    Nonproliferation: U.S. Efforts to Combat Nuclear Networks Need
    Better Data on Proliferation Risks and Program Results
    (31-OCT-07, GAO-08-21).

    For decades, the United States has tried to impede nuclear
    proliferation networks that provide equipment to nuclear weapons
    development programs in countries such as Pakistan and Iran. GAO
    was asked to examine U.S. efforts to counter nuclear
    proliferation networks, specifically the (1) status of U.S.
    efforts to strengthen multilateral controls, (2) impact of U.S.
    assistance to help other countries improve their legal and
    regulatory controls, and (3) impact of U.S. efforts to strengthen
    its enforcement activities. GAO's findings focused on seven
    countries where network activities reportedly occurred.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-08-21
        ACCNO:   A77871
      TITLE:     Nonproliferation: U.S. Efforts to Combat Nuclear Networks
    Need Better Data on Proliferation Risks and Program Results
         DATE:   10/31/2007
      SUBJECT:   Data collection
    	     Data integrity
    	     Export regulation
    	     Exporting
    	     Interagency relations
    	     International cooperation
    	     International law
    	     International relations
    	     Nuclear proliferation
    	     Nuclear weapons
    	     Risk assessment
    	     Risk management
    	     Weapons of mass destruction

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    GAO-08-21

         * [1]Results in Brief
         * [2]Background
         * [3]United States Supported Several Multilateral Efforts to Addr

              * [4]The United States Negotiated Passage of UN Resolution 1540 t
              * [5]The United States Led NSG to Carry Out Several Activities to
              * [6]The U.S. Government Supported IAEA Actions Against Prolifera
              * [7]U.S. Government Led Efforts to Establish and Gain Support fo

         * [8]Impact of U.S. Export Control Assistance Is Uncertain Becaus

              * [9]United States Provided Export Control Assistance to Address
              * [10]Impact of U.S. Assistance Is Difficult to Determine Because

                   * [11]State's Risk Analyses Are Undocumented and Incomplete
                   * [12]State Did Not Perform Many of Its Program Assessments

         * [13]Agencies Cannot Identify Information to Assess Whether Their

              * [14]Agencies' Ability to Judge Progress Against Nuclear Prolifer
              * [15]Changes to Policies and Procedures May Strengthen U.S. Agenc

                   * [16]Executive Order, New Law, and Proposed Legislation
                     Create Ne
                   * [17]FBI Created a WMD Directorate and WMD-Related
                     Initiatives bu
                   * [18]Department of Justice Has Made Initial Plans for
                     Improving P

         * [19]Conclusion
         * [20]Recommendations for Executive Action
         * [21]Agency Comments and Our Evaluation
         * [22]GAO Comments
         * [23]GAO Comments
         * [24]GAO Comments
         * [25]GAO Contact
         * [26]Staff Acknowledgments
         * [27]GAO's Mission
         * [28]Obtaining Copies of GAO Reports and Testimony

              * [29]Order by Mail or Phone

         * [30]To Report Fraud, Waste, and Abuse in Federal Programs
         * [31]Congressional Relations
         * [32]Public Affairs
         * [33]PDF6-Ordering Information-Young-10-25-07.pdf

              * [34]GAO's Mission
              * [35]Obtaining Copies of GAO Reports and Testimony

                   * [36]Order by Mail or Phone

              * [37]To Report Fraud, Waste, and Abuse in Federal Programs
              * [38]Congressional Relations
              * [39]Public Affairs

    Report to Ranking Member, Committee on Banking, Housing, and Urban
    Affairs, U.S. Senate

    United States Government Accountability Office

    GAO

    October 2007

    NONPROLIFERATION

    U.S. Efforts to Combat Nuclear Networks Need Better Data on Proliferation
    Risks and Program Results

    GAO-08-21

    Contents

    Letter 1

    Results in Brief 2
    Background 6
    United States Supported Several Multilateral Efforts to Address Nuclear
    Networks, but Some Proposals Have Not Been Adopted 8
    Impact of U.S. Export Control Assistance Is Uncertain Because Agencies Do
    Not Consistently Assess Programs 13
    Agencies Cannot Identify Information to Assess Whether Their Ability to
    Combat Nuclear Proliferation Networks Has Improved 21
    Conclusion 28
    Recommendations for Executive Action 29
    Agency Comments and Our Evaluation 29
    Appendix I Scope and Methodology 33
    Appendix II Comments from the Department of Commerce 35
    GAO Comments 39
    Appendix III Comments from the Department of Homeland Security 40
    Appendix IV Comments from the Department of State 42
    GAO Comments 50
    Appendix V Comments from the Department of Treasury 54
    GAO Comments 56
    Appendix VI GAO Contact and Staff Acknowledgments 58

    Tables

    Table 1: EXBS Risk Analysis Categories 17
    Table 2: INECP Risk Analysis Categories 18

    Figures

    Figure 1: U.S. Export Control Assistance (All Countries), Fiscal Years
    2003 to 2006 15
    Figure 2: U.S. Export Control Assistance to Selected Countries, Fiscal
    Years 2003 to 2006 16

    Abbreviations

    CBP Customs and Border Protection
    DHS Department of Homeland Security
    DOD Department of Defense
    EAA Export Administration Act
    EXBS Export Control and Related Border Security Assistance
      Program
    FBI Federal Bureau of Investigation
    G8 Group of Eight
    IAEA International Atomic Energy Agency
    ICE Immigration and Customs Enforcement
    ICP International Counterproliferation Program
    INECP International Nonproliferation Export Control Program
    NPT Non-Proliferation Treaty
    NSG Nuclear Suppliers Group
    OFAC Office of Foreign Assets Control
    PSI Proliferation Security Initiative
    UAE United Arab Emirates
    UN United Nations
    WMD weapons of mass destruction

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
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    separately.

    United States Government Accountability Office
    Washington, DC 20548

    October 31, 2007

    The Honorable Richard C. Shelby
    Ranking Member, Committee on Banking,
      Housing, and Urban Affairs
    United States Senate

    For decades, the United States has tried to impede the efforts of
    state-run nuclear proliferation networks that provide equipment or
    components to nuclear weapons development programs in countries such as
    Pakistan, India, Iraq, and more recently, North Korea and Iran. These
    networks use business and commercial practices to circumvent national and
    international restrictions against procuring the technologies necessary
    for developing nuclear weapons programs. The A.Q. Khan nuclear
    proliferation network, operated by the former head of Pakistan's nuclear
    weapons program, was the first private network to be run for profit rather
    than state purposes. The exposure of the network in 2003 illustrated how
    determined proliferators can effectively avoid export controls to acquire
    sensitive nuclear-related and dual-use technologies, which are
    technologies that can have both commercial and military applications. The
    network also highlighted the role that companies in several countries
    unwittingly played in facilitating sales as suppliers of technology or
    points of transit. In February 2004, the President announced the breakup
    of the A.Q. Khan network and the initiation of several programs and
    activities to strengthen nonproliferation actions.

    The United States has addressed nuclear proliferation and networks through
    three means. First, the United States has conducted activities with
    multilateral bodies^1 such as the United Nations (UN), the Nuclear
    Suppliers Group (NSG),^2 the International Atomic Energy Agency (IAEA),
    and the Proliferation Security Initiative (PSI)^3 to help curtail nuclear
    proliferation. Second, it has provided bilateral assistance in the form of
    training and equipment to foreign governments to help them establish or
    strengthen laws and regulations to control exports of technology that
    could be used to develop nuclear weapons. Principal U.S. programs include
    the Export Control and Related Border Security Assistance Program (EXBS)
    and the International Nonproliferation Export Control Program (INECP),
    which are managed by the Departments of State and Energy, respectively.
    Third, on the national level, U.S. laws control the export of dual-use
    items from the United States to other countries. The U.S. government
    enforces these laws through activities such as inspections and
    investigations that may result in criminal or administrative penalties.

    ^1Multilateral bodies include formal treaty-based organizations, like the
    United Nations and International Atomic Energy Agency, and informal,
    nonbinding arrangements of like-minded countries, like the Nuclear
    Suppliers Group and the Proliferation Security Initiative.

    ^2NSG comprises 45 countries that are suppliers of nuclear-related
    technology.

    ^3State lists about 80 countries as PSI participants.

    We examined the (1) status of U.S. efforts to strengthen multilateral
    controls to counter nuclear proliferation networks, (2) impact of U.S.
    bilateral assistance to help other countries improve their legal and
    regulatory controls against nuclear proliferation networks, and (3) impact
    of U.S. efforts to strengthen its national enforcement activities to
    combat nuclear proliferation networks.

    To meet these objectives, we reviewed program documentation and
    interviewed knowledgeable officials from key U.S. agencies: the
    Departments of Commerce, Defense (DOD), Energy, Homeland Security (DHS),
    Justice, State, and Treasury. We focused our review on countries where,
    according to open-source reporting, A.Q. Khan network activities occurred.
    These include Malaysia, Pakistan, Republic of Korea, Singapore, South
    Africa, Turkey, and Dubai in the United Arab Emirates (UAE). We did not
    travel to these countries because State cited foreign policy sensitivities
    of ongoing diplomatic discussions in these countries. It is important to
    note that the level of cooperation State provided on this review was
    erratic and resulted in a delay of several months in completing our work.
    Nonetheless, with information available from other sources, we were able
    to address the review's objectives. For the purposes of this report, we
    reviewed U.S. programs and activities that involved export controls and
    their enforcement, as nuclear networks typically engage in acts that
    violate or circumvent national and international export controls. Appendix
    I contains a detailed description of our scope and methodology. We
    conducted our review from September 2006 through August 2007 in accordance
    with generally accepted government auditing standards.

    Results in Brief

    The United States has initiated a range of multilateral efforts and
    proposals to counter nuclear proliferation networks. Although multilateral
    bodies have adopted some U.S. proposals, they have not adopted others.
    First, the United States negotiated the passage of a UN Security Council
    resolution that obligated all member states to adopt laws and regulations
    prohibiting the proliferation of weapons of mass destruction. Second, the
    U.S. government led NSG, among other actions, to develop watch lists of
    nuclear technologies that are not formally controlled by member states.
    NSG has not adopted two other proposals. The first proposal would commit
    members not to export nuclear technology to states that lack the
    capability to develop the material necessary to make nuclear fuel or
    nuclear weapons. The second proposal would commit NSG members to refrain
    from providing nuclear-related technologies to countries that have not
    agreed to allow IAEA additional rights to inspect facilities suspected of
    covert nuclear activities. Third, IAEA addressed proliferation networks
    through several actions, such as forming a unit intended to analyze covert
    nuclear trade activities. However, IAEA has not yet adopted a
    U.S-supported recommendation for member states to provide IAEA with export
    data that would allow the agency to better detect covert nuclear
    activities.

