In February 2004, Dr. Abdul Qadeer Khan, the former head of Khan Research Labs, confessed to the illicit transfer of nuclear weapons technology to Iran, Libya, North Korea and other countries. Khan is reported to have amassed millions of dollars from the transfers. According to media reports, Khan reportedly told Inter Services Intelligence officials that he transferred nuclear weapons technology so that other Muslim countries could use it to enhance their security.  Khan was pardoned by President Musharraf in the wake of these revelations for his involvement in smuggling, in return for cooperating with Pakistani authorities to uncover the extent and scope of the smuggling network. Despite his pardon, Khan remains under house arrest while subject to questioning by Pakistani security services. In addition, several scientists and security officials have been detained and questioned and may be prosecuted in the future. 
An investigation into Khan's activities revealed the transfer of nuclear weapons-related technology, centrifuge parts, and blueprints to Iran and Libya through a Malaysian middleman, Buhary Syed Abu Tahir. Tahir also revealed the network of European middlemen from Germany, Turkey, the United Kingdom, and Switzerland aiding in the illicit trafficking of nuclear technology through countries ranging from the United Arab Emirates, to South Korea, Switzerland, Germany, Japan, the United Kingdom, and the Netherlands. 
Pakistan previously released export control regulations in July 1998, February 1999, and August 1999, as well as the Export Policy and Procedures Order of November 2000. These Statutory Regulatory Orders (SRO) banned the export of fissile material and required a "no objection certificate" to be issued by the Pakistani Atomic Energy Commission (PAEC) for the export of nuclear substances, radioactive material, and nuclear energy-related equipment. However, the controversy of the A.Q. Khan episode shed light on the weaknesses in Pakistan's existing export control legislation.
Previous regulations contained contradictions, such as the July 1998 SRO, which banned all exports of nuclear material, and subsequent regulations that laid out procedures for acquiring a certificate and license for the export of nuclear energy-related items, including nuclear substances, such as heavy water and enriched uranium.  Another major loophole in the 2000 export control regulations is the provision that grants automatic exemptions to agencies under the Ministry of Defense. In addition, Pakistani law also allowed the "Vice Chairman" of the Export Promotion Bureau to waive regulations on behalf of any enterprise. Little information exists detailing which enterprises have been exempted in the past, and there does not appear to be any oversight authority to audit the use of this provision. 
Although these numerous loopholes were present, Khan used his national status as one of the leaders of Pakistan's nuclear efforts to conduct his black market sales of nuclear material and technology. He had established black market channels initially to acquire nuclear technology for Pakistan, but slowly the direction of the flow reversed. His old black market channels became the new channels by which Khan distributed nuclear technology and material to Iran, North Korea, and Libya. Khan did not appear to take advantage of the loopholes in the old Pakistani export control system. He had little or no oversight from the government. According to an aide close to President Musharraf, "Khan had a complete blank check. He could do anything. He could go anywhere. He could buy anything at any price." 
In the aftermath of these revelations concerning the black market smuggling network of A.Q. Khan, the Pakistani Ministry of Foreign Affairs prepared new export control regulations to address future concerns raised by the International Atomic Energy Agency and the United States.  On June 7, 2004, the Pakistani government introduced a bill in the National Assembly, known as the Export Control on Goods, Technologies, Material and Equipment related to Nuclear and Biological Weapons and their Delivery Systems Act, 2004. The bill was subsequently passed by the Pakistan National Assembly and Senate on September 14 and 19, respectively.  The bill stipulated that any violation of the act would result in up to 14 years' imprisonment, forfeiture of all property and assets to the government, and a fine of 5 million rupees (about $86,500). Any individuals attempting to commit or abetting the commission of such offenses would be charged as if they had themselves committed the violation.  It is believed that should further evidence against Khan surface, the conditional pardon he received from President Musharraf could be withdrawn.  However, recent statements by the Pakistani Foreign Minister, Khursid Mahmud Kasuri, indicate that the bill will not be applied retroactively, and will not have any effect on the cases of A.Q. Khan and other scientists involved in the smuggling ring. 
The act also called for the creation of an oversight board to administer export control regulations, enforcement of the act, and licensing for export and re-export of nuclear- and biological-related goods and technology. Furthermore, exporters will also be required to maintain records of all transactions and report them to the designated government agencies. All government agencies involved in the licensing process will be required to maintain records of all recommendations and decisions involving licensing. The control lists of items subject to licensing requirements will be reviewed periodically and updated as required by the government. 
After the revelations concerning Khan, the Pakistani government asked for U.S. and Japanese assistance in drafting new export control legislation. Japan provided English translations of relevant Japanese export control regulations and invited Pakistani experts to attend export control seminars.  In mid-May, U.S. Under-Secretary of Commerce Kenneth Juster held talks with Pakistani officials on export controls. Juster expressed the appreciation of the United States for Pakistan's efforts to streamline and strengthen export controls, with both sides agreeing to continued dialogue and cooperation on export controls. Further assistance to Pakistan has come in the form of the Export Control and Related Border Security Assistance (EXBS) program, which provides funds for training and equipment for border control personnel, as well as expert-level exchanges on export control legal/regulatory reform and customs enforcement. EXBS funding was provided for in the 2004 financial assistance package agreed upon by Pakistan and the U.S. in January 2004.  Pakistan was also invited to attend the Department of Commerce's Annual Update conference on dual-use export control regulations and implementation, to be held in October 2004.  Additionally, in February, France proposed a dialogue between Pakistan and the international community and presented a proposal to hold a nonproliferation summit with Pakistan in the coming months. The dialogue would focus on the strengthening of export controls, greater cooperation with the IAEA, and Pakistani participation in international nonproliferation regimes. 
- Gaurav Kampani, "Proliferation Unbound: Nuclear Tales from Pakistan," Feb 23, 2004, CNS, https://cns.miis.edu.
- Gaurav Kampani, "Nuclear Watch--Pakistan: The Sorry Affairs of the Islamic Republic," www.nti.org.
- Sharon Squassoni, "Closing Pandora's Box: Pakistan's Role in Nuclear Proliferation," Arms Control Today, April 2004, www.armscontrol.org.
- Sharon Squassoni, "Weapons of Mass Destruction: Trade Between North Korea and Pakistan," CRS RL31900, Federation of American Scientists, www.fas.org.
- Leonard Weiss, Pakistan: It's deja vu all over again," Bulletin of the Atomic Scientists, May/June 2004, www.thebulletin.org.
- Karen Yourish and Delana D'Souza, "Father of Pakistani Bomb Sold Nuclear Secrets," Arms Control Today, March 2004, www.armscontrol.org, BBC, Profile: Abdul Qadeer Khan, https://news.bbc.co.uk.
 "AQ Khan confesses to leaking nuclear secrets to Iran, Libya," Agence France-Presse, February 2, 2004.
 "Powell Says Nuclear Ring Broken," BBC News, February 9, 2004, www.bbc.co.uk; "Pakistan Scientists to Face Nuclear Charges Selling Nuclear Secrets," The Independent, January 27, 2004, on Lexis-Nexis, www.lexis-nexis.com.
 "AQ Khan sold centrifuge parts to Iran: Malaysian Police," Associated Press, February 20, 2004, www.ap.org; "AFP: Further on Malaysia Says Pakistani AQ Khan Architect in Leaks to Libya, Iran," Hong Kong AFP, February 20, 2004, in FBIS JPP20040220000116; "Khan Sold His Soul for $3 Million," Times of India, February 21, 2004, www.timesofindia.indiatimes.com; "Khan Sold Nuke Tech to Syria, Turkey," Times of India, March 9, 2004, www.timesofindia.indiatimes.com. For further background on A.Q. Khan's network, see "A.Q. Khan's Clandestine Nuclear Market" in Asian Export Control Observer, the April 2004, https://cns.miis.edu.
 Alex Wagner and Seth Brugger, "Pakistan Clarifies Nuclear Export Control Guidelines," Arms Control Today, Sept. 2000, www.armscontrol.org/act.
 Anupam Srivastava and Seema Gahlaut, "Curbing Proliferation from Emerging Suppliers: Export Controls in India and Pakistan," Arms Control Today, September 2003, www.armscontrol.org/act; Government of Pakistan, Ministry of Commerce, "Export Policy and Procedures Order 2000," November 7, 2000, www.epb.gov.pk.
 William J. Broad, David E. Sanger, and Raymond Bonner, "How Pakistani Built His Network," New York Times, February 12, 2004, www.nytimes.com.
 "Pakistan: Upcoming Nuclear Bill May Empower Govt to Punish Proliferators," The News (Islamabad), June 5, 2004, in FBIS SAP20040605000019.
 "Pakistan Assembly Passes Bill to Control Nuclear Goods Export," Islamabad APP, September 14, 2004, in FBIS IAP20040914000068; "Pakistan Senate Adopts Bill on Nuclear Export Controls," Islamabad PTV World, September 18, 2004, in FBIS SAP20040918000037.
 Shahid Hussain, "Islamabad Tightens Nuclear Controls," Gulf News, May 6, 2004, on Lexis-Nexis, www.lexis-nexis.com; "Govt Introduces Bill to Control Proliferation of Nuclear Materials," The News (Islamabad), June 8, 2004, in FBIS SAP20040608000029.
 "Foreign Minister Says Nuclear Export Bill Not to Apply Retroactively," Islamabad APP, September 18, 2004, in FBIS IAP20040918000036.
 "Nuclear Exports Control Bill Tabled in NA," The Pakistan Newswire, June 7, 2004, on Lexis-Nexis, www.lexis-nexis.com.
 "Japan, Pakistan Discuss Export Controls," Daily Yomiuri, May 17, 2004, on Lexis-Nexis, www.lexis-nexis.com.
 U.S. Department of State, "The EXBS Program: Export Control and Related Border Security Assistance," October 7, 2004, www.state.gov; "Close US Eye on N-Activity in South Asia," Asia Times, June 27, 2003, www.atimes.com; "$500m Debt Relief Expected from US," The News (International), January 28, 2004,www.jang.com.
 "Talks Held with US on N-export Controls," Dawn, May 17, 2004, www.dawn.com; "US Lauds Islamabad's Nuclear Export Control Law," Islamic Republic News Agency, May 16, 2004, www.irna.ir; "US Appreciates Pak Efforts to Streamline Its Export Control," Global News Wire, May 16, 2004, on Lexis-Nexis, www.lexis-nexis.com.
 Shahid-ur-Rehman, "France Urges Pakistan to Begin Global Nonproliferation Dialogue," Nucleonics Week, March 4, 2004, on Proquest, www.proquest.com; "Kyodo: France Proposes International Dialogue on Nuclear Proliferation," Kyodo World Service, Feb. 28, 2004, in FBIS JPP20040228000067.