS, NSA and others. And I think that we actually have a very
    productive interagency process for terrorist financing.
        Chairman Roberts. I'm probably unintentionally taking away
    a question that the Vice Chairman will ask you, but what steps
    do you plan to take to improve information access--that's our
    latest buzzword and interest--for and by the Department of the
    Treasury?
        Ms. Gardner. Information access from other organizations?
        Chairman Roberts. Yes, ma'am. Not information-sharing.
    Information-sharing does connote somebody owns it and they'll
    push it to you when they decide, as opposed to you having a
    seat at the table and having the same mission and thereby
    having information access.
        Ms. Gardner. Well, as I mentioned, I think that we have a
    variety of forums where we can have the information access, as
    you suggested. There are a number of ways, both personally,
    one-on-one. We have lots of very good bilateral relationships
    with the rest of the intelligence community, but also
    multilateral, through the interagency process.
        And one area where we do probably need to do some more work
    is in the information technology side, to make sure that we
    have information access.
        Chairman Roberts. Have you had any discussions with our new
    Director of National Intelligence with regard to the
    relationship between your shop and the intelligence community?
        Ms. Gardner. Yes. As I mentioned, I met with Ambassador
    Negroponte and General Hayden yesterday, and they were very
    supportive and offered anything that they could do to help,
    especially in the area of things like information technology,
    where I think they can have input. And Ambassador Negroponte
    has also met with Secretary Snow and they have a very good
    relationship.
        Chairman Roberts. Was there any discussion with the DNI's
    office regarding the new procedures and priorities for
    developing your budget?
        Ms. Gardner. Not directly, yet. We have had discussions
    with their staff in terms of the former Community Management
    Staff. We're starting discussions right now.
        Chairman Roberts. So that's a priority consideration.
        Ms. Gardner. Yes.
        Chairman Roberts. How do you envision the process for
    formulating your fiscal year 2007 budget?
        Ms. Gardner. Well, within the Department we've already
    launched our fiscal year 2007 budget process, and we will
    coordinate that very closely with the DNI's office. As you
    know, as a departmental office, we go through two chains. We
    have the Treasury appropriations chain, but then we have the
    intelligence oversight chain. So we actually are going through
    two channels for that.
        Chairman Roberts. We had hoped you could go through one,
    but that was not the case.
        It's been 18 months since the position for which you have
    been nominated was established in law, and I'm told that in
    order to have a core staff upon which to build, the Department
    of Treasury basically detailed the Foreign Terrorist Division
    from the Office of Foreign Assets Control to the Office of
    Intelligence and Analysis.
        First, is that correct? If so, do you have any thoughts on
    the detailing of the whole Foreign Terrorism Division to your
    shop?
        Ms. Gardner. After 9/11, there was a great need for
    intelligence analysis on terrorist financing, and at the time,
    the former Office of Intelligence Support, OIS, really didn't
    have the wherewithal to build that analytical capability. And
    OFAC, to its credit, stepped up and filled the void. The work
    that they do is basically building evidentiary packages for
    designation of terrorist groups. So primarily it is an
    intelligence analysis function. About 90 percent of their work
    is based on intelligence sources.
        So when OIA was created, it made sense to move that
    function over to OIA, and we had many discussions with the
    Director of OFAC, who I have an excellent relationship with, of
    how do we split this function. If OIA did the targeting and
    then OFAC did the analysis, how do we break up that line in the
    process?
        And it really didn't make sense to break it at any point
    where you would have two centers of expertise on the same
    groups that we were trying to designate. So I believe, and the
    Secretary has stated, that the decision was not driven by
    resources, although we did look at overlap. So I think that we
    started on April 1 with the transfer of the detail of OFAC
    analysts, and I believe that we've made excellent progress,
    even in this short time.
        I think OFAC actually has benefited from this move. They
    are better able now to leverage IC resources. They were doing
    work that was 90 percent intelligence sources. For example,
    they weren't reading the current intelligence every day. And if
    they were preparing the packages, they weren't updating and
    making sure that new targets were being considered. And now
    that we have a better line into the intelligence community,
    they have a better opportunity to work with them in terms of
    downgrading information that's usable at the U.N. or with
    foreign governments. We also now have hired a full-time
    requirements officer, so now these OFAC analysts have access to
    feeding requirements into the intelligence community. And even
    things like intelligence community training they now have
    access to.