    The U.S. government has focused on bilateral export control assistance to
    foreign countries to combat the sale of illicit nuclear-related technology
    through proliferation networks. Programs operated by State and Energy
    provide most of this assistance. Between 2003 and 2006, these programs
    provided about $9 million in assistance^4 to improve the export controls
    of seven countries in which nuclear proliferation network activities
    reportedly occurred.^5 However, the impact of this assistance is difficult
    to determine because State did not evaluate either (1) the proliferation
    risk for all of the countries in which network activities are alleged to
    have occurred or (2) the results of its assistance efforts. State did not
    perform risk analyses for 11 of the 56 countries in its program for those
    years and did not document the basis for each country's proliferation
    threat level or explain how the risk analyses were done. Of the six
    countries in our study to which State provided assistance, State performed
    risk analyses for five. State did not conduct program assessments for
    about 60 percent of its participating countries or for two of the six
    countries in our study that received assistance. Moreover, while State's
    program assessments characterize a country's export control system and its
    weaknesses, they do not assess how U.S. training efforts contributed to
    correcting weaknesses. In contrast, Energy performed risk analyses and
    program assessments for all of its 45 participating countries between 2003
    and 2006, which assess the contributions of the program's efforts toward
    strengthening the recipient country's export system. Despite the
    limitations of these assessments, State and Energy officials cited some
    positive changes in countries' export and border control systems as a
    result of U.S. assistance. For example, in 2006, Pakistan strengthened its
    export control laws by expanding the list of items for which it requires
    exporters to obtain licenses.

    ^4This assistance provided training such as workshops to help countries
    improve their export control laws and regulations, and equipment, such as
    radiation detectors, that help export control officers locate illicit
    radioactive material.

    ^5These countries were Malaysia, Pakistan, Republic of Korea, Singapore,
    South Africa, Turkey, and UAE. State provided export control assistance to
    six of these countries, while Energy provided assistance to all seven.

    U.S. agencies engaged in export control enforcement activities are
    impaired from judging their progress in preventing nuclear proliferation
    networks because they cannot readily identify basic information on the
    number, nature, or details of all their enforcement activities involving
    nuclear proliferation. The Departments of Homeland Security, Justice, and
    Treasury cannot readily identify which of their enforcement activities
    involve nuclear proliferation because they do not categorize their
    activities in a way that would allow them to do so. Furthermore, some
    agencies that maintain lists of individuals and companies that have
    violated export control laws or engaged in weapons of mass destruction
    (WMD) proliferation could not identify all listed parties that engaged in
    nuclear proliferation. For example, none of the entities publicly
    identified in relation to the A.Q. Khan nuclear proliferation network
    appears on Treasury's specially designated nationals list.^6 While facing
    this limitation, the U.S. government since 2003 has made several changes
    to its policies and procedures related to national enforcement activities
    that may strengthen its ability to prevent nuclear proliferation networks.
    The United States has created new sanctions programs to target and
    restrict the assets of WMD proliferators and their supporters,^7 increased
    penalties for export control violations,^8 and created a new WMD
    directorate in Justice in 2006 to coordinate investigations aimed at
    preventing foreign nations from obtaining WMD technologies.

    ^6Treasury maintains a specially designated nationals list that contains
    the names of individuals and entities that are subject to penalties under
    its various sanctions programs.

    ^7Executive Order 13382, "Blocking Property of WMD Proliferations and
    Their Supporters," July 1, 2005.

    ^8Public Law 109-177, USA Patriot Improvement and Reauthorization Act of
    2005, March 9, 2006, and Public Law 110-96, International Emergency
    Economic Powers Enhancement Act, October 16, 2007.

    To help assess the impact of the U.S. response to the threat of nuclear
    proliferation networks, we recommend that State take the following two
    actions: (1) comply with State's guidance on assessing proliferation risk
    and the export control system for each country receiving EXBS funding and
    (2) document each risk analysis conducted to evaluate the progress made in
    alleviating those risks. To help assess how U.S. government agencies that
    engage in export control enforcement activities are accomplishing their
    stated goal of combating nuclear proliferation, we also recommend that the
    Departments of Commerce, Homeland Security, Justice, and Treasury modify
    their data collection processes to clearly identify when enforcement
    activities involve nuclear proliferation.

    In comments on a draft of this report, DHS stated that it concurred with
    the substance and recommendations of the report. State said that it
    partially concurred with the recommendation to comply with its guidance on
    assessing proliferation risk and document risk analyses and planned to
    implement it. State disagreed with our findings that it had not conducted
    program assessments for 11 of 56 countries receiving EXBS assistance and
    not conducted and documented risk analyses for all countries. Nonetheless,
    as we stated in our draft, those program assessments that State conducted
    using its assessment tool did not evaluate the extent to which training
    and development efforts contribute to improved performance and results in
    the country, pursuant to federal guidance for human capital training.
    Moreover, State provided no evidence of other assessments.

    In comments on a draft of this report, Commerce stated that the
    recommendation to modify its data collection processes to clearly identify
    when enforcement activities involve nuclear proliferation should not be
    directed to it. Commerce stated that the report recognized that it already
    has this capability. However, we directed this recommendation to Commerce
    because its various lists used for enforcement purposes cannot identify
    when names are listed for nuclear proliferation purposes. Commerce
    acknowledged this deficiency when it was unable to provide this type of
    information when we requested it. Treasury did not comment on our
    recommendations but stated that it can and does identify which entities
    have been designated for nuclear proliferation reasons at the time of
    designation. However, Treasury could not readily retrieve this information
    when we requested it and did not provide us with a complete list of
    entities designated for nuclear proliferation reasons.

    Background

    Proliferation networks use commercial and business practices to obtain
    materials, technology, and knowledge to further nuclear, chemical,
    biological, and radiological programs. Nuclear proliferation networks seek
    to circumvent national and international restrictions against procuring
    the technologies necessary for developing nuclear weapons programs. These
    networks exploit weak export control systems, procure dual-use goods with
    both nuclear and common industrial uses, and employ deceptive tactics such
    as front companies and falsified documents, according to the Department of
    Energy.

    The A.Q. Khan network, established by the former head of Pakistan's
    nuclear weapons program, supplied Pakistan with nuclear technology for its
    national weapons program. However, it became a network that provided
    nuclear technology to any state for profit. The development of this
    network illustrates how determined proliferators can effectively
    circumvent existing export controls to acquire sensitive nuclear-related
    and dual-use technologies. According to Energy, the A.Q. Khan case
    illustrates the scope and magnitude of the threat of nuclear networks--how
    both weak export control systems and system gaps allowed a network to
    procure sensitive materials from states worldwide. The network also
    highlighted the role that companies in several countries, such as
    Malaysia, played in unwittingly facilitating sales as suppliers of
    technology or points of transit. According to open-source reporting,
    countries where A.Q. Khan proliferation network activities occurred
    included Germany, Japan, Malaysia, the Netherlands, Pakistan, Republic of
    Korea, Singapore, South Africa, Turkey, United Arab Emirates (UAE), and
    United Kingdom.

    The multilateral nonproliferation regime, which, among other purposes,
    attempts to counter nuclear networks, consists of the Non-Proliferation
    Treaty (NPT), International Atomic Energy Agency (IAEA) inspection regime,
    United Nations (UN) Security Council Resolution 1540, Nuclear Suppliers
    Group (NSG), and the Proliferation Security Initiative (PSI). The regime
    also includes multilateral and national assistance programs and national
    export controls and laws.

    Entered into force on March 5, 1970, NPT obligates nuclear weapon states
    not to transfer nuclear weapons or other nuclear explosive devices to any
    recipient, and not to assist, encourage, or induce any nonnuclear weapon
    state to manufacture or otherwise acquire nuclear weapons or other nuclear
    explosive devices. Under the treaty, each nonnuclear weapon state pledges
    not to receive, manufacture, or otherwise acquire nuclear weapons or other
    nuclear explosive devices, and not to seek or receive assistance in their
    manufacture. NPT also obliges each nonnuclear weapon state to accept
    comprehensive international safeguards, including inspection, through
    agreements negotiated with IAEA. The intent of these safeguards is to
    deter and detect the diversion of nuclear material for nuclear explosive
    purposes.

    Relevant U.S. assistance programs on export and border controls include
    EXBS and INECP. State's EXBS program assists foreign governments in
    strengthening their export controls by improving their legal and
    regulatory frameworks, licensing processes, border control and other
    enforcement capabilities, outreach to industry, and interagency
    coordination. The mission of Energy's INECP is to prevent the
    proliferation of WMD and WMD-related material, equipment, and technology
    by helping other countries develop effective national export control
    systems. Total EXBS funding for fiscal years 2003 through 2006 was about
    $175 million and for INECP was about $30 million.

    Since the terrorist attacks of September 11, 2001, and the exposure of the
    A.Q. Khan nuclear proliferation network, the President and U.S. government
    agencies involved in national enforcement activities have emphasized the
    importance of preventing WMD proliferation, including nuclear
    proliferation. On a national level, the United States endeavors to counter
    nuclear proliferation by enforcing laws that control the export of
    materials--including dual-use items--that could be used to make a nuclear
    weapon and by applying criminal or administrative penalties to
    proliferators. The Departments of Commerce, Homeland Security, Justice,
    State, and Treasury have responsibilities for enforcing various laws that
    relate to nuclear proliferation. The U.S. government's control over the
    export of defense nuclear and dual-use items is primarily divided between
    two departments--State and Commerce, respectively. Support for enforcement
    activities comes primarily from Commerce, through its Bureau of Industry
    and Security's Office of Export Enforcement; DHS, through its Customs and
    Border Protection (CBP) and Immigration and Customs Enforcement (ICE); and
    Justice, through the Federal Bureau of Investigation (FBI) and the United
    States Attorneys Office. Export enforcement involves inspecting items to
    be shipped, investigating potential violations of export control laws, and
    punishing export control violators.

    United States Supported Several Multilateral Efforts to Address Nuclear
    Networks, but Some Proposals Have Not Been Adopted

    The United States has initiated a range of multilateral efforts and
    proposals to counter nuclear proliferation networks. Although multilateral
    organizations have adopted some U.S. proposals that would help address
    illicit nuclear proliferation networks, they have not adopted others.
    First, the United States negotiated the passage of UN Security Council
    Resolution 1540 that obligated all member states to adopt laws and
    regulations prohibiting the proliferation of WMD. Second, the U.S.
    government led NSG to conduct several activities aimed at combating
    proliferation networks, including development of watch lists; however, two
    U.S. proposals to NSG have not been adopted. Third, with U.S. support,
    IAEA has taken several actions to address proliferation networks, such as
    establishing a unit intended to analyze covert nuclear trade activities.
    However, IAEA has not yet adopted a recommendation drafted in June 2005
    that calls on member states to provide IAEA with information on their
    exports to improve the agency's ability to detect possible clandestine
    nuclear activities. Finally, the U.S. government has led efforts to
    establish the Proliferation Security Initiative (PSI).

    The United States Negotiated Passage of UN Resolution 1540 to Combat WMD
    Proliferation

    The United States negotiated the passage of a UN Security Council
    resolution that obligated all member states to adopt laws and regulations
    prohibiting the proliferation of WMD. The UN Security Council adopted
    Resolution 1540 in April 2004, obligating all member states to adopt laws
    prohibiting proliferation of WMD as well as to maintain and enforce
    adequate export controls. Under UN Security Council Resolution 1540, all
    states have three primary obligations relating to nuclear, chemical, and
    biological weapons, and their delivery systems. They are to (1) refrain
    from providing support to nonstate actors seeking such items; (2) prohibit
    nonstate actors from acquiring, using, and attempting to acquire and use
    such items; and prohibiting nonstate actors from participating in,
    assisting, or financing such activities; and (3) put in place and enforce
    effective measures to control these items and related material to prevent
    their proliferation. Member states have begun implementing its provisions
    by submitting required reports on their export control laws to a committee
    designated the 1540 committee.^9 The committee also has been tasked with
    identifying the assistance needs of countries and coordinating their
    requests for assistance with offers from other countries.

