Below is a translation of an article by Nistana Darshan-Leitner that appeared in the Israeli Finance publication “Globes.” The original Hebrew article can be found here.
Last week the media reported that ISIS is advancing and is currently within 2 kilometers of Baghdad. The United States has already launched 281 airstrikes against the most vicious organization in the world, yet has not been able to prevent ISIS’s advancement towards conquering its next target, the capital city of Iraq. It seems like there is no way to stop ISIS. The strength of ISIS and its seemingly inexhaustible force are expressed not only through its cruelty, determination, and extreme nature, evident by its merciless acts committed without any restraint or inhibitions, but also in its economic resilience.
Today, ISIS is considered the wealthiest terror organization in the world, with a net capital value in the hundreds of millions of dollars. In its nascent stages, ISIS accumulated the support of rich private donors from countries like Qatar, Kuwait, and Saudi Arabia. These governments turned a blind eye to the transfers because they saw Sunni ISIS as the proper adversary for Shiite Iran, a regime that intimidates them, as well as its proxy, the despised Assad regime in Syria.
In recent years, the United States and international community began persuading the Gulf Arab States to stop money transfers from their territories to ISIS. The pressure worked, and the private donations dwindled significantly, but it was too late. ISIS no longer needed the same level of material support. It had found better sources of money, safer, more readily available, and most importantly – yielding much more money than the prior financial support.
Like any skilled crime organization, ISIS raises its funds through blackmail, robbery, and ransom. In areas it controls, the organization established a professional tax system that applies to all local residents and local companies. ISIS calls it the “revolution tax.” ISIS blackmails business owners, charges “protection” money, sponsorship fees from the conquered population, imposes road blocks and charges the drivers of cars and trucks “donations” for the Mujahideen. According to reports, ISIS’s income from these activities reaches $8 million per month.
Another method of raising money is kidnapping locals and demanding ransom from their families, or abducting foreigners and demanding a ransom from foreign governments. For example, in exchange for four French hostages, ISIS received $18 million dollars. Two weeks prior to that, it received a substantial amount of money from Spain in exchange for three abducted Spanish journalists. Qatar is also known for paying tens of millions of dollars to release foreign hostages, including an American journalist. The sum of ISIS’s total ransom money has been estimated at over $100 million. Non-payment would result in the public beheading of the hostages that would be caught on tape and broadcast to the world.
In the territories conquered by ISIS, ISIS robs factories, shops, banks, and gas stations. In June, ISIS took over the city of Mosul and robbed its central bank, gaining $425 million dollars. ISIS allowed the account holders to withdraw a maximum of 10% of their savings, and to pay 5% as a donation to ISIS. It has seized precious artwork and sold it for tens of millions of dollars. ISIS has also taken control of weapons, armored cars, Apache missiles, and sophisticated tanks that were given to the Iraqi forces by Americans, and sold those weapons it did not know how to operate on the black market.
However, the main source of ISIS’s income is produced by oil fields that the group took over in northern Iraq and Eastern Syria. In order to profit from these acquisitions, ISIS kept the workers and employees of the oil fields, but replaced the higher management. The production of the fields is sold to local permanent clients through third parties that are connected within the oil sphere – clients that are located in Iraq, Kurdistan, Syria, and Turkey.
Ironically, one of ISIS’s most important clients in Syria is the Assad regime, which ISIS is fighting. Assad doesn’t mind funding ISIS, because it eliminates the rebel groups in East Syria for him. According to reports, ISIS controls at least 12 oil fields that produce up to 40,000 oil barrels daily, which yield an estimated profit of $1.2 million dollars per day.
Shutting down the money flow
There is no doubt that ISIS has a business plan: the organization is careful to conquer only those areas that will help its funding and will produce profits; it does not conquer empty fields but only towns, villages, and main junctions that contribute to its financing activity.
ISIS itself sponsors a vast array of activities. The organization pays high salaries to its employees and awards bonuses to its combatants. The amount of the salary is determined by the family size. The organization pays all the expenses of its warriors and subordinates, such as rent, health care, and security, and pledges to support the families of fallen combatants.
ISIS also has an active government with well-funded offices and orderly systems of governance. The ISIS high commander, Abu Bahad el Baghdadi, has appointed a seven-minister cabinet that consult with him on matters of security and finance. In addition, he appointed two deputies, one to oversee Iraq and the other Syria, and they are responsible for managing the flow of money in these countries. This management occurs through orderly systems of governance: each state is hierarchically divided into twelve districts, each headed by a governor. Beneath the governor are counsels that handle all day-to day-issues – oil selling, purchasing weapons and supplies, defending territory, internal policing, intelligence, information gathering, and supporting the combatants.
Without the vast funds that ISIS raises, it could not continue supporting its current structure. It could not feed an entire army and maintain its loyalty, could not run a well-oiled government, and could not gain sympathy of the local communities that it controls and pays good salaries to under its regime. To continue its rule, along with its murderous activity, ISIS needs its hundreds of millions of dollars that it is currently able to raise. The question remains: is it possible to stop the money flow?
A terror organization, like any crime organization, has an Achilles heel. Both necessarily operate with one foot in the criminal sphere of murder, robbery, and theft, and the other foot in the legitimate world of transactions and finance. ISIS needs the banking system to transfer the capital it raises, whether it be private donations or from its profits selling looted goods. The only way to access the massive amounts of cash ISIS receives from oil-selling merchants is through banking systems.
ISIS smuggles oil to Turkey through a pipe that goes through Kurdistan across the border to Turkey; however, the cash it gets in exchange cannot be smuggled through the same route. There is no way to make tens of millions of cash transactions for long. The only way to practically transfer such large amounts is through Turkish banks. Further, the only way to receive donation money that keeps flowing in from Gulf States is through Qatari and Saudi banks. It is clear that these channels must be cut off.
The United States should sanction the banks that are responsible for assisting the continued money flow to ISIS. But the US Treasury is hesitant to forcefully act against the banks of these US Allied countries, using its full force. This, in essence, is the problem. The US is bombing ISIS command and soldiers, but skips its bank accounts. If it will use the same tenacious approach against ISIS’s financial system, it will hurt the money flow to ISIS, which is its oxygen. If ISIS’ oxygen supply is cut off, its terror activity will cease.
The US was wrong in the past with its estimation in regards to ISIS. It should not be mistaken in the way to stop it.
*The author, Nitsana Darshan-Leitner is the director of Shurat HaDin-Israel Law Center which is working to stop terror funding around the world through legal channels.