        So I believe they are better integrated into the
    intelligence process as well as the policy process. So I think
    it's a win-win situation where OFAC has benefited and the
    Department has benefited.
        Chairman Roberts. Well, you've just taken away about four
    of my questions and done it very well. One was, can you assure
    the Committee that OIA will be supportive of OFAC at the level
    necessary to ensure the latter can achieve its mission? You've
    answered that.
        Does the Administration's budget request for fiscal year
    2006 provide for the hiring of personnel and the procurement of
    your requisite equipment that you deem essential to do the job?
        Ms. Gardner. Yes. If we are able to get our 2006 request,
    that would take us a long way to fulfilling our mission.
        Chairman Roberts. Has the Office of Intelligence and
    Analysis met its hiring objectives?
        Ms. Gardner. For fiscal year 2005 we have met all our
    objectives except for the Assistant Secretary and that person's
    special assistant.
        Chairman Roberts. What about 2006? How confident are you?
        Ms. Gardner. I'm very confident. We had 800 applicants for
    the positions that we were advertising in fiscal year 2005, so
    we've been able to attract some very good candidates.
        Chairman Roberts. Eight hundred applicants for how many
    positions?
        Ms. Gardner. For this fiscal year, seven.
        Chairman Roberts. Seven? That's very impressive.
        What additional resources or authorities do you need for
    OIA to effectively and efficiently meet its duties and
    responsibilities? Here's your chance.
        Ms. Gardner. Well, as I said, if we are able to get our
    full request for fiscal year 2006, I think we will be able to
    fulfill our mission.
        Chairman Roberts. Without objection, a statement by Senator
    Bond will appear at the appropriate place in the record
    following the statement by the distinguished Vice Chairman, who
    I recognize at this point.
        Vice Chairman Rockefeller. Thank you, Mr. Chairman.
        This is not exactly on point, but it just occurred to me
    that I think it was right here that Senator Frank Church
    revealed for the very first time to me that the President and
    his people had been reading my mail for the previous 20 years.
    I was on Nixon's enemies list. I don't quite know why--probably
    my personality. But I'm just trying to think of all the letters
    that he must have read. I think I was dating my wife at the
    time. I thought I was all sort of interesting historically.
        Chairman Roberts. If you're looking to me, No. 1, I have
    not had any access to that, other than what you've told me,
    which has been very interesting.
        Vice Chairman Rockefeller. Thank you.
        Chairman Roberts. It's not often you get me speechless,
    Jay, but on that one I think you did.
        [Laughter.]
        Vice Chairman Rockefeller. I know. I know. Candor is a
    marvelous thing.
        In its monograph, so to speak, on terrorist financing, on
    page 4 of the 9/11 Commission, they stated that prior to
    September 11, those attacks, that ``terrorist financing was not
    a priority for either domestic or foreign intelligence
    collection. As a result, intelligence reporting on the issue
    was episodic, insufficient and often inaccurate.'' Do you
    concur with that?
        Ms. Gardner. Before 9/11, I was not working on terrorist
    financing, but I can speak to the past several years that I've
    been working on the issue. It has become a priority, and I
    think that the various INTs do a wide range of collection. I
    don't want to get into too much detail. But I think that it is
    very robust at this point in terms of collection.
        Vice Chairman Rockefeller. You earlier mentioned analysis
    as opposed to collection. You made a differentiation between
    the two. So do you believe that collection and analysis on
    terrorist financing has improved since 9/11?
        Ms. Gardner. Yes. As I mentioned, the collection I think is
    fairly robust. And on the analytical side I think that we could
    probably do a little more on the strategic intelligence, and
    that's what we're trying to do, on the systemic problems--how
    do we deal with it--rather than just individual targets.
        But yes, I think it has improved.
        Vice Chairman Rockefeller. I didn't know about FinCEN. I
    should have. And you indicated that there were approximately
    100 other countries that you work with. Is it on these kinds of
    matters?
        There has been not necessarily agreement between various
    governments in the general collection of intelligence or the
    analysis from the collection of intelligence. But in your area
    it's been more agreed upon.