    ^9Resolution 1673, adopted on April 27, 2006, renewed the 1540 committee
    for 2 years, and re-emphasized the steps each state must take to implement
    its 1540 obligations. The Security Council requested states to report to
    the 1540 committee on steps they have taken or intend to take to implement
    resolution 1540. Resolution 1673 calls upon states that have not yet
    presented a report to the committee to do so without delay and encourages
    all states that have submitted such reports to provide, at any time or
    upon the committee's request, additional information on their
    implementation of resolution 1540.

    The United States Led NSG to Carry Out Several Activities to Help Combat
    Proliferation Networks, but Two U.S. Proposals Are Not Yet Adopted

    The U.S. government led NSG in several activities to combat proliferation
    networks, including the development of watch lists. However, NSG has not
    adopted two U.S. proposals that would commit members to refrain from
    exporting certain technologies to states that do not already have the
    capability to use them and to countries that have not agreed to allow IAEA
    additional rights to inspect any facilities suspected of covert nuclear
    activities.

    NSG, established in 1975, is a multilateral export control regime with 45
    participating governments.^10 The purpose of NSG is to prevent the
    proliferation of nuclear weapons through export controls of nuclear and
    nuclear-related material, equipment, and technology, without hindering
    international cooperation on peaceful uses of nuclear energy. NSG
    periodically updates and strengthens its guidelines on how member states
    should control and license sensitive technologies and maintain lists of
    the technologies to be controlled. However, NSG, like other multilateral
    export control regimes, is a consensus-based organization and depends on
    the like-mindedness or cohesion of its members to be effective.

    NSG has undertaken several activities to help shut down proliferation
    networks. For example, in May 2004, NSG noted its concern over the
    discovery of a covert international proliferation trafficking network,
    through which sensitive nuclear-related equipment had found its way to
    Libya. To address this concern, the United States developed national
    procurement watch lists for all supplier states as a means to help block
    further procurement of nuclear-relevant items that are not formally
    controlled by placement on export control lists. To slow down North
    Korea's and Iran's work on their nuclear programs, the watch lists focus
    on items of interest to those countries, according to Energy. The lists
    include items that could be used to enrich uranium, reprocess spent
    nuclear reactor fuel, and fabricate fuel for nuclear reactors. Both NSG
    members and nonmembers use the lists.

    ^10Current NSG members are Argentina, Australia, Austria, Belarus, Belgium,
    Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark,
    Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan,
    Kazakhstan, Republic of Korea, Latvia, Lithuania, Luxembourg, Malta,
    Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russian
    Federation, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland,
    Turkey, Ukraine, United Kingdom, and United States.

    Through U.S. leadership, NSG also has conducted outreach to non-NSG
    members, creating awareness of issues related to the supply of sensitive
    technology, and pressing for adherence to NSG guidelines. For example, NSG
    worked with existing international organizations, such as IAEA and the UN
    Security Council Resolution 1540 committee, and with nonmembers to help
    close gaps in the nonproliferation regime that proliferation networks seek
    to exploit.

    NSG has not adopted two U.S. proposals announced by the President in
    2004.^11 The first proposal would commit members to not export certain
    nuclear technology to states that do not have the capability to develop
    material for nuclear fuel or nuclear weapons. Also, NSG has not adopted a
    second proposal under which NSG members would refrain from providing
    nuclear-related technologies to countries that have not agreed to allow
    IAEA additional rights to inspect any facilities suspected of covert
    nuclear activities. The President announced that NSG members should refuse
    to sell enrichment and reprocessing equipment and technologies to any
    state that does not already possess full-scale, functioning enrichment and
    reprocessing plants. This step, according to the President, would prevent
    new states from developing the means to produce fissile material for
    nuclear bombs.

    State and Energy officials stated that the first proposal has not yet been
    adopted within NSG because it favors states that already have enrichment
    and reprocessing capability^12 over those that do not. According to State
    officials, states in the European Union (EU) are opposed to this proposal
    because it violates EU internal free trade policies. However, we could not
    independently determine why NSG has not adopted these proposals because
    State did not facilitate our travel to meet with representatives of NSG
    members in Vienna, Austria.

    ^11Office of the President, "President Announces New Measures to Counter
    the Threat of WMD," Remarks by the President on Weapons of Mass
    Destruction Proliferation (Washington, D.C.: Feb. 11, 2004).

    ^12Enrichment is the process of increasing the amount of uranium usable in
    a nuclear reactor or nuclear weapon. Reprocessing is the chemical process
    of removing impurities from plutonium, the byproduct of burning uranium in
    a nuclear reactor, so that it can be reused in a nuclear reactor or
    nuclear weapon.

    NSG also has not yet adopted the second U.S. proposal announced in 2004 to
    restrict exports of nuclear-related technology to countries that have not
    adopted IAEA's more stringent safeguards inspection agreements. In 2004,
    the President proposed that by the next year, only states that have signed
    the Additional Protocol would be allowed to import equipment for their
    civilian nuclear programs. However, other countries have been hesitant to
    implement the Additional Protocol for various reasons, including an
    unwillingness to submit to intrusive inspections.

    The U.S. Government Supported IAEA Actions Against Proliferation Networks, but
    IAEA Has Not Yet Adopted a Recommendation to Better Detect Covert Nuclear
    Activities

    The U.S. government supported IAEA's establishment of several activities
    over the past several years to help combat nuclear proliferation
    trafficking and network activities. However, IAEA has not yet adopted a
    recommendation that calls for member states to provide it with export data
    that would allow the agency to better detect covert nuclear activities.

    IAEA is responsible for inspecting civilian nuclear facilities worldwide
    to ensure they are used exclusively for peaceful purposes. In 1997, IAEA
    adopted a new arrangement, called the Additional Protocol, for existing
    safeguards agreements under NPT that is designed to give IAEA a stronger
    role and more effective tools for conducting worldwide inspections.

    IAEA established several activities supported by the Unites States to help
    combat nuclear proliferation trafficking and network activities. These
    included the following:

               o Nuclear Trade and Technology Analysis Unit. Following the
               revelations about extensive covert networks procuring and
               supplying sensitive nuclear technology, IAEA established a new
               unit in November 2004. It was intended to help analyze patterns
               and trends in nuclear trade to identify covert nuclear trade
               activities.^13

               o Illicit Trafficking Database. IAEA established IAEA Illicit
               Trafficking Database in 1995 to facilitate exchange of
               authoritative information on incidents of illicit trafficking and
               other related unauthorized activities involving nuclear and other
               radioactive materials among states. It contains information, which
               has been confirmed by the states involved, about incidents of
               illicit trafficking and related unauthorized activities involving
               nuclear and other radioactive materials.
               o Nuclear Security Fund. IAEA established a fund in March 2002 to
               support its expanded nuclear security program, including
               developing international standards and providing training and
               assistance to combat nuclear smuggling. Through 2006, pledges from
               IAEA members totaled nearly $74 million, with about $34 million
               from the United States.

    ^13The unit was formerly named the Nuclear Trade Analysis Unit .

               IAEA has not yet implemented a draft recommendation^14 that member
               states provide it with relevant information on their exports so
               IAEA can improve its ability to detect possible undeclared nuclear
               activities. Under this recommendation, members would provide
               information on their exports of specified equipment and nonnuclear
               material, procurement enquiries, export denials, and relevant
               information from commercial suppliers, according to State
               officials. However, there is no current mandate to do this,
               according to State officials.

    			  U.S. Government Led Efforts to Establish and Gain Support for PSI

               The United States established and gained support for PSI, a
               U.S.-led effort to work with other countries to interrupt the
               transfers of sensitive items to proliferators.^15

               PSI is a global effort to stop trafficking of WMD, their delivery
               systems, and related materials to and from states and nonstate
               actors of proliferation concern worldwide. Launched by the
               President on May 31, 2003, PSI is a set of voluntary activities,
               not a formal treaty-based organization, to stop
               proliferation-related shipments of WMD technologies. PSI
               interdiction training exercises and other operational efforts are
               intended to help participating states work together in a
               coordinated and effective manner to stop, search, and seize
               shipments. In September 2003, the countries participating in PSI
               at that time agreed to its statement of interdiction principles.
               The statement identifies specific steps participants can take to
               effectively interdict WMD-related trafficking and prevent
               proliferation. As of July 2007, PSI participants conducted 28
               exercises (maritime, air, land, or combined) to practice
               interdictions, held 15 operational experts group meetings to
               discuss proliferation concerns and plan future exercises, and
               hosted 4 workshops to acquaint industries with PSI goals and
               principles.

    ^14Recommendations to be Considered by the Advisory Committee on Safeguards
    and Verification within the Framework of the IAEA Statute to Further
    Improve the Effectiveness and Efficiency of the Safeguards System.

    ^15The United States also established and gained support for the Group of
    Eight (G8) global partnership against proliferation, which pledges funds
    to train and equip countries to deter the spread of WMD. However, limited
    G8 assistance was pledged for export and border controls and none of the
    G8 assistance was pledged to the countries in the scope of our review.

               State lists several countries as PSI participants that open-source
               reporting also names as locations of nuclear proliferation network
               activity. Listed PSI participants are Germany, Japan, Singapore,
               Turkey, UAE, and United Kingdom. PSI nonparticipants are Malaysia,
               Pakistan, Republic of Korea, and South Africa. (See our September
               2006 classified report on PSI.^16)

    			  Impact of U.S. Export Control Assistance Is Uncertain Because Agencies
    			  Do Not Consistently Assess Programs

               The U.S. government has focused on bilateral export control
               assistance to foreign countries to combat the sale of illicit
               nuclear-related technology through proliferation networks. Three
               programs, operated by State, Energy, and Defense provide this
               assistance. However, the impact of this assistance is difficult to
               determine because State did not evaluate either the proliferation
               risk for all of the countries in which network activities are
               alleged to have occurred or the results of its assistance efforts.
               In contrast, Energy performed risk analyses and program
               assessments for all of its 45 participating countries. Although
               there were limitations in the assessments of the programs,
               officials from Energy and State said that some positive changes
               occurred as a result of U.S. export and border control assistance.

               United States Provided Export Control Assistance to Address Nuclear
    			  Networks

               To combat nuclear networks, State officials said they focused on
               addressing export control problems in other countries. State's
               EXBS assists foreign governments in strengthening their export
               controls by improving their legal and regulatory frameworks,
               licensing processes, border control and other enforcement
               capabilities, outreach to industry, and interagency coordination.
               EXBS partners with a number of U.S. agencies and the private
               sector to provide capacity-building training, technical exchanges
               and workshops, regional conferences and seminars, and inspection
               and interdiction equipment. For example, EXBS completed an
               advanced workshop on regulations in July 2006 with Pakistani
               officials and sponsored a forum on technical aspects of
               regulations in September 2006 through a private contractor. In
               Malaysia, EXBS sponsored a workshop on legal aspects of
               regulations in August 2005 and another workshop with Malaysian
               officials in Washington, D.C., on export licensing in February
               2007. Commerce conducted these workshops. In addition, DHS stated
               that ICE is the primary law enforcement partner to EXBS for
               training its counterpart agencies to investigate, conduct
               surveillance and undercover operations, detect, and interdict
               unauthorized transfers of WMD-related items. During 2007 and 2008,
               according to DHS, ICE conducted or planned to conduct training in
               several countries where A.Q. Khan network activities reportedly
               occurred, including Malaysia, Pakistan, Singapore, Republic of
               Korea, Turkey, and UAE.

    ^16GAO, Nonproliferation: Better Controls Needed to Plan and Manage
    Proliferation Security Initiative Activities, [40]GAO-06-937C (Washington,
    D.C.: Sept. 28, 2006).

