This morning I wanted to say a few words about the work of, and some 1540 relevant takeaways from, Project Alpha, a research and outreach project embedded in the Centre for Science and Security Studies at King’s College London.

One important caveat before I start: while I am the officially designated PI for Project Alpha, my colleague Ian Stewart has run Alpha on a day-to-day basis from the start, bringing to it an amazing level of enthusiasm and drive. So expect to hear from Ian during the discussion!

Project Alpha was established in the spring of 2011, with initial funding from the UK government, and the goal of increasing the resilience of the British private sector against illicit procurement attempts initiated by countries of proliferation concern.

As we all know, various countries of proliferation concern have and continue to seek to further their WMD programmes by acquiring specialised material, equipment and training from abroad using covert and complex proliferation networks.

These networks exploit the transnational nature of the globalised manufacturing base by targeting private sector entities, such as manufacturers, exporters, brokers, freight-forwarders, shipping companies, port authorities and the insurance industry.

A key assumption underlying Project Alpha from the outset was that the private sector in the UK and elsewhere could and should do much more to ensure the effective implementation of non-proliferation related controls provided for in 1540 but also under other UNSCRs related to the DPRK and Iran.

It was also recognised that raising sufficient awareness in the private sector of the importance of such implementation would take a targeted, collaborative and concerted effort involving governments, industry and academia.

Since the spring of 2011, then, Project Alpha has worked to encourage and to assist companies holding sensitive goods to adopt a trade control compliance approach we have termed ‘anti-proliferation’. An ideal-type approach where private sector companies:

• Conduct due diligence as part of trade control compliance when exporting sensitive items;
• Take responsibility for their supply-chains in this respect; and
• Encourage competitors to do the same

There is no time to delve into great detail on all of the activities of Project Alpha and 1540 takeaways, so I have opted to focus in on three core issues to be addressed under the following headings:

• A partnership approach;
• The value of open source research; and
• Outreach

A partnership approach

To begin with, then, a few words about Alpha’s approach to engaging industry.

It was recognised at the start that to achieve a resilient private sector would require a partnership approach involving government, industry and academia.

Consequently, Alpha has proactively engaged with industry to develop relationships with key firms in the UK, and elsewhere, with the aim of transferring knowledge on illicit trade and supply chain issues so that companies can develop a better understanding of what illicit procurement looks like.

We are currently seeking to deepen these existing relationships and to expand our links with other firms through our “Partners Against Proliferation” initiative.

This peer-based initiative is a voluntary and inclusive mechanism designed to share good practices between companies in the area of export and trade compliance.

Participation is designed to reduce the likelihood that a company’s goods or services will aid proliferation, or that a company will breach trade control obligations.

At its heart is a set of good practice guidelines designed to improve a partner company’s implementation of trade controls.

The guidelines themselves have been developed in collaboration with industry and government, and their adoption and promotion by individual companies is designed to reduce the risk of inadvertent supply of items to illicit programmes.

In addition to directly implementing the guidelines, partners are asked to encourage their supply chains to become compliant, whether these firms are based in the UK or elsewhere. The hope is to cascade more effective compliance practices through relevant supply chains.

And this is not just about complying with the letter of the law. It is about ensuring that compliance systems are robust and proportionate as this is essential to ensuring effective implementation.

Moreover, the partners’ initiative should help a participating company’s customers or suppliers to have greater confidence in that company’s compliance system – whether this confidence relates to safeguarding their own controlled technologies, or the provision of correct trade control information.

In short, the partnership initiative demonstrates that a company ‘gets compliance’ and participation provides a route to demonstrate a commitment to non-proliferation through the adoption of anti-proliferation practices.

Non-compliance with 1540 and other relevant UNSCRs is, of course, socially and politically unacceptable and threatens to undermine international security, so partnering also demonstrates to stakeholders that a company is socially responsible.