        Ms. Gardner. Well, the financial intelligence units around
    the world are members of what's called the Egmont Group, and
    FinCEN is the United States' FIU, the financial intelligence
    unit. And intelligence is a bit of a misnomer. It's not like
    clandestine collection. But it's an informational unit where
    they have exchanges. Some of the units are in the finance
    ministries. Some of them are in the ministries of interior.
    Some of them are in central banks. There's a wide variety.
        But FinCEN manages that program, and we have access to the
    counterterrorism-related information from that program.
        Vice Chairman Rockefeller. All right. Has intelligence
    reporting since 9/11 led the Treasury Department to make
    changes? To be honest with you, I know under both Democratic
    and Republican administration's the Treasury has tended to
    focus on certain issues, and it's been my opinion--not
    particularly on this one. So do you think that the Treasury
    Department, since 9/11, has made changes in its general
    approach to tracking and disrupting terror financing, or has it
    confirmed the validity of the Department's current strategy?
        Ms. Gardner. Yes. I'm actually very glad you asked that
    question, because that's the very purpose of the new Office of
    Terrorism and Financial Intelligence, led by an Under
    Secretary. We only have three Under Secretaries at Treasury--
    one of them for international affairs, one for domestic
    affairs, and now we have one specifically for terrorism and
    financial intelligence. I think that's critical.
        And the new approach that we're trying to take is a very
    holistic, integrated approach. In the past, Treasury didn't
    have an umbrella organization, so if a problem went to OFAC,
    the outcome would be a designation, because that's what they
    do. If the issue was directed at FinCEN, it would probably be a
    PATRIOT Act 311 designation.
        Now what we're doing is we have a targeting meeting every
    week where the Office of Intelligence and Analysis tees up the
    target--whether it's an individual, a group, trend, rogue
    nation--and we say what are the range of Treasury authorities
    that we can put toward this target. It can be anything from
    going to the financial task force--financial action task
    force--which is a multilateral organization where we can
    basically tell country X you can't be a member of this
    international club because your standards aren't high enough.
    Or it could be a designation. It could be a range of actions.
        So I think that the new strategy that Treasury has, you are
    right. Before TFI existed, the Office of Terrorism and
    Financial Intelligence, we didn't have the wherewithal to look
    at the full range of Treasury authorities. We didn't have an
    intelligence arm that could provide the analysis to support
    these authorities.
        Now we have that kind of integrated approach and that's
    exactly what TFI is about.
        Vice Chairman Rockefeller. OK. I have this feeling, not
    necessarily correctly, that Treasury--well, for example, Rubin
    sort of told Clinton what to do on free trade, occasionally the
    word ``fair'' was mentioned, but not very often. I think John
    Snow, who ran a railroad that I fought for 20 years or 30 years
    in West Virginia, has his attributes, but I'm not sure that the
    focus on what we're talking about here would fall within either
    his level of interest or whatever. I don't know how to put that
    delicately, so I just didn't do it very delicately.
        Treasury has had a problem asserting itself at the table on
    non-specifically Treasury issues, if you know what I mean. Now
    you've indicated that you've got a new leader and you've got
    you, who we're going to confirm, and seven others. And you've
    had a good conversation with Negroponte.
        But actually this question of following the money trail is
    so hugely important. We in our work tend not to get into that
    as much because we're not as good at that. So that means you
    have to be really, really good. And I want to know why I should
    look at you and feel good about the future, not with relation
    to you, but with relation to your place at the table,
    Negroponte, the traditional position of the Treasury
    Department.
        Ms. Gardner. I believe the Department has demonstrated a
    tremendous amount of commitment to this new office, both in
    terms of resources. As you know, we created both the Office of
    Terrorism and Financial Intelligence as well as OIA out of the
    budget cycle. So in 2004 and 2005 the Secretary took resources
    from international affairs, domestic finance, other parts of
    the Department in order to stand up TFI. I think that
    demonstrates a large amount of commitment of the senior
    leadership.