               Energy's INECP provides bilateral assistance to governments to
               prevent the proliferation of WMD and WMD-related material,
               equipment, and technology by working with governments worldwide to
               develop effective national export control systems. INECP receives
               funding from and collaborates with the EXBS and Homeland
               Security's CBP and also works with other agencies such as the
               Coast Guard. For example, in Turkey, INECP conducted training to
               help customs inspectors identify nuclear-related commodities^17 in
               March 2004 and September 2005. INECP has conducted similar
               training in Pakistan, Singapore, and Republic of Korea.

               In addition, DOD's International Counterproliferation Program
               (ICP) offers equipment, training, and advice to help countries
               prevent and counter WMD proliferation, including border control
               assistance. The majority of ICP's programs have been in countries
               in the former Soviet Union, the Balkans, and the Baltics, with
               total funding of about $29 million for fiscal years 2003 through
               2006. ICP provided about $86,000 for training in Singapore in
               fiscal year 2006.^18

               Overall, the U.S. provided about $234 million dollars in export
               control assistance to 66 countries between fiscal years 2003 and
               2006 through these three programs, with EXBS as the largest
               contributor to U.S. export control assistance (see fig. 1).

    ^17INECP's Commodity Identification Training familiarizes customs
    inspectors with the materials, components, and equipment sought by WMD
    procurement programs. It simplifies export control lists by grouping items
    into categories and aids recognition through a focus on physical
    appearance using pictures and demonstration kits.

    ^18We did not include DOD's ICP in our evaluation of program assessments or
    comment on the results of its assistance efforts because only one ICP
    country, Singapore, is in the scope of our review. Also, ICP is currently
    under reorganization and performs no program assessments and produces no
    annual report.

               Figure 1: U.S. Export Control Assistance (All Countries), Fiscal
               Years 2003 to 2006

               From fiscal years 2003 through 2006, the U.S. government provided
               about $9 million, or 4 percent of the overall total, to seven
               countries in which A.Q. Khan network activities reportedly
               occurred: Malaysia, Pakistan, Republic of Korea, Singapore, South
               Africa, Turkey, and the UAE. From fiscal years 2003 to 2006, EXBS
               provided about $7 million to six of these countries,^19 while
               INECP provided nearly $2 million to the seven countries in our
               study. Turkey was the largest recipient of assistance among the
               countries in our study, and Pakistan was the second largest (see
               fig. 2).

    19One country accepted the U.S. offer of export control assistance on
    condition that all U.S. government agencies refrain from publicly
    mentioning its participation in any EXBS-funded activity, according to
    State.

               Figure 2: U.S. Export Control Assistance to Selected Countries,
               Fiscal Years 2003 to 2006

    			  Impact of U.S. Assistance Is Difficult to Determine Because U.S.
    			  Agencies Do Not Consistently Assess Their Programs

               Despite U.S. government efforts to provide bilateral assistance to
               countries to help them improve their export control systems, it is
               difficult to determine the impact of these programs because State
               did not consistently conduct or document risk analyses as a basis
               for countries to receive assistance and has not assessed the
               program performance. Although Energy and State officials said they
               are unable to systematically establish that their assistance has
               effected positive change in countries that received U.S.
               assistance, they said some positive change occurred during the
               period in which assistance was provided.

    			    State's Risk Analyses Are Undocumented and Incomplete

               While both State's and Energy's assistance programs conduct risk
               analyses on a country-by-country basis to prioritize assistance
               efforts, State did not conduct one such analysis for each country
               in its program and did not document the ones it conducted. The
               EXBS strategic plan indicates EXBS prioritizes assistance in
               accordance with five proliferation threat categories for which
               most, but not all, EXBS countries are assessed (see table 1).

    Table 1: EXBS Risk Analysis Categories

    Category 1 Countries that are a potential WMD source (which would include
                  countries that have a production capability and those that are
                  believed to have stocks).
    Category 2 Countries that produce WMD-related dual-use items (countries
                  with industries that can be expected to be seeking licenses for
                  transfer and where there is an ongoing risk of unauthorized
                  transfer from outgoing production, and risk of contributing to
                  WMD programs).
    Category 3 Countries that are significant transit or transshipment routes
                  for WMD and related items.
    Category 4 Countries that are producers of advanced conventional
                  weapons/man-portable air-defense systems and related dual-use
                  items.
    Category 5 Countries that represent less significant threats for
                  transit/transshipment and threats for retransfer of munitions
                  stocks.

    Source: State.

    The EXBS strategic plan, which provides guidance for EXBS, provided a risk
    analysis summary for five of the six countries in our study to which it
    provided assistance, but did not provide a risk assessment for one
    country. The strategic plan indicated that two of the countries in our
    study are at risk in all five categories, and a third country is at risk
    in all but category 1. A fourth country is at risk in categories 2, 4, and
    5, and a fifth country is at risk in categories 3 and 5. State did not
    respond to our request for a risk assessment for the sixth country.
    Overall, the EXBS strategic plan did not provide a risk analysis for 11 of
    the 56 countries to which it provided assistance between fiscal years 2003
    and 2006. Furthermore, EXBS officials could not provide us with
    documentation showing the basis for which they determined the risk
    categories for the countries that appear in the strategic report and said
    the risk analyses are not updated annually.

    INECP assesses country risk by measuring proliferation threat based on the
    capacity of the recipient country to supply or be a conduit for
    WMD-related goods. The assessment also takes into consideration the
    vulnerability of the recipient country's export control system to illicit
    procurement. INECP places the countries receiving assistance into one of
    four categories based on that countries' production capacity and export
    control system (see table 2).

    Table 2: INECP Risk Analysis Categories

    Category 1: Low-commodity production capacity, no export control system
    Category 2: High-commodity production base, no export control system
    Category 3: Low-commodity production capacity, perfect export control
                   system
    Category 4: High-commodity production base, perfect export control system

    Source: Energy.

    All of the countries in our study to which INECP provided assistance fell
    into category 2: having potentially weak export control systems and high
    commodity production capacity. While we did not evaluate the methodology
    that EXBS and INECP use to perform risk assessments or prioritize their
    assistance, we observed that each INECP risk analysis we reviewed was more
    thoroughly documented than the EXBS risk analyses. For example, INECP
    provided us with country plans for each of the countries in our scope,
    which document and identify the sources of information used to determine
    the status of the country's export control system and its potential to
    supply or be a conduit for nuclear-related materials. In addition, an
    INECP official noted that one of the purposes of the country plans is to
    document the data that inform their risk analyses.

      State Did Not Perform Many of Its Program Assessments

    Despite U.S. government efforts to provide bilateral assistance to
    countries to help them improve their export control systems, it is
    difficult to determine the impact of these programs because State has not
    assessed their performance. Specifically, State's EXBS has not performed
    annual program assessments for all countries receiving EXBS assistance, as
    required by program guidance, and has not received required data for some
    assessments that were conducted. INECP also requires annual program
    assessments, which it conducted for all of its 45 assistance recipients
    for fiscal years 2003 through 2006.

    EXBS program assessments characterize features of a country's export
    control system but do not evaluate the impact of U.S. training on the
    country. EXBS guidance specifies that recipient countries should be
    assessed using a revised assessment tool, which contains questions
    intended to determine whether the country is committed to developing an
    effective export control system and identify the weaknesses in the
    country's current system.^20 Categories in the EXBS assessment tool, which
    was implemented by contractors, include an examination of various aspects
    of the recipient country's dual-use and munitions licensing, the country's
    ability to enforce its regulations, and a review of industry-government
    relations. In contrast, federal guidance for evaluating human capital
    training calls for assessing the extent to which training and development
    efforts contribute to improved performance and results.^21

    State contractors performed assessments in 2004 for only two of the six
    countries in the scope of our review that received EXBS funding, Turkey
    and UAE. According to a State official, these assessments were not useful
    for State's purposes because the contractor provided the results of the
    evaluations but not the data that EXBS officials said would be necessary
    to measure the progress of these countries in improving their export
    control systems. The official said the data were omitted because State did
    not require them in the contract. Therefore, EXBS did not receive the
    information it needed to construct a baseline against which to evaluate
    the progress of these countries. State has contracted for future
    assessments to be used as a baseline for determining countries' future
    progress. Overall, State received assessments for 34 countries--about 60
    percent of the countries that received EXBS funding between 2003 and
    2006--though none of these contained baseline data, according to State
    officials. In commenting on a draft of this report, State said that EXBS
    program planning takes into account other information, including open
    source information, diplomatic reporting from posts, intelligence
    community products, and assessments and information from other U.S.
    government agencies. As State commented, however, these and other
    information sources are intended to substitute for the assessment tool
    only when State determines it is infeasible or impractical to use it.

    ^20The EXBS strategic plan states that the program continuously reevaluates
    the effectiveness of recipient countries' strategic trade controls,
    remaining deficiencies, and the contributions made by EXBS.

    ^21GAO, Human Capital: A Guide for Assessing Strategic Training and
    Development Efforts in the Federal Government, [41]GAO-04-546G
    (Washington, D.C.: March 2004).

    INECP also produces country plans that serve as program assessments for
    all of the 47 countries to which it provided assistance in this period.^22
    An INECP official said that the country plans are updated on an annual
    basis in order to track the history of assistance with each partner
    country and to enforce a standard process for tracking and reviewing the
    combined results of assistance efforts and of countries' independent
    efforts to implement system reforms. INECP officials provided us with
    updated annual assessments for all seven countries, which contain an
    analysis of each country's export control system, and proposals for future
    assistance. While we did not evaluate the quality of Energy's assessments,
    INECP has updated assessments for all of its program participants, and the
    assessments contain the baseline data necessary for measuring future
    progress and are updated on an annual basis. In addition, we noted that
    the INECP country plans we reviewed assess the country's progress in
    improving its export control systems and contain recommendations for
    future activities.

    Energy and State officials said they are unable to systematically
    establish that their assistance has effected positive change in countries
    to which they provided assistance, because actions such as changing laws
    and implementing new regulations are undertaken by sovereign governments
    and are not always directly attributable to assistance efforts. However,
    officials from both programs said some positive change occurred during
    this period. For example, officials from both EXBS and INECP cited some
    improvements in assistance recipients' export controls that occurred after
    training or other types of assistance were provided. In 2006, after
    exchanges and consultations regarding licensing and regulations with EXBS
    program officers, Pakistan strengthened its export controls by further
    expanding its control lists, according to State officials. In addition,
    officials reported that Malaysia, UAE, and Pakistan drafted export control
    legislation during the period of EXBS engagement in each of these
    countries. Pakistan passed its export control law in 2004.

    Furthermore, INECP officials reported that their engagement with Singapore
    has led its government to amend its control list to adhere to all the
    multilateral control lists, and INECP also helped Pakistan complete
    adoption of the European Union control list. In addition, they said that
    the Republic of Korea has reported that INECP training led to several
    high-level investigations of illegal transfers and greater industry
    awareness of dual-use items.

    ^22Energy developed 34 country plans for its 47 INECP assistance
    recipients, according to Energy officials. One plan covers 15 European
    Union countries and one plan--for Uzbekistan--has not been updated
    because, according to the officials, Energy has been unable to work with
    Uzbekistan since that government stopped cooperating with the United
    States.

