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

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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][email protected] .
           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 [email protected]
			  
			  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:[email protected]
  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:[email protected]
  50. mailto:[email protected]
  51. mailto:[email protected]
  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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