As Alpha and the Partners Initiative moves forward, the aim is to build a project funding model drawing more on industry resources generated from on-line compliance training courses, workshops and the like.

In terms of wider impact beyond the UK, the partnership guidelines were submitted earlier this year by the British government to the Nuclear Suppliers Group for discussion.

These were subsequently published on the NSG website as a ‘framework for industry engagement’ and highlighted as ‘an example of best practice’.

But they are relevant to all states working in the context of 1540 to strengthen private sector compliance.

The framework/guidelines suggest that companies should seek to do several things:

1. implement internal systems to ensure due-diligence checks are carried out on potential customers and business partners and the goods, software and technology that they wish to acquire, utilising public information such as early warning lists, red-flag checklists and questionnaires provided by the United Nations, States and other parties with an interest in supporting the multilateral non-proliferation effort, and to consult with the relevant government authorities as necessary;
2. monitor, collate and vet enquiries within the scope of due diligence, relating to the acquisition of proliferation sensitive goods, software and technology;
3. consult government export control authorities before having any dealings with entities identified as being of proliferation concern either from public sources, from corporate monitoring systems or from contact with relevant competent authorities in states themselves;
4. implement best efforts to share information about illicit attempts to procure items for Weapons of Mass Destruction programmes with security and other relevant agencies in the State where they are established and with business partners and others in instances where the State judges that broader publicity would be appropriate;
5. promote the adoption of due diligence and information sharing within the supply chain and with other business partners within the boundaries of legitimate protection of business and company information;
6. incorporate non-proliferation measures and export control compliance into existing Corporate Social responsibility statements;
7. encourage relevant industry-wide trade and professional bodies to recognise the importance of supporting and encouraging the non-proliferation effort and the measures set out herein; and
8. foster an open and transparent relationship with appropriate government and regulatory authorities.

So, that is the first 1540 takeaway I would make from Project Alpha: the importance of partnership to enhancing trade control compliance, and the pursuit of a common approach to compliance by individual companies.

In the end this is about norm development over the medium-to-long term. It takes time but significant progress is being made with projects like Alpha and others working industry and the private sector.

Value of open source research

The second point builds on the first and relates to research as Alpha is not just about outreach and facilitation.

Our experience has shown how valuable systematic and original open source research on the private sector’s experience of being targeted by illicit procurement is to generating new knowledge and understanding, and then disseminating this in an accessible way to a wider private sector audience – via case studies, other publications, training opportunities, workshops and so on.

While generally the private sector in the UK complies with national or international trade controls under 1540 and other UNSCRs, and individual companies will usually provide assistance when requested by government, some companies also possess relevant information which -- if properly harnessed through research -- can significantly support general efforts to prevent proliferation.

Such information could include, for example, identities of individuals and entities possibly involved in proliferation, or the methodologies used by proliferators to acquire sensitive technologies.

And it is here specifically where the research element of Project Alpha has, we believe, been important in terms of understanding:

• Not just proliferation methodologies and trends although that is central;
• But also the scope and priorities of commercial internal compliance procedures in the UK and overseas; and
• Current anti-proliferation behaviours where these do exist

For example, Alpha has been working with MKS instruments in the US in order to learn from its experience of seeing the company’s “Capacitance Manometers” turn up in Iran’s centrifuge programme.

I am reliably told that “Capacitance Manometers” are used to gauge pressure in vacuum systems.

MKS did have export licences to ship this equipment to a Chinese distributor but the end user undertaking had been falsified.

The company responded by developing a “Controlled Delivery” supply-chain model to stop this type of thing happening again, and in doing so has become an important reference point for best practice in the context of trade control compliance.

There are various other case studies available on the Alpha website if anyone wishes to peruse them.

Another case study produced by Alpha involves Rakon in the UK which was targeted by Iranian missile procurement and which is available on the Bulletin of Atomic Scientists website.

Clearly, illuminating such recent cases through original open source research is very important to educating industry more generally in terms of conducting due diligence.