    Agencies Cannot Identify Information to Assess Whether Their Ability to Combat
    Nuclear Proliferation Networks Has Improved

    U.S. agencies engaged in export control enforcement activities are
    impaired from judging their progress in preventing nuclear proliferation
    networks because they cannot readily identify basic information on the
    number, nature, or details of all their enforcement activities involving
    nuclear proliferation. While facing this limitation, the U.S. government
    since 2003 has made several changes to its policies and procedures related
    to national enforcement activities that may strengthen its ability to
    prevent nuclear proliferation networks.

    Agencies' Ability to Judge Progress Against Nuclear Proliferation Is Impaired by
    Constraints on Information

    U.S. agencies engaged in export control enforcement activities are
    impaired from judging their progress in preventing nuclear proliferation
    networks because they cannot readily identify basic information on the
    number, nature, or details of all their enforcement activities involving
    nuclear proliferation. Most of these agencies do not collect or store
    their data in a manner that would allow them to reliably identify which of
    their enforcement actions involved nuclear proliferation. This makes it
    difficult for agencies to determine the level of resources expended in
    countering nuclear proliferation networks, as well as the results obtained
    from these efforts. Since 2005, Commerce and ICE have taken steps to
    facilitate more reliable identification of their enforcement activities
    involving nuclear proliferation.

    Most of the agencies engaged in export control enforcement
    activities--DHS, Justice, and Treasury--could not readily produce reliable
    data representing their respective agency's enforcement actions related to
    nuclear proliferation. Enforcement data, such as data collected on
    inspections, seizures, investigations, arrests, indictments, and penalties
    applied, were often stored according to the law that had been violated or
    by a category or code describing the item corresponding to the enforcement
    action, such as the type of good seized. Consequently, agencies compiling
    enforcement data related to nuclear proliferation often depended on
    conducting searches of agency databases using key words (e.g., "nuclear")
    or key codes (e.g., the ICE code for dual-use items is "06"). An accurate
    compilation of such data depends on several factors, including (1)
    selecting appropriate key words or key codes for searching the database,
    (2) use of appropriate words or codes to describe the nature of the
    enforcement action when agency officials record it in the database, and
    (3) mandatory completion of the data fields that would identify the
    enforcement action as being related to nuclear proliferation. For example,
    we asked agencies engaged in export control enforcement activities for
    data on their activities related to nuclear proliferation, with the
    following results:

               o CBP compiled data on enforcement activities (seizures) related
               to nuclear proliferation by engaging in keyword searches of its
               database. However, a CBP official noted there is not a specific
               category for dual-use seizures, so these seizures would not be
               included in the statistics. Moreover, the official stated that one
               would need to look beyond seizures, for example to inspections, to
               get a complete picture of CBP activities conducted to combat
               nuclear proliferation. However, CBP does not have data on
               inspections conducted for nuclear or WMD proliferation purposes
               unless the inspection led to a seizure of goods or involved
               nuclear material, according to DHS officials.
               o ICE performed a key-code search of its database to produce
               statistics on closed investigations involving nuclear
               proliferation. An ICE official said the statistics that ICE
               compiled likely undercounted the number of investigations
               involving nuclear proliferation because there is not one single
               code agents can use to represent nuclear proliferation cases.
               Rather, there are multiple codes that represent nuclear
               proliferation, but agents are not required to enter all of them.
               The ICE official concluded that it would be difficult to correctly
               identify all nuclear proliferation-related ICE investigations.
               o In response to our request for enforcement statistics, FBI
               produced two conflicting sets of statistics on open investigations
               related to nuclear proliferation. One Bureau official noted that
               identifying enforcement actions related to nuclear proliferation
               is not straightforward; rather, it requires Bureau analysts to
               interpret information about the enforcement action to judge
               whether it involves nuclear proliferation. In technical comments
               on a draft of this report, Justice stated that FBI has a
               classification which defines proliferation investigative
               activities. This classification can be used to search the FBI's
               automated case system to determine the exact number of
               investigative activities and obtain a report on the nature and
               details of these activities, according to Justice. However, two
               FBI officials told us that it is not possible to search the
               database to identify all cases related to nuclear proliferation.
               Compiling data such as the number of cases involving nuclear
               proliferation and deciding whether cases are related to WMD or
               nuclear proliferation requires an interpretation of the data.
               o Finally, Justice (Executive Office for United States Attorneys)
               stated its case management database could not sort cases according
               to nuclear proliferation networks, nuclear proliferation, or WMD
               proliferation, due to the way the data are stored, but can sort
               export enforcement data.

               Furthermore, some agencies that maintain lists of individuals and
               companies that have violated export control laws or engaged in WMD
               proliferation could not identify which parties were placed on the
               lists for nuclear proliferation reasons. For example, Treasury,
               which maintains a specially designated nationals list containing
               the individuals and entities that have been designated under its
               Office of Foreign Assets Control's (OFAC) various sanctions
               programs,^23 reported it cannot identify all entities that have
               been placed on the list for nuclear proliferation reasons.
               Treasury officials said that they maintain records on the
               rationale for placing an entity on the list, but do not
               necessarily denote the type of WMD proliferation entities are
               engaged in or support. In addition, Treasury confirmed that none
               of the entities publicly identified in relation to the A.Q. Khan
               nuclear proliferation network appears on the specially designated
               nationals list or in the Annex to Executive Order 13382. Commerce
               stated that it does not maintain readily available information
               that would allow it to identify individuals or entities placed on
               its denied persons list for nuclear proliferation reasons. This
               list includes individuals and entities that have been denied
               export privileges. In contrast, State reported periodically to
               Congress that, between 2003 and 2006, it had sanctioned foreign
               persons for engaging in nuclear proliferation activities with Iran
               or Syria.^24

    ^23Treasury's OFAC administers two distinct sanctions programs designed to
    combat WMD proliferation in addition to the program under Executive Order
    13382. According to Treasury, these are (1) an import ban that provides
    for State to name certain foreign persons from whom U.S. persons cannot
    import goods, services, or technology; and (2) a highly enriched uranium
    blocking program intended to protect highly enriched uranium from
    attachment by third parties.

    ^24State imposed sanctions under the Iran Nonproliferation Act (as amended,
    the Iran and Syria Nonproliferation Act) from 2003 through 2006 for the
    transfer to, or acquisition from, Iran or Syria of goods, services, and
    technology controlled under multilateral export control lists or otherwise
    having the potential to make a material contribution to the development of
    WMD or cruise or ballistic missile systems. Entities involved in
    conventional arms transfers were the most widely sanctioned, followed by
    the chemical-biological, missile, and nuclear areas..

               Several agencies stated they use their enforcement data to make
               resource allocation decisions. However, without enforcement data
               that accurately reflect actions taken to prevent nuclear
               proliferation, agencies would not be able to make informed
               resource decisions. Without the ability to reliably identify their
               enforcement activities involving nuclear proliferation, it is
               difficult for agencies to accurately track the amount of time and
               resources expended in countering nuclear proliferation networks,
               as well as the results obtained from these efforts. Most of these
               agencies lack performance metrics for assessing the results
               obtained from their efforts to prevent nuclear proliferation.^25
               In contrast, federal standards for internal control state that
               management should have procedures in place to create performance
               indicators, monitor results, track achievements in relation to
               agency plans, and ensure adequate communications with external
               stakeholders that may significantly impact achieving the agency's
               goals.^26

               Since 2005, two agencies have taken steps to facilitate more
               reliable identification of their enforcement activities involving
               nuclear proliferation. In fiscal year 2005, Commerce began
               classifying enforcement data to identify enforcement actions
               involving nuclear proliferation. In June 2007, an ICE official
               proposed modifying ICE's case data collection process to more
               precisely identify investigations involving nuclear proliferation.
               Thus, the official stated, if implemented, this proposal would
               allow ICE to better track its performance in combating nuclear
               proliferation, as well as respond to congressional inquiries for
               information.

    ^25ICE stated that many of the components which may be sought by
    procurement networks for a developing nuclear program are categorized as
    dual-use technologies, having both nuclear and nonnuclear, commercial and
    military applications. Unless the true ultimate application of the
    dual-use components is known, according to ICE, it is difficult to
    accurately apply metrics to assess export enforcement activities involving
    nuclear proliferation.

    ^26GAO, Standards for Internal Control in the Federal Government,
    [44]GAO/AIMD-00-21 .3.1 (Washington, D.C.: November 1999). Federal
    standards for internal control state that management should (1) have
    effective procedures to monitor results; (2) track major agency
    achievement in relation to its plans; (3) establish and monitor
    performance measures and indicators; (4) have documentation, whether in
    paper or electronic form, useful to managers in controlling their
    operations and to auditors and others involved in analyzing operations;
    and (5) ensure there are adequate means of communicating with, and
    obtaining information from, external stakeholders that may have a
    significant impact on the agency achieving its goals.

               Changes to Policies and Procedures May Strengthen U.S. Agencies'
    			  Ability to Combat Nuclear Proliferation Networks

               Since 2003, the U.S. government has made several changes to the
               policies and procedures governing national enforcement activities
               that may strengthen agencies' ability to combat nuclear
               proliferation networks. On a national level, the United States
               endeavors to counter nuclear proliferation by enforcing laws that
               control the export of materials that could be used to make a
               nuclear weapon, including dual-use items, and applying criminal or
               administrative penalties to proliferators. Commerce, DHS, Justice,
               State, and Treasury carry out these enforcement activities, often
               in collaboration.

      Executive Order, New Law, and Proposed Legislation Create New Penalties and
      Enhance Existing Penalties

               Two changes to policies and procedures governing national
               enforcement activities created new penalties and increased
               existing penalties for export control violations. In addition,
               draft legislation developed by the executive branch is intended to
               further increase penalties and provide some new authorities for
               one enforcement organization.

               First, Executive Order 13382, announced in 2005, created an
               additional nonproliferation sanction program that allows Treasury
               and State to target the assets of proliferators and those who
               assist them.^27 Under the executive order, Treasury and State
               designate individuals or entities that are WMD proliferators, deny
               them access to the U.S. financial system, and have all their
               property or interests in property blocked. Initially, the sanction
               program applied to eight organizations in Iran, North Korea, and
               Syria. As additional WMD proliferators are designated, they are
               added to Treasury's specially designated nationals list, which
               contains the names of individuals and entities that have been
               sanctioned under OFAC's various sanctions programs. U.S. persons
               and entities are prohibited from providing support to these
               proliferators and can be punished with criminal or civil penalties
               if they are found to be in violation of this prohibition. The
               executive order is designed to cut off support to proliferators
               from front companies, financiers, logistical supporters, and
               suppliers. As of June 15, 2007, 43 persons or entities were on
               Treasury's specially designated nationals list pursuant to the
               executive order.

    ^27Executive Order 13382, "Blocking Property of WMD Proliferators and Their
    Supporters," July 1, 2005.

               Second, the USA Patriot Improvement and Reauthorization Act of
               2005^28 increased the maximum penalties that can be imposed on
               certain export control violations from $10,000 to $50,000 per
               violation. Maximum prison sentences increased from 10 years to 20
               years. However, according to Commerce statements, these increased
               penalties are not high enough to deter violators or to provide
               incentives for violators to cooperate with law enforcement. The
               Assistant Secretary of Commerce for Export Enforcement recently
               noted that significantly increased penalty provisions are needed.