        In terms of budget priorities for the next fiscal year, the
    Secretary has indicated, both publicly and within the
    Department, that TFI is a priority. So I believe we've been the
    beneficiary of that. And he has devoted a significant amount of
    his time and attention with us. Of course we have weekly
    intelligence briefings, but more regularly we brief him for the
    National Security Council meetings, and in many cases not just
    terrorist finance specifically, but the underpinnings,
    financial underpinnings of national security threats is an area
    in which Treasury has a unique niche and a contribution it can
    make at the National Security Council table.
        So I believe that we are making a contribution. We do have
    a seat at the table. As well as on the area of terrorist
    financing, the policy coordination committee that I referred to
    earlier, we have a full seat at the table. We help drive the
    agenda. We share equally, the information access that you
    mentioned, from the intelligence community.
        I believe that we are making good progress with our new
    office. We've been around for a year, so I'm sure there's more
    progress that we can make, but I think, in terms of commitment,
    you have that from the Department.
        Vice Chairman Rockefeller. I'm glad to hear that.
        Just on a general basis, as you look at the importance of
    following the money trail--and that is a path and a skill which
    is absolutely essential for anything else that anybody does in
    the intelligence world, the policymaking world or whatever--
    could you go over again the structure you have or will have and
    defend it in its capacity, size, intricacy?
        Ms. Gardner. The Office of Intelligence and Analysis will
    have I think a robust analytical capability. Without going into
    numbers and dollars, we are divided up organizationally in
    terms of both the al-Qa'ida and its affiliates, Iraq, Syria,
    Iran. We have transnational threats. We have East Asia and
    Central Eurasia. I think we're organized in a way where we can
    get, both functionally and geographically, the full range of
    targets.
        We also have the intelligence support side, where we're
    still going to be supporting the rest of the Department on the
    full range of political and economic issues.
        So I believe we do have the capability to fulfill the full
    mission that we've articulated, as well as the resources.
        Vice Chairman Rockefeller. OK. I'm going to ask two more
    questions. It has been suggested that the intelligence
    community is neglecting the important role played by offshore
    banks, shell companies and business fronts in funding
    terrorism. Do you share this view? If so, why is this critical
    area not receiving more attention--if you believe that is the
    case? Is it because of the possible negative impact on
    economies in the Caribbean and elsewhere?
        Ms. Gardner. As I mentioned earlier in my statement, we are
    a work in progress and we've started on the current
    intelligence process. One of the areas that I mentioned that we
    need to work more on are these kind of systemic issues or
    functional issues, not in terms of this is the target, this is
    the threat, but how are people moving money. This is one of the
    areas, I think, that we do need to look into. I think it is
    currently a gap. We don't currently have people working on
    this.
        But I think that that's what this office could offer--
    looking over the horizon at these kinds of strategic issues. We
    have not to date.
        Vice Chairman Rockefeller. So there's a lot of work to be
    done.
        Ms. Gardner. There's more work to be done, definitely.
        Vice Chairman Rockefeller. Finally, there is Hawala. The
    transfer of funds through so-called informal value transfer
    systems, often referred to by the term ``hawala,'' present a
    difficult challenge to all of us in the intelligence community.
    Studies have shown that Hawala can serve a vital role in
    helping immigrant workers send funds to their families,
    especially for countries that lack developed financial systems.
        However, that same system has proven itself highly
    susceptible to abuse by terrorist financiers. What policies has
    Treasury drawn up regarding the regulation of Hawala, and how
    has Treasury worked with foreign jurisdictions to improve the
    oversight of same?
        Ms. Gardner. That is an area where the Treasury Department
    has focused a lot of its energies. As you know, as the
    multinational pressure comes down on the terrorist
    organizations and there's more pressure on them in terms of how
    do we move and raise funds, they are looking more at non-
    traditional areas such as Hawala, couriers and, as you
    mentioned earlier Senator, diamonds, gold. That's an area that
    we are looking at.
        But our sister organization on the policy side within the
    Office of Terrorism and Financial Intelligence has spent a lot
    of time in the FATF--the Financial Action Task Force, where I
    think there are 33 member countries, or 35--where they have
    talked with foreign governments on setting better standards on
    Hawala regulations. Areas in South Asia, even I think, have
    come a long way in terms of giving greater scrutiny to Hawala
    and making sure that they are better regulated.
        So on the policy side I think we've done a significant
    amount of work, but they continue to work on that area as well.
