The Islamic State of Iraq and Syria (ISIS) is a spinoff of the al-Qaida terrorist group active in the Middle East. The group strives to bring Muslim-inhabited areas around the globe under its control and claims to be a religious authority for all Muslims. As a Sunni extremist group, it adheres to global jihadist principles known as Jihadist Globalism. This applies to an aggressive and violent set of religious and political ideologies that form the strategies and agenda for this terror group. The overarching goal is to set up a powerful global caliphate. The title of caliph refers to an Islamic political religious leader. By calling itself a caliphate and utilizing global jihadist principles, ISIS is attempting to create a worldwide Muslim movement.
ISIS has grown tremendously since its beginnings as a spinoff group from al-Qaida, generating revenue from each territory it has conquered. It has recently been called the world’s richest terrorist group, with an estimated $2 billion on hand. This figure is astoundingly higher than the funds available to the Taliban, Hezbollah and al-Qaida.
ISIS’s quest for funding began long before it seized oil fields in northern Iraq and eastern Syria. The terror group began utilizing methods of extortion and imposing tariffs. The territories ISIS conquered were chosen carefully, with its strongholds set up in areas where it could achieve maximum funding for its cause.
ISIS militants were extorting local business owners along their journey to set up strongholds. They began with the Syrian province of Raqqa, continued into Iraq through Fallujah and ended in Mosul. They would demand payment, and if they did not receive it, they would respond with violence or kidnapping.
ISIS has focused on establishing control over territories and funding. It has targeted commercial centers, denser cities and heavily traveled roads. ISIS is believed to be taking in an estimated $3 million a day in illicit proceeds to fund its cause.
The group generates funds through the following:
- Donations from wealthy individuals from the Persian Gulf
- Extortion, taxes and checkpoints
- Control over natural resources
When ISIS was starting off, it relied heavily on cash donations from sympathizers. Much of these donations were from wealthy Arabs in the Persian Gulf who believed in the group’s ideology. The majority of the funds came from Qatar because the Qatari government does not strictly enforce laws over the flow of currency, whereas neighboring countries such as Saudi Arabia and the United Arab Emirates do.
ISIS began by hiring fundraisers to seek out financing. These people would meet with wealthy individuals to advocate for their cause. They also turned to social media sites such as Twitter and Facebook to display propaganda that would reach a broader audience and solicit more funds. The use of social media has not only helped raise funds for the extremist group, but it also consistently aids it in its recruitment efforts.
ISIS’s recruitment and propaganda efforts have a global reach and are aimed at young people who are adept with the Internet and social media. These recruiters are located in the Middle East, Europe and the Western world, looking for jihadi supporters in mostly non-Muslim regions such as the United States, United Kingdom and Canada. While the majority of these young western recruits are men headed to Syria to fight, some are strategically positioned to help raise money for the cause through criminal activity.
Kidnapping and Ransom
While wealthy sympathizers still provide ample donations, the West has done a great job at making it very difficult. Banks pay extremely close attention to sanctions, money laundering and terrorist financing activities. As a result, ISIS had to emulate al-Qaida and use ransom from kidnappings as a source of revenue. Kidnapping and demanding ransom is a low-cost way for these terror groups to demand thousands to millions of dollars. The majority of the kidnapped victims are from European and Western countries. Many of the victims are employees of large corporations, many of whom discretely pay the ransom to secure the release of their employees.
Kidnapping people and holding them hostage is an easy way for terror groups to secure funding. Many European countries pay millions of dollars in ransom each year. The United States, United Kingdom and Poland have government policies that neither allow nor support paying ransoms in order to secure an individual’s freedom. Therefore, hostages from these areas are more likely to be executed and made a spectacle of for the terror group’s political agenda.
When ransoms are paid, it only encourages the terrorists to kidnap more people and demand more money. However, failure to pay a ransom can result in torture or death for the victim. Since kidnapping and ransom demand is a low-risk and high-reward activity for the terror group, it will sadly be a method the group continues to use.
Recent evidence has revealed that female British recruits have started an all-women militia called al-Khanssaa, which acts as an ultra-religious police force. The mission of this group is to punish any un-Islamic behavior displayed by females in ISIS-controlled territories.
As a form of punishment, they have begun forcing women into sexual slavery. Women and young girls of all ages are taken from their villages where ISIS militants have set up a stronghold. They are brought to areas where ISIS has large populations, typically in and around northern Iraq. When they stop in a city, some of the girls are offered to ISIS fighers as gifts; however, not even the ISIS commanders are allowed to take their virginity. Girls and women not given as gifts are either put into ISIS-run brothels or sold at slave auctions. Bidding for these girls usually begins around $10 to $25 and can go as high as $150.