               Third, the congress enacted a law that that increased penalties
               and the executive branch drafted a legislative proposal intended
               to further increase penalties and provide some new authorities for
               one enforcement organization. The International Emergency Economic
               Powers Enhancement Act was enacted into law on October 16, 2007,
               and increased the civil and criminal penalties applicable to the
               violation of OFAC sanctions.^29 In addition, the executive branch
               drafted a legislative proposal, the Export Enforcement Act of
               2007, to revise and enhance the Export Administration Act (EAA)^30
               and be in effect for 5 years after the date of its enactment. The
               legislative proposal would increase penalties for export control
               violations while enhancing Commerce's law enforcement authorities
               to combat illicit exports of dual-use items. For example, criminal
               penalty amounts in the proposal would be increased to $1,000,000
               per violation or a fine and imprisonment for not more than 10
               years, for each violation by an individual, and $5,000,000 or up
               to 10 times the value of the exports involved, whichever is
               greater, per violation by a person other than an individual. The
               civil penalty amounts would be increased to $500,000 for each
               violation of EAA or any regulation, license, or order issued under
               that act. According to Commerce, the increased penalty amounts
               would provide an enhanced deterrent effect. The proposal also
               would provide Commerce's special agents with statutory overseas
               investigative authority and expanded undercover authorities and
               expand the list of criminal violations upon which a denial of
               export privileges may be based.

    ^28Public Law 109-177, March 9, 2006.

    ^29Public Law 110-96, the International Emergency Economic Powers
    Enhancement Act, October 16, 2007.

    ^3050 U.S.C. App. S 2401 et seq. Authority granted under the act lapsed in
    August 2001. However, Executive Order 13222, Continuation of Export
    Control Regulations, which was issued in August 2001 under the authority
    provided by the International Emergency Economic Powers Act (50 U.S.C.
    SS1701 et seq.), continues the controls established under the act, and the
    implementing Export Administration Regulations.

                 FBI Created a WMD Directorate and WMD-Related Initiatives but
    				 Provided No Information on Impact of These Changes

               In 2006, the FBI created a WMD directorate to support and
               consolidate FBI's WMD components. The directorate was designed to
               prevent and disrupt foreign nations or individuals from obtaining
               WMD capabilities and technologies and using them against the
               United States, according to FBI documents. In addition, FBI
               officials reported the initiation of several initiatives designed
               to prevent WMD proliferation. These initiatives include a program
               focused on dual-use nuclear technology, as well as
               country-specific WMD counterproliferation efforts in national labs
               and other U.S. entities. However, FBI did not provide information
               on the impact of these activities on FBI's ability to counter WMD
               and nuclear proliferation.

               In technical comments on a draft of this report, Justice stated
               that FBI has information to provide but was not given the
               opportunity to do so. FBI's WMD Directorate can provide
               information on this impact by providing limited information on
               accomplishments and statistics on a number of proliferation
               investigations and operations, according to Justice. However, on
               June 15, 2007, we asked FBI officials about the impact of either
               the establishment of the WMD directorate or the WMD initiatives on
               FBI's ability to counter WMD and nuclear proliferation, but they
               provided no answer nor would they meet with us to discuss related
               issues. In late June, FBI provided us with a written response that
               included no specific information that answered our request.

    			    Department of Justice Has Made Initial Plans for Improving
    				 Prosecution of Export Control Violations

               To respond to the threat of nuclear proliferation, Justice is
               preparing a national export enforcement initiative that department
               officials stated is intended to improve the investigation and
               prosecution of persons and corporations violating U.S. export
               control laws. The initiative follows the 2006 creation of the
               National Security Division within Justice to strengthen the
               effectiveness of its national security efforts and, according to a
               Justice official, to respond to the threat of WMD proliferation.

               As we have previously reported, U.S. Attorneys Offices have many
               competing priorities, including prosecuting cases involving
               terrorism, counterterrorism, and government contractor fraud, and
               the level of interest and knowledge of export control laws varies
               among assistant U.S. Attorneys.^31 According to the U.S. Attorney
               General, one of the key elements of the initiative will be to
               provide federal prosecutors with the assistance, training, and
               expertise they need to undertake export control prosecutions.^32
               For example, Justice held a national export control conference in
               May 2007. The following month, Justice appointed its first
               National Export Control Coordinator, who will be responsible for
               coordinating with other U.S. agencies the enforcement of export
               controls and development of training materials for prosecutors in
               an effort to enhance their capacity and expertise. The impact of
               the export enforcement initiative on Justice's ability to
               prosecute export control cases is yet to be demonstrated as the
               initiative has just begun.

    			  Conclusion

               Although the U.S. government has announced that countering nuclear
               proliferation and nuclear networks is a high priority, it lacks
               the necessary information to assess the impact of its multiple
               efforts to do so. While U.S. assistance to foreign governments to
               help them strengthen their laws and regulations against nuclear
               proliferation networks has the potential for positive impact, U.S.
               agencies are not sufficiently monitoring aid recipients' actions
               to assess what U.S. assistance is accomplishing. State's
               assistance program is not completing and documenting risk analyses
               or program assessments, as required by program guidance. In
               addition, U.S. government agencies that engage in enforcement
               activities to counter nuclear proliferation networks are impaired
               from judging their progress in this effort because they cannot
               readily identify basic information on the number, nature, or
               details of their enforcement activities involving nuclear
               proliferation. Without such information, agencies cannot identify
               what their efforts are, assess how their efforts are working, or
               determine what resources are necessary to improve their
               effectiveness. Developing such information would be a necessary
               first step for U.S. agencies in beginning to assess how well their
               efforts to combat nuclear proliferation networks are working. As
               of October 2007, these agencies may not know whether their
               capabilities for addressing the problem of nuclear proliferation
               networks have improved.

    ^31GAO, Export Controls: Challenges Exist in Enforcement of an Inherently
    Complex System, [45]GAO-07-265 (Washington, D.C.: Dec. 20, 2006).

    ^32Prepared Remarks of Attorney General Alberto R. Gonzales at the Global
    Initiative to Combat Nuclear Terrorism Law Enforcement Summit; Miami,
    Florida; June 11, 2007.

               Recommendations for Executive Action

               To help assess the impact of the U.S. response to the threat of
               nuclear proliferation networks, we recommend that the Secretary of
               State take the following two actions: (1) comply with its guidance
               to conduct periodic assessments of proliferation risk and the
               export control system for each country receiving EXBS funding and
               (2) document each risk analysis conducted to evaluate the progress
               made in alleviating those risks.

               To help assess how U.S. government agencies that engage in export
               control enforcement activities are accomplishing their stated goal
               of combating nuclear proliferation, we recommend that the
               Secretaries of Commerce, Homeland Security, and Treasury, and the
               U.S. Attorney General individually direct that their respective
               agency's data collection processes be modified to support the
               collection and analysis of data that clearly identify when
               enforcement activities involve nuclear proliferation. For example,
               each agency could consider

               o designating appropriate categories or codes for nuclear
               proliferation for staff to use when recording information in the
               databases and
               o mandating completion of relevant data fields that would identify
               an enforcement action as related to nuclear proliferation.

    			  Agency Comments and Our Evaluation

               We provided copies of this report to Commerce, Defense, DHS,
               Energy, Justice, State, and Treasury. Commerce, DHS, State, and
               Treasury provided written comments. Justice provided us with
               technical comments that we incorporated in the report, as
               appropriate. Defense and Energy did not comment on the draft.

               In its comments on a draft of this report, Commerce stated, first,
               that the report did not identify what it means by enforcement
               activities involving nuclear proliferation. Second, Commerce
               stated that the report should present the President's 2004
               nonproliferation proposals to NSG exactly as stated. Finally,
               Commerce stated that the recommendation to modify relevant
               databases to support the collection and analysis of data that
               clearly identify when enforcement activities involve nuclear
               proliferation should not be directed to it because the report
               recognizes that it already has this capability. Moreover, it said
               that Commerce officials could take names from its denied persons
               list, which does not indicate the reason for listing the name, and
               query the relevant database to identify whether the name was
               listed for nuclear proliferation reasons. First, we did identify
               what is meant by enforcement activities on page 8 of this report
               to include inspecting items to be shipped, investigating potential
               violations of export control laws, and punishing export control
               violators. We asked Commerce officials to identify when such
               activities involved nuclear proliferation but they indicated
               certain actions for which they could not. Second, we shortened the
               description of the President's 2004 proposals for brevity and
               clarity. Moreover, Commerce's description of the proposals does
               not match the text of the proposals as originally presented in the
               President's speech. Finally, while our report recognized that
               Commerce had developed the capability that we recommend for its
               database, we included Commerce in the recommendation because its
               various lists, such as the denied persons list, cannot identify
               names included for nuclear proliferation reasons. Commerce
               indicated to us that because the database and denied persons list
               were not linked, providing such information would have been
               difficult and require a case-by-case analysis. As a result,
               Commerce did not provide us with this requested data.

               In its comments, DHS agreed with the substance of the report and
               concurred with the overall recommendations. DHS described specific
               actions that it took in September 2007 to identify seizures in the
               relevant database that involve nuclear proliferation. It also
               described modifications that it intends to make by the end of 2007
               to identify examinations of cargo involving nuclear proliferation
               issues.

               In commenting on a draft of this report, State partially concurred
               with our recommendation that it should (1) comply with its
               guidance to conduct periodic assessments of proliferation risk and
               the export control system for each country receiving EXBS funding
               and (2) document each risk analysis conducted to evaluate the
               progress made in alleviating those risks. State commented that it
               recognizes the value of taking a more standardized approach to
               assessing program countries on a regular basis as a means of
               refining assistance efforts and evaluating progress. Therefore,
               State said that it will set clear guidelines for when assessments
               and reassessments should occur. State also said that it recognizes
               the value in documenting in one place all risk analyses and the
               process by which they are reached and will do so in a revised
               publication of its EXBS program strategic plan.

               State disagreed with our finding that it did not conduct program
               assessments for about 60 percent of its participating countries,
               asserting that it conducted program assessments for all six of the
               countries in the scope of our review that received EXBS funding.
               State said that it used various means to assess its program other
               than its revised assessment tool designed for this purpose. We
               reiterate our finding that State did not conduct program
               assessments using its designated tool for two of the six countries
               in our study that received EXBS assistance. More importantly,
               these assessments do not evaluate the impact of U.S. training on
               the country, as recommended by federal guidance for evaluating
               human capital training. This guidance calls for assessing the
               extent to which training and development efforts contribute to
               improved performance and results. State also disagreed with our
               finding that it did not perform risk analyses for 11 of the 56
               countries in its program for fiscal years 2003 through 2006. It
               stated that the country risk assessment summary in its program
               strategic plan included only those countries for which funds were
               requested at the time the plan was prepared and the summary was
               never intended as a comprehensive source of all risk analyses.
               However, the State official responsible for EXBS did not provide
               this explanation and said the risk summary does not change unless
               there is new information. Furthermore, we found that this
               explanation of the risk assessment summary is not consistent. At
               least one country was included in the summary even though it
               received no EXBS funding throughout this period and at least four
               other countries were not listed although they did receive EXBS
               funding.

               Treasury did not comment on our recommendations. However, Treasury
               stated that it can and does identify which entities have been
               designated for nuclear proliferation reasons at the time of
               designation. However, this statement misses our point. As our
               report stated, U.S. government agencies that engage in enforcement
               activities to counter nuclear proliferation networks are impaired
               from judging their progress in this effort because they cannot
               readily identify basic information on the number, nature, or
               details of their enforcement activities involving nuclear
               proliferation. If Treasury cannot readily retrieve this
               information, then the information is not useful for assessing the
               impact of its sanctions specifically on nuclear proliferators.
               Despite its assertion, Treasury did not provide us with a list of
               all listed entities designated for nuclear proliferation reasons,
               as we had requested. In commenting on our finding that Treasury
               did not designate any entities publicly identified with the A.Q.
               Khan network, Treasury stated that its designation decisions
               involve an interagency process that identifies, assesses, and
               prioritizes targets. Therefore, it appears that Treasury did not
               designate any A.Q. Khan network entities because an interagency
               process did not identify and assess them as priority targets.