        Vice Chairman Rockefeller. Thank you.
        Chairman Roberts. Ms. Gardner, I know this question doesn't
    fall squarely within your area of responsibility, but I would
    appreciate your response and I think you can simply take it for
    the record and get back to me with a written response. I would
    actually prefer a written response, and it doesn't have to be
    done yesterday.
        I have heard from a number of small banks in many of my
    rural communities in my home State of Kansas--and I'm sure the
    Vice Chairman has heard the same thing. It's in regard to the
    filing of something called SARs--and we're not talking about
    the disease, unless paperwork and regulations are a disease,
    which in Washington a good case could be made for that--but the
    filing of suspicious activity reports. And these banks, almost
    to a person, believe current regulations require them to file
    more suspicious activity reports than are warranted. They even
    think there are quotas. We're talking about banks with less
    than $100 million in terms of their total assets--$60 million,
    $40 million--very small communities.
        And I think this is in response in large part--we very
    typically do this in Washington--to the Riggs Bank case in
    which the bank was fined a considerable amount for systemic
    failure to report. And I understand that. As a matter of fact,
    I think, Mr. Vice Chairman, we have in our PATRIOT Act and
    perhaps you have in your standard operating procedure that you
    are fined $1 million or twice the amount.
        For a small bank like that, that really poses a hardship,
    and they get into defensive filings. And we don't have people
    out there that really have the expertise to do that, to become
    what I call sort of a bad news bear to go around and form all
    the rest of the limited people in the bank to be of help to
    their local community. In most cases, there's one bank. So
    consequently everybody knows everybody else.
        So I guess my question is--or I know my question is--what's
    the Department doing to address the concerns that cause the
    defensive filings? And on the intel side, will these defensive
    filings cause more difficulty for you in gathering actual
    intelligence from the SARs reports?
        You can respond now very briefly, but if you could respond
    in a written response for the record, I would certainly
    appreciate it.
        Ms. Gardner. On the first part of the question, I think you
    are right, that that's a question for my counterpart who heads
    FinCEN. Director Fox has been spending a lot of time on this
    issue, talking to the private sector. And I would take that
    back to the Department to answer on that one.
        In terms of the intelligence community and our ability to
    sift through volumes of data, the volume problem is definitely
    real. The more information you have--how do you get the needle
    in the haystack? That's why I believe, first, we do have access
    to all the counterterrorism SARs, so we get those as well as
    hotline tips. And we integrate that in with the rest of the
    classified information.
        But I think that's where our information technology system
    comes in. We do need to have better tools to be able to mine
    through that volume of data, and that's something that we're
    working on as well.
        Chairman Roberts. We need information out to these small
    community banks. We have the story of Aunt Harriet, who lived
    in the community for 80 years and came in and had to show her
    driver's license to the local teller or whoever it was that she
    was doing business with, and couldn't figure out why on earth,
    since she'd been Aunt Harriet for 80 years, why in the Lord's
    name she should have to show her driver's license. But the
    person thought that that's what she had to do to comply with
    the SARs regulation. I think you can get where we're headed.
        Without objection, the record will remain open until the
    close of business tomorrow for Members to submit statements or
    questions for the record. We do appreciate your appearance
    before the Committee and your forthrightness in responding to
    the Committee. And I am very hopeful that you will be confirmed
    soon.
        Is there any other comment the distinguished Vice Chairman
    would like to make?
        Vice Chairman Rockefeller. Just one, and that is you raised
    a very interesting point when you talked about the network for
    the proliferators. It caught my attention because that's
    incredibly subtle, dangerous and where accuracy is needed. Can
    you just tell me what you meant by that?
        Ms. Gardner. Sure. The WMD Commission made a recommendation
    that we take our regime to deal with terrorist financing and
    apply that toward the financial network of proliferators, and
    we're working on trying to establish that process now. We work
    very closely with the intelligence community. They really have
    the expertise in terms of proliferators, but we're trying to
    buildup that expertise as well and have a similar robust
    program as we do for terrorist financing.
        Vice Chairman Rockefeller. Thank you.
        Chairman Roberts. Very good. We thank you very much.
        [Whereupon, at 4:12 p.m., the Committee adjourned.]

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