Extortion, Taxes and Checkpoints
ISIS utilizes scare tactics to acquire funding from local businesses and civilians in cities or territories it has claimed. Before entering the cities, people are stopped at checkpoints. These stops ensure they are adhering to Muslim laws and rules. If an individual is noncompliant, he or she suffers beatings, fines, “education sessions” or worse.
ISIS collects taxes on anything it believes to be of value. This includes businesses, commercial vehicles, cell phone towers, etc. All non-Muslims are required to pay an infidel tax to ensure their safety. The militants’ goal is to terrorize nonbelievers into submission or tax them until they convert or die.
ISIS members continuously extort local businesses. When they refuse to pay, the group responds with violence, destruction of property, kidnapping and even murder. Those who did not flee from ISIS-controlled areas are now realizing the risks of doing business in these dangerous regions.
Control Over Natural Resources
As ISIS has conquered territories and set up strongholds, the terror group was able to take control of portions of Iraq’s most fertile farmlands. Much of these areas are responsible for producing 40 percent of the country’s wheat.
The militants have also pillaged upward of 50,000 tons of grain from government-owned silos, which they turned to flour and sold. This has caused a lack of food and overall instability of the region, which has significantly driven up the price of food, inevitably increasing ISIS’s wheat profit margin.
The militants also aim to generate funds through hydroelectric power and water resources. They were briefly able to control one of Iraq’s largest dams, the Mosul Dam, in the city of Mosul. The militants have subsequently tried to attack the Haditha Dam in Iraq’s western Anbar province.
The Mosul Dam is located on the Tigris River, and the Haditha Dam is located on the Euphrates River. Statistics show that 95 percent of Iraq’s water comes from these two rivers. If ISIS were to take control these two dams, it would have the potential to cripple the country’s water supply, putting the entire region at catastrophic risk.
Another way ISIS has been generating funds is through selling stolen goods. Militants are known to rob banks, stores and civilian homes and even loot areas for priceless antiques and artifacts. These fundraising methods are typical of terror groups, especially al-Qaida.
Iraq and Syria were once known as Mesopotamia, commonly referred to as the “cradle of civilization.” This area is rich with ancient artifacts, many of which date back thousands of years. ISIS has taken advantage of this opportunity by stealing and selling the artifacts on the black market.
University College London archaeologist Sam Hardy notes that “insurgents and paramilitaries generally enter the [black-market antique] trade in at least one of three ways: by running a trafficking network, facilitating smuggling through offering a service or levying a tax on traffickers who move looted artifacts through their territory.”
ISIS’s largest form of funding is through the black-market sale of oil from seized oil fields in eastern Iraq and Syria. ISIS is able to produce between 25,000 and 40,000 barrels of oil per day. ISIS started smuggling oil in late 2013 when it took oil fields in eastern Syria and has since expanded to support many black-market oil refineries along the Syrian border and eastern Iraq that produce gasoline and heating oil.
The smuggling networks that ISIS has created to export crude oil are even more elaborate. They follow their path into Turkey, though the group has been smuggling crude oil as far as Afghanistan and Armenia. Middlemen are paid to assist the group in smuggling the barrels, earning millions for the fighters.
ISIS also takes oil directly from pipelines and storage tanks. Militants then load the oil onto trucks and sell the barrels on the black market for $25 to $60 per barrel. In 2014, the average market value for crude oil is fluctuating between $95 and $112 per barrel, meaning ISIS is selling oil for 42 percent to 74 percent below market value. Discounted oil will always sell due to high demand in the global market. Transportation of the crude oil is routed by trucks through Islamic State-controlled territories into Turkey. Estimates show the sale of oil generates about $1 million to $2 million per day for ISIS.
ISIS’s criminal activities have made it the most-funded terrorist group in history. The accumulation of its sizable wealth has allowed the group to increase its operational scope, attain weapons and resources and recruit local and foreign fighters.
The multifaceted and dangerous relationship ISIS has cultivated for each fundraising method has been exceptionally calculated and profitable. Through the exploitation of known smuggling routes on Turkey’s border, it has used the black market to sell oil, natural resources and looted goods. Similarly, the group has profited from banks lacking in sanctions and wire controls of laundered money and illegally donated funds.
Recently, at the International Conference on Peace and Security in Iraq, the main topic was ensuring all United Nations members are strictly abiding by Security Council Resolution 2170, which calls for all countries to ensure their companies and civilians are prohibiting terrorist financing. It also calls for countries to implement effective sanction programs that encompass social media technologies since statistics point to money flowing through tools such as, but not limited to, Facebook, YouTube, WhatsApp and Twitter.
If countries in the Middle East strengthen their money-laundering policies and police efforts for black-market trade, they may begin to put a small dent in ISIS’s efforts to amass its fortune.
Financial Crime Prevention Strategist, IBM Security
Brooke Satti Charles is a Financial Crime Prevention Strategist within IBM Security. Her career has been focused on research and reporting of fraud, money la...