               We are sending copies of this report to interested congressional
               committees and the Secretaries of Commerce, Defense, Energy,
               Homeland Security, Justice, State, and Treasury. We will also make
               copies available to others upon request. In addition, this report
               will be available at no charge on the GAO Web site at
               [42]http://gao.gov .

               If you or your staff have any questions concerning this report,
               please contact me at (202) 512-8979 or at [43]christoffj@gao.gov .
               Staff acknowledgments are listed in appendix VI.

               Sincerely yours,

               Joseph A. Christoff
    			  Director, International Affairs and Trade

    			  Appendix I: Scope and Methodology

               To meet our objectives, we reviewed program documentation and
               interviewed knowledgeable officials from key U.S. agencies: the
               Departments of Commerce, Defense (DOD), Energy, Homeland Security
               (DHS), Justice, State, and Treasury.

               To identify the status of U.S. efforts to strengthen multilateral
               controls to counter nuclear proliferation networks, we reviewed
               program documentation and interviewed knowledgeable officials from
               key U.S. agencies: DOD, Energy, and State. We also met with
               acknowledged nonproliferation experts to discuss U.S. proposals
               announced in 2004 and their applicability to addressing nuclear
               proliferation networks. The experts included two former Assistant
               Secretaries of State for Nonproliferation and experts from the
               following institutions: Center for Contemporary Conflict, National
               Security Affairs Department, Naval Postgraduate School in
               Monterey, California; Center for International Trade and Security
               at the University of Georgia, Athens, Georgia; Center for
               Nonproliferation Studies at The Monterey Institute of
               International Studies, Washington, D.C.; Center for Strategic and
               International Studies, Washington, D.C.; Georgetown University,
               Edmund A. Walsh School of Foreign Service, Washington, D.C.;
               Heritage Foundation, Washington, D.C.; Nuclear Threat Initiative,
               Washington, D.C.; and Wisconsin Project on Nuclear Arms Control,
               Washington, D.C.

               We tried to visit the U.S. Mission to the International Atomic
               Energy Agency, officials of the International Atomic Energy
               Agency, and foreign government representatives to the Nuclear
               Suppliers Group, all in Vienna, Austria, to discuss various U.S.
               proposals and other efforts to strengthen activities to combat
               nuclear proliferation networks. While State agreed after months of
               negotiation to facilitate our proposed travel to Vienna, it did
               not do so within any acceptable time frames. Furthermore, citing
               diplomatic sensitivities, State proposed restrictions on which
               U.S. and foreign officials we could meet and on what subjects we
               could discuss, thus causing considerable delays in completing our
               work.

               To assess the impact of U.S. bilateral assistance to help other
               countries improve their legal and regulatory controls against
               nuclear proliferation networks, we reviewed program documentation
               and interviewed knowledgeable officials from key U.S. agencies:
               DOD, Energy, and State. To evaluate the amount of assistance
               provided overall and to the seven countries associated with
               nuclear networks in our study (Malaysia, Pakistan, Republic of
               Korea, Singapore, South Africa, Turkey, and United Arab Emirates),
               we obtained and reviewed financial data from DOD, Energy, and
               State, and interviewed agency officials about these data. We
               determined that these data were sufficiently reliable for the
               purposes of this report. Therefore, we reviewed program assessment
               documentation to the extent that it was available in Washington,
               D.C. We interviewed knowledgeable DOD, Energy, and State officials
               about the impact and outcomes of these programs. We also contacted
               the embassies in Washington, D.C., of the governments of Malaysia,
               Pakistan, Republic of Korea, Singapore, South Africa, Turkey, and
               United Arab Emirates to obtain their perspectives on U.S.
               assistance. However, only the government of Singapore responded to
               our request for information.

               To assess the impact of U.S. efforts to strengthen its national
               enforcement activities to combat nuclear proliferation networks,
               we reviewed documentation and met with officials of the
               Departments of Commerce, DHS, Justice, State, and Treasury in
               Washington, D.C. We also spoke by phone with DHS/Immigration and
               Customs Enforcement attaches stationed in Bern, Switzerland, and
               Vienna, Austria, regarding their roles in enforcing U.S. export
               control laws for cases related to nuclear proliferation. Also, we
               reviewed statistical data and descriptions of enforcement cases
               from Commerce, DHS, and Justice, when available, to try to
               determine how many cases involved nuclear proliferation and how
               such information was used to assess agencies' activities. We also
               reviewed data on Commerce, State, and Treasury sanctions against
               identified WMD proliferators. The information on foreign law in
               this report does not reflect our independent legal analysis, but
               is based on interviews and secondary sources.

               We focused our review on countries that, according to open-source
               reporting, are involved in the A.Q. Khan network. These include
               Malaysia, Pakistan, Republic of Korea, Singapore, South Africa,
               Turkey, and Dubai in UAE. We did not travel to these countries
               because State cited foreign policy sensitivities of ongoing
               diplomatic discussions in these countries. It is important to note
               that the level of cooperation State provided on this review was
               erratic and resulted in a delay of several months in completing
               our work. Nonetheless, with information available from other
               sources, we were able to address the review's objectives.. For the
               purposes of this report, we reviewed U.S. programs and activities
               that involved export controls and their enforcement, as nuclear
               networks typically engage in acts that violate or circumvent
               national and international export controls.

               We conducted our review from September 2006 through August 2007 in
               accordance with generally accepted government auditing standards.

    			  Appendix II: Comments from the Department of Commerce

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 2.

    See comment 3.

    See comment 1.

    See comment 4.

    GAO Comments

               The following are GAO's comments on the Department of Commerce's
               letter dated October 15, 2007.

                            1. We agree with Commerce's statement that the draft
                            report did not identify what it means by "enforcement
                            activities involving nuclear proliferation." First,
                            we did identify what is meant by enforcement
                            activities on page 8 of this report to include
                            inspecting items to be shipped, investigating
                            potential violations of export control laws, and
                            punishing export control violators. We asked Commerce
                            officials to identify when such activities involved
                            nuclear proliferation but they indicated certain
                            actions for which they could not.
                            2. We disagree with Commerce's comment that our
                            description of the President's proposal to the NSG
                            was not clear. We had simplified and shortened the
                            proposals to make them clear and free from jargon.
                            3. We disagree with Commerce's comment that our draft
                            is true but misleading in stating that Commerce does
                            not maintain readily available information that would
                            allow it to identify individuals or entities placed
                            on its denied parties list for nuclear proliferation
                            reasons. Commerce said the purpose of this list is to
                            readily identify persons who are denied export
                            privileges and it further explained that its agents
                            can query names from the list to determine the reason
                            individuals were denied export privileges. However,
                            when we requested that Commerce provide such a list,
                            Commerce indicated that it had not previously
                            conducted such a review, did not maintain readily
                            available information, and it could not readily
                            create a list of individuals who have been denied
                            export privileges for nuclear proliferation reasons.
                            4. In comments on a draft of this report, Commerce
                            stated that the recommendation to modify its data
                            collection processes to clearly identify when
                            enforcement activities involve nuclear proliferation
                            should not be directed to it. Commerce stated that
                            the report recognized that it already has appropriate
                            categories or codes for nuclear proliferation staff
                            to use when recording information in the databases
                            and already mandates completion of relevant data
                            fields that would identify an enforcement action as
                            related to nuclear proliferation. However, we
                            directed the recommendation to Commerce because its
                            various lists, including the denied persons list,
                            cannot identify when names are listed for nuclear
                            proliferation purposes. Commerce acknowledged this
                            deficiency when it was unable to provide this type of
                            information when we requested it.

    			  Appendix III: Comments from the Department of Homeland Security

               Appendix IV: Comments from the Department of State

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 1.

    See comment 3.

    See comment 4.

    See comment 2.

    See comment 6.

    See comment 5.

    See comment 8.

    See comment 7.

    See comment 11.

    See comment 10.

    See comment 9.

    See comment 15.

    See comment 14.

    See comment 13.

    See comment 12.

    See comment 16.

               The following are GAO's comments on the Department of State's
               letter dated October 17, 2007.

    GAO Comments

                            1. We disagree with State's comment explaining why it
                            did not conduct program assessments for about 60
                            percent of its participating countries. State said
                            that it also relies on an interagency assessment of a
                            country at the early stages of engagement with the
                            program and on a variety of open source information,
                            studies by nongovernmental research organizations,
                            and information from other U.S. agencies. State did
                            not indicate in its comments what percentage of
                            contractor program assessments have been completed
                            and produced no documentation of these other
                            assessments. Moreover, in earlier documents State
                            explicitly informed us that the contractor assessment
                            tool is the current survey tool EXBS uses to provide
                            a formal and full assessment.
                            2. We disagree with State's comments that it assesses
                            program progress despite the absence of a contractor
                            assessment. State's EXBS strategic plan, written
                            responses to our questions, and discussions with the
                            key EXBS official who State designated to meet with
                            us emphasized the contractor program assessments as
                            the tool to be used for a full assessment of a
                            country's progress, as well as for planning purposes
                            and establishing a baseline of a country's
                            capabilities and needs. The strategic plan describes
                            the contractor's assessment tool as compiling data
                            and analysis from all sources to assist State to
                            measure performance broadly by evaluating progress
                            made between assessments. State's written response to
                            us stated that EXBS tracks the performance of the
                            foreign government in its development of strategic
                            trade controls using the assessment tool.
                            3. We agree with State's comment that its program
                            planning takes into account other information,
                            including open source information, diplomatic
                            reporting from posts, intelligence community
                            products, and assessments and information from other
                            U.S. government agencies. We have added language to
                            the report to reflect this.
                            4. State commented that EXBS officials have access to
                            and factor into their planning process assessments by
                            other U.S. agencies, such as Energy's INECP which
                            receives some EXBS funding. While we commend such
                            interagency collaboration, we note that any Energy
                            program assessments are relevant only to its training
                            and courses provided in support of EXBS, not to the
                            EXBS program as a whole. Furthermore, the evidence
                            that State provided in its meetings with us, its
                            written response to our questions, and its EXBS
                            strategic plan discusses interagency coordination in
                            planning, but not in assessing the contributions made
                            by the EXBS program to particular countries.
                            5. We disagree with State's comment that risk
                            analyses have been conducted and documented for each
                            country that received or is receiving assistance
                            under EXBS and that we based our findings solely on
                            the EXBS strategic plan. In addition to the strategic
                            plan, we relied on State's written response to
                            questions we posed on the subject and meetings with
                            State EXBS officials. As we stated in our report, the
                            EXBS strategic plan did not identify a risk level for
                            11 of the 56 countries to which it provided
                            assistance between fiscal years 2003 and 2006.
                            6. We disagree with State's comment that our report
                            was inconsistent because it included information on
                            EXBS assistance to six of the seven countries where
                            A.Q. Khan network activity was reported to have
                            occurred as well as other countries receiving EXBS
                            assistance. We included statistical information on
                            the total number of EXBS program assessments to place
                            the data on the seven countries into an overall
                            perspective.
                            7. We partially agree with State's comment that it
                            would be more clear to say that the EXBS country risk
                            assessment summary did not include two of the
                            countries in which network activities are alleged to
                            have occurred. We cannot confirm State's assertion
                            that a risk analysis was done for one of these
                            countries. State provided no documentation to support
                            this point.
                            8. We disagree with State's comment that the absence
                            of a country from the risk summary table in the EXBS
                            strategic plan does not mean a risk analysis was not
                            done. State provided no evidence that it had
                            conducted a risk analysis for this country, and the
                            State official designated to speak for the program
                            said there was no documentation for the analyses.
                            9. We disagree with State's comment that State
                            subsequently requested and received missing program
                            assessment data in December 2006 that the contractor
                            had not initially provided to support assessment
                            results. State provided no evidence to support this
                            comment and it directly contradicts information
                            provided to us by the cognizant State official.
                            10. We disagree with State's comment that its EXBS
                            program assessments generally highlight the
                            relationship between assistance efforts and progress
                            in specific countries. In a written response to our
                            questions in February 2007, State highlighted the
                            difficulties in doing so. Also, during the course of
                            our review, State said that EXBS does not
                            systematically track information on changes to a
                            country's laws for the purpose of showing the
                            effectiveness of the EXBS program because it is
                            difficult analytically to create a good design for
                            doing so. Nonetheless, State said in its comments on
                            a draft of this report that formal reassessments of
                            countries are needed to more accurately and regularly
                            measure progress.
                            11. We disagree that State made a sincere and good
                            faith effort to cooperate with our review of nuclear
                            proliferation networks. The level of cooperation
                            State provided on this review was erratic and
                            resulted in a delay of several months in completing
                            our work. While State agreed after months of
                            negotiation to facilitate our proposed travel to
                            Vienna, it did not do so within any acceptable time
                            frames and delayed providing some requested documents
                            for several months. Nonetheless, with information
                            available from other sources, we were able to address
                            the review's objectives.
                            12. These findings were not directed to State. The
                            agencies to which they were directed did not raise a
                            concern about access to classified information and
                            none of these agencies disagreed with our
                            recommendation.
                            13. State commented that our draft should note that
                            Pakistan passed its export control law in 2004. We
                            have added this language to the report.
                            14. We disagree with State's comment that referring
                            to PSI as a multilateral body ascribes a formality to
                            the PSI that does not exist and that the U.S. has
                            never sought to create. Given our previous classified
                            report on PSI, we would not ascribe any more
                            formality to PSI than appropriate. We recognized that
                            this lack of formality contributed to management
                            deficiencies in U.S. PSI activities, and congress
                            legislated in Public Law 110-53 that corrective
                            action be taken.
                            15. We agree with State's statement that certain
                            states or their governments were not involved in
                            proliferation network activities; only private
                            entities in these countries were reported to have
                            been allegedly involved in proliferation network
                            activities in open sources. We included clarifying
                            language, accordingly.
                            16. We disagree with State's comment that we should
                            report that more than 80 countries are PSI
                            participants. As we reported in an unclassified
                            section of our report on PSI, State did not provide
                            us with documentation to demonstrate any precise
                            number of countries that expressed support for PSI.

    Appendix V: Comments from the Department of Treasury

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 9.

    See comment 8.

    See comment 7.

    See comment 6.

    See comment 5.

    See comment 3.

    See comment 4.

    See comment 1.

    See comment 2.

               The following are GAO comments on the Department of Treasury's
               letter dated October 24, 2007.

    			  GAO Comments

                            1. We disagree with Treasury's statement that because
                            the scope of our study covered countries where A.Q.
                            Khan operated, it likely skewed the results. The
                            request for our review directly asked us to assess
                            the U.S. government response to the A.Q. Khan
                            network. Therefore, it was methodologically
                            appropriate to focus on countries where such network
                            activities reportedly occurred and would have been
                            fruitless to focus a review of the U.S. response to
                            nuclear networks on countries where such activity has
                            not occurred.

                                         2. We disagree with Treasury's assertion
                                         that it is able to identify which of its
                                         designations are related to nuclear
                                         proliferation and could similarly
                                         identify any civil penalties imposed
                                         based on the violation of OFAC
                                         sanctions. Treasury officials stated to
                                         us that they could not conduct a keyword
                                         search to identify entities that had
                                         been designated for nuclear
                                         proliferation reasons. One official
                                         emphasized that Treasury lacks the
                                         ability to definitively identify whether
                                         a given entity was designated for
                                         nuclear proliferation reasons. Treasury
                                         officials noted that they keep records
                                         on the rationale for an entity's
                                         designation, but they do not necessarily
                                         record what type of WMD proliferation
                                         the entity is involved in, if any.
                                         Despite its assertion, Treasury could
                                         not readily retrieve this information
                                         when we requested it and did not provide
                                         us with a complete list of entities
                                         designated for nuclear proliferation
                                         reasons.
                                         3. Treasury's statement that it can and
                                         does identify which entities have been
                                         designated for nuclear proliferation
                                         reasons at the time of designation
                                         misses our point. It stated that
                                         entities or individuals designated under
                                         Executive Order 13382 are listed on
                                         OFAC's web site and specially designated
                                         nationals' list with the specific
                                         identification of "NPWMD." During our
                                         review, Treasury could not readily
                                         retrieve this information specifically
                                         for nuclear proliferation designations.
                                         4. In commenting on our finding that
                                         Treasury did not designate entities
                                         publicly identified with the A.Q. Khan
                                         network, Treasury stated that its
                                         designation decisions involve an
                                         interagency process that identifies,
                                         assesses, and prioritizes targets. Given
                                         the absence of these names, Treasury's
                                         statement suggests that the interagency
                                         process did not identify and assess
                                         entities of the A.Q. Khan network as
                                         priority targets.
                                         5. We agree with Treasury's comment on
                                         the footnote on OFAC's sanctions
                                         programs and have added clarifying
                                         language, accordingly.
                                         6. We have modified the language in the
                                         draft to reflect Treasury's comment.
                                         7. We have changed this language,
                                         accordingly.
                                         8. We believe that the language of our
                                         draft accurately reflects the meaning of
                                         Treasury's proposed rewording in a more
                                         concise fashion. Thus, we have not
                                         modified the language of our report.
                                         9. We have modified language in the
                                         report to reflect Treasury's updated
                                         information on enactment of the
                                         International Emergency Economic Powers
                                         Enhancement Act.

               Appendix VI: GAO Contact and Staff Acknowledgments

    			  GAO Contact

               Joseph A. Christoff at (202) 512-8979 or christoffj@gao.gov

    			  Staff Acknowledgments

               Muriel J. Forster, Assistant Director; Jeffrey D. Phillips; Leah
               DeWolf; Jennifer L. Young; Lynn Cothern; Mark B. Dowling; Mark C.
               Speight; and Martin De Alteriis made key contributions to this
               report.

    (320443)

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    Highlights of [53]GAO-08-21 , a report to Ranking Member, Committee on
    Banking, Housing, and Urban Affairs, U.S. Senate

    October 2007

    NONPROLIFERATION

    U.S. Efforts to Combat Nuclear Networks Need Better Data on Proliferation
    Risks and Program Results

    For decades, the United States has tried to impede nuclear proliferation
    networks that provide equipment to nuclear weapons development programs in
    countries such as Pakistan and Iran.

    GAO was asked to examine U.S. efforts to counter nuclear proliferation
    networks, specifically the (1) status of U.S. efforts to strengthen
    multilateral controls, (2) impact of U.S. assistance to help other
    countries improve their legal and regulatory controls, and (3) impact of
    U.S. efforts to strengthen its enforcement activities.

    GAO's findings focused on seven countries where network activities
    reportedly occurred.

    [54]What GAO Recommends

    To assess the impact of the U.S. response to nuclear proliferation networks, GAO
    recommends that State assess countries receiving U.S. funding and document its
    risk analyses.

    To assess U.S. agencies' progress in combating nuclear proliferation, GAO
    recommends that each agency modify its data collection processes to identify
    when enforcement actions involve nuclear proliferation.

    Homeland Security and State generally concurred with our recommendations.
    Commerce and Treasury said recommendations should not be directed to them.
    We disagree as they cannot identify when certain enforcement actions
    involved nuclear proliferation.

    The United States has advocated several multilateral actions to counter
    nuclear proliferation networks. Although multilateral bodies have adopted
    some U.S. proposals, they have not adopted others. For example, the United
    States negotiated passage of a United Nations Security Council resolution
    that obligated all member states to adopt laws and regulations prohibiting
    the proliferation of weapons of mass destruction. It also led the
    development of watch lists of nuclear technologies that are not formally
    controlled by states and formation of a multilateral unit intended to
    analyze covert nuclear trade activities. However, one multilateral body
    has not adopted two key U.S. proposals made in 2004 to commit its members
    to add new restrictions on exporting sensitive nuclear technologies. Also,
    one multilateral organization has not adopted a recommendation for member
    states to provide it with more export data that would allow it to better
    detect covert nuclear activities.

    The impact of U.S. bilateral assistance to strengthen countries' abilities
    to counter nuclear networks is uncertain because U.S. agencies do not
    consistently assess the results of this assistance. The impact of this
    assistance is difficult to determine because the Department of State did
    not evaluate either (1) the proliferation risk for all of the countries in
    which network activities are alleged to have occurred or (2) the results
    of its assistance efforts. Between 2003 and 2006, State and the Department
    of Energy provided about $9 million to improve the export controls of
    seven countries in which nuclear proliferation network activities
    reportedly occurred. State did not evaluate either (1) the proliferation
    risk for all of the countries in which network activities are alleged to
    have occurred or (2) the results of its assistance efforts. State did not
    perform risk analyses for 11 of the 56 countries in its program for those
    years and did not document the basis for each country's proliferation
    threat level or explain how the risk analyses were done. Of the six
    countries in our study to which State provided assistance, State performed
    risk analyses for five. Also, State did not conduct program assessments
    for about 60 percent of its participating countries and for two of the six
    countries in our study that received assistance. Moreover, while State's
    program assessments characterize a country's export control system and its
    weaknesses, they do not assess how U.S. training efforts contributed to
    correcting weaknesses.

    Relevant U.S. agencies are impaired from judging their progress in
    preventing nuclear networks because they cannot readily identify basic
    information on the number, nature, or details of all their enforcement
    activities involving nuclear proliferation. The U.S. government identified
    the prevention of nuclear proliferation as a high priority. U.S. agencies
    collect information, maintain lists of companies and individuals that they
    sanction, and maintain case files on investigations of suspected
    violations of U.S. law. However, most of these agencies cannot readily
    identify which enforcement activities involve nuclear proliferation as
    they cannot ensure that searching their case file databases for words,
    such as nuclear, would reveal all relevant cases.

    References

    Visible links
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-06-937C
      41. http://www.gao.gov/cgi-bin/getrpt?GAO-04-546G
      42. http://gao.gov/
      43. mailto:christoffj@gao.gov
      44. http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1
      45. http://www.gao.gov/cgi-bin/getrpt?GAO-07-265
      46. http://www.gao.gov/
      47. http://www.gao.gov/
      48. http://www.gao.gov/fraudnet/fraudnet.htm
      49. mailto:fraudnet@gao.gov
      50. mailto:jarmonG@gao.gov
      51. mailto:youngc1@gao.gov
      52. http://www.gao.gov/cgi-bin/getrpt?GAO-08-21
      53. http://www.gao.gov/cgi-bin/getrpt?GAO-08-21
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