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
__________
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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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