[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



                    U.S. GOVERNMENT PRINTING OFFICE
24-982                      WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                    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.]

    [GRAPHIC] [TIFF OMITTED] T4982.001
    
    [GRAPHIC] [TIFF OMITTED] T4982.002
    
    [GRAPHIC] [TIFF OMITTED] T4982.003
    
    [GRAPHIC] [TIFF OMITTED] T4982.004
    
    [GRAPHIC] [TIFF OMITTED] T4982.005
    
    [GRAPHIC] [TIFF OMITTED] T4982.006
    
    [GRAPHIC] [TIFF OMITTED] T4982.007
    
    [GRAPHIC] [TIFF OMITTED] T4982.008
    
    [GRAPHIC] [TIFF OMITTED] T4982.009
    
    [GRAPHIC] [TIFF OMITTED] T4982.010
    
    [GRAPHIC] [TIFF OMITTED] T4982.011
    
    [GRAPHIC] [TIFF OMITTED] T4982.012
    
    [GRAPHIC] [TIFF OMITTED] T4982.013
    
    [GRAPHIC] [TIFF OMITTED] T4982.014
    
    [GRAPHIC] [TIFF OMITTED] T4982.015
    
    [GRAPHIC] [TIFF OMITTED] T4982.016
    
    [GRAPHIC] [TIFF OMITTED] T4982.017
    
    [GRAPHIC] [TIFF OMITTED] T4982.018
    
    [GRAPHIC] [TIFF OMITTED] T4982.019
    
    [GRAPHIC] [TIFF OMITTED] T4982.020
    
    [GRAPHIC] [TIFF OMITTED] T4982.021
    
    [GRAPHIC] [TIFF OMITTED] T4982.022
    
    [GRAPHIC] [TIFF OMITTED] T4982.023
    
    [GRAPHIC] [TIFF OMITTED] T4982.024
    
    [GRAPHIC] [TIFF OMITTED] T4982.025
    
    [GRAPHIC] [TIFF OMITTED] T4982.026
    
    [GRAPHIC] [TIFF OMITTED] T4982.027
    
    [GRAPHIC] [TIFF OMITTED] T4982.028
    
    [GRAPHIC] [TIFF OMITTED] T4982.029
    
    [GRAPHIC] [TIFF OMITTED] T4982.030
    
    [GRAPHIC] [TIFF OMITTED] T4982.031
    
    [GRAPHIC] [TIFF OMITTED] T4982.032
    
    [GRAPHIC] [TIFF OMITTED] T4982.033
    
    [GRAPHIC] [TIFF OMITTED] T4982.034
    
    [GRAPHIC] [TIFF OMITTED] T4982.035
    
    [GRAPHIC] [TIFF OMITTED] T4982.036
    
    [GRAPHIC] [TIFF OMITTED] T4982.037
    
  

                                  
