The Federal Bureau of Investigation (FBI) and designated State and local criminal justice agencies across the country use the National Instant Criminal Background Check System (NICS) to determine whether or not individuals seeking to purchase firearms or apply for firearms permits are prohibited by law from receiving or possessing firearms. This report conducted by the U.S. Government Accounting Office (GAO) in 2004, through a review of applicable Federal laws and regulations, FBI policies and procedures, relevant statistics, and interviews with officials from 11 States addresses the following issues: (1) what terrorist watch lists are searched during NICS checks; (2) how many NICS transactions resulted in valid matches with terrorist watch list records; (3) on valid matches, what are Federal and State procedures for sharing NICS-related information with Federal counterterrorism officials; and (4) to what extent does the FBI monitor the States’ handling of NICS transactions with valid matches to terrorist watch lists. The report revealed that Federal and State procedures for handling terrorism-related NICS transactions do not clearly address the specific types of information that can or should be routinely provided to counterterrorism officials or the sources from which such information can be obtained. In addition, it is not clear if FBI and State personnel can routinely call a gun dealer or a law enforcement agency processing a permit application to obtain and provide counterterrorism officials with information not submitted as part of the initial NICS check. Appendix 1-3