There is certainly an argument for using such research to better support the 1540 Committee and the UN sanctions panels in deepening their knowledge and understanding of issues such as illicit procurement and the associated challenges of compliance in the private sector.

One specific idea here would be to pursue a virtual NGO open source research centre to coordinate the work of relevant organisations that already conduct research on procurement of one form or another. Something we at King’s are currently pursuing with CNS, Monterey.

Outreach

Finally, Project Alpha has sought to conduct outreach activities over the past 3 years primarily by organising workshops in order to raise awareness of the importance of implementing best practice trade control compliance in line with 1540 and other UNSCRs.

In the UK we have run numerous sector specific workshops on compliance issues: nuclear, carbon fibre, electronics

Alpha has also conducted outreach in China.

Over the past two decades, China has slowly expanded its non-proliferation commitments and its non-proliferation record has certainly improved.

But China continues to be a key source of goods and technology for the prohibited nuclear and missile programs of Iran and North Korea, and the primary source has been the country’s burgeoning private sector, particularly small- and medium-sized enterprises that often act as distributors or middlemen in trade with western manufacturers.

Smaller firms, often without a presence in Beijing, are frequently less aware of non-proliferation issues. And, while state-owned enterprises show signs of improved trade control compliance, vast numbers of dual-use manufacturers and traders are not being similarly engaged on trade control issues.

This situation is not helped by the fact that proliferation often involves dual-use goods that sit below control-list thresholds -- that is, just below the point when a specific controlled item or technology becomes subject to export licensing requirements.

With these issues in mind Project Alpha has run workshops, in Dalian and Qingdao for example, to raise awareness of the costs – financial and otherwise – of WMD proliferation within the private sector and the importance of implementing best practice compliance. And we are running a third workshop in China in two weeks time.

The focus has been on sectors of Chinese industry likely to be most vulnerable to targeting by illicit supply networks. For example, companies manufacturing proliferation sensitive metal alloys and carbon fibre.

In addition to representatives from UK industry and the Alpha team, the workshops have included Chinese government officials and other experts who provide updates on China’s export control procedures and examples of best practice compliance in cooperation with industry.

But the scale of the trade control compliance challenge facing Chinese non-proliferation officials is immense and growing.

There are purportedly thousands of exporters of dual-use technologies in China, and the number is only growing and quickly.

The Chinese manufacturing base for proliferation-sensitive goods is also expanding, as the government has authorized strategic investment in the nuclear, semiconductor, composites and alloys sectors through multiple five-year plans. Technology from each of these sectors appears, of course, on in the lists of the international export-control regimes.

Based on Project Alpha’s work in China it has become clear that greater resources need to be invested in government agencies responsible for enforcing non-proliferation measures across the country’s ever expanding private sector, and outreach efforts to industry need to be enhanced.

Chinese authorities at both the central and provincial levels need to develop an industry-engagement strategy that includes workshops and other mechanisms to raise awareness of export controls across Chinese industry.

By allowing government ministries to work with international partners to hold a number of outreach events in recent years, the Chinese government has demonstrated a growing appreciation of the value of engaging export businesses.

Workshops have been well attended, both by state-owned enterprises and by other businesses. But true non-proliferation success requires that all exporters know the risks associated with trading in sensitive goods and technologies.

Moreover, while face-to-face training can be effective, new tools, such as e-learning and other web-based resources, may be required to meet the growing scale of the challenge posed by industrial expansion in China.

There are clear resource challenges in all of this, so the international community should remain prepared to work with, and potentially provide resources to help, China in implementing a national strategy to prevent illicit trade by enhancing the implementation of trade controls.

Summary

Three takeaways:

• Partnership
• Open source research
• Outreach

I think Ian Stewart will chime into the conversation pretty quickly and he can add more granularity on some of these issues and add in anything I’ve overlooked in this brief talk.

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