Intelligence Insights: Disrupting the ISIS Financing Stream

Terrorists need substantial streams of money to wreak their havoc across the globe, and this raises the inevitable question of where they get that money. This article will dive more deeply into how one terrorist group — ISIS (the Islamic State) — obtains its funding.

In a 2014 report,  sources of ISIS funding have been broken down into the following sources:
• 38% oil
• 17% natural gas
• 12% extortion
• 10% phosphate
• 10% cement
• 7% wheat and barley
• 4% kidnapping and ransom (K&R)
• 2% donations

There are two things that are surprising about this list: The first is how little of the group’s funding stream is through direct donations (only 2%). The second is how much comes from the sale of various commodities (82%). The latter is made possible by the commodity rich areas controlled by ISIS.

It seems natural then to focus efforts on disrupting the flow of commodities-based funding. But there may still be a connection between individuals who donate and the commodities-based funding. Donors (largely from Gulf States, and in particular from Qatar) may very well be people who also play a role in arranging for the sale of commodities. A two-pronged counter-terrorism effort to thwart funding would therefore best be aimed at the people who serve as middlemen in purchasing and reselling the commodities that ISIS controls, as well as the banking institutions that enable the storage and transfer of the funds generated from the sale of commodities.

Target countries to which commodities flow tend to be neighbors of Syria – Jordan, Lebanon, Iraqi Kurdistan — and especially Turkey. The commodities go from ISIS-controlled areas into the hands of individual middlemen in those same areas, who then sell to buyers in the neighboring states. At some point, the commodities then enter the international markets, which means there are corporations bringing ISIS commodities there. Those companies should be investigated and held accountable for their role in enabling, however indirectly, terrorist financing.

It’s also worth noting that although the combined financial impact of K&R and donations is only 6% of the ISIS funding stream, that