Going after Islamic State’s sources of financing
Shaky video posted to YouTube last week pans across foot-high bundles of $100 bills topped by two shining gold ingots. A man’s voice calls for Islamic blessings and says the rich trove — “maybe even millions of dollars” — belongs to Usama Nujaifi, a deputy president of Iraq.
Not anymore. Islamic State seized the cash and gold as part of its effort to raise money through robbery, extortion, seizure of assets, kidnapping and oil smuggling.
FOR THE RECORD:
Islamic State finances: In the Sept. 28 Section A, a caption with a photo accompanying an article about U.S. efforts to disrupt fundraising by the terrorist group Islamic State erred in identifying an American fighter jet. It was an F-15 Strike Eagle, not an F-22A Raptor.
Estimates vary widely on Islamic State’s income. U.S. intelligence officials estimate that the group takes in $100 million annually, while the Pentagon said the group gets about $2 million a day, or more than $700 million a year.
Hoping to choke the illicit financing that has made Islamic State the world’s wealthiest terrorist group, the Obama administration has set up an interagency team, led by the Treasury Department, to track down Islamic State’s foreign donors, crack down on its smuggling, and identify individuals and institutions that help the group transfer or hide its money.
The early efforts appear mostly symbolic, however.
The campaign began Wednesday when the Treasury Department designated 11 individuals and one Islamic charity as global terrorists, saying they had sent millions of dollars, weapons and other material to Islamic State and several Al Qaeda-linked groups. But no one was arrested, and it’s unclear whether the sanctions will have any direct effect.
Six U.S. and 10 allied Arab warplanes also bombed a dozen “small oil refineries” in eastern Syria, the Pentagon announced. The raids made headlines, but the facilities proved to be improvised stills used to produce total of only a few hundred barrels of gasoline a day.
“This organization is still, even after the hits they’ve taken — and they have been hit — they still have financing at their fingertips,” Pentagon spokesman Rear Adm. John Kirby said after the refinery airstrikes. “This is just the beginning.”
The U.S. government has had mixed success in efforts to stem terrorist financing.
After the Sept. 11, 2001, attacks, intelligence agencies found that Osama bin Laden and his Al Qaeda network raised money from deep-pocketed donors in the Middle East and North Africa, as well as through fundraisers at mosques. Patrons contributed to the group’s coffers through a web of couriers, wire transfers and exchange houses.
The CIA, Pentagon, Treasury Department and other government agencies organized a joint task force, backed by U.S. allies, to crack down. They imposed sanctions on individuals and financial institutions, and produced a string of arrests and prosecutions at home and abroad.
The campaign eventually slowed the funding stream to a relative trickle. But most of Bin Laden’s terrorist operations were relatively inexpensive to mount — the Sept. 11 plot cost only $400,000 to $500,000 to execute, according to the 9/11 Commission — so the U.S. effort was never fully effective.
Islamic State, an Al Qaeda breakaway group, may be even tougher to stop. Instead of relying on the charity of outsiders, it has a vast source of internal funding it uses to pay for its military operations and to administer the territory it seizes.
The group’s fighters have taken dozens of cities and towns in Syria and Iraq in the last year, looting bank vaults and other private resources. In some cases, they have imposed road tolls and business taxes, and reportedly have charged for basic services such as electricity, water and sewage.
The militants also control granaries, as well as oil fields and refineries much larger than those destroyed last week.
“America’s post-9/11 approach to blocking terrorist financing will not be effective against ISIS because the group uses money as an instrument of statecraft,” said Patrick B. Johnston, a counter-terrorism analyst the Rand Corp. think tank, using an alternative acronym for the group.
In addition, he said, the United States does not have tens of thousands of troops and intelligence officers in Iraq and Syria, as it once did in Iraq and Afghanistan, to glean details on the terrorist money flow.
Rep. Adam B. Schiff (D-Burbank), a member of the House Intelligence Committee, said the U.S. needed to put pressure on people outside the region who do business with Islamic State, such as those buying oil or providing banking services. He said the group’s “internal economy” is harder to hit.
The expansion of Islamic State territory may bring its own risks. The group is trying to govern Sunni cities in northern Iraq, for example, that have been subsidized for decades by the central government in Baghdad.
“The group is trying to administer territory and fight a two-front military war,” said a U.S. intelligence official who asked for anonymity to discuss internal assessments. “Running the caliphate is not cheap, and the sustainability of its financial activities is far from certain.”
Led by the United States, the United Nations Security Council last week approved a nonbinding resolution instructing countries to block Islamic State’s access to financing. Treasury officials say the vote will help them track people raising or transferring money in permissive jurisdictions, especially Kuwait and Qatar.
Further efforts are expected to block the black market sales of oil from Islamic State. The oil is sold at a discount to traders, businessmen and smugglers, especially in Turkey, and there is little security along that country’s porous border with Syria and Iraq.
In contrast to the isolation of Afghanistan, Syria’s proximity to Europe makes it easier to move money into the war zone.
“You can literally drive a car with $10,000, $20,000 or a million dollars from XYZ country to Syria,” said a former U.S. counter-terrorism official, who asked for anonymity to discuss internal assessments of the terrorist financing arrangements.
Insurgents in Iraq and Afghanistan relied on an informal money-transfer system known as hawala, or on religious charities operating as front organizations, to bring in cash. Islamic State doesn’t rely as heavily on those systems, which were easier to choke off than its other fundraising schemes.
“Not a whole lot we can do,” the former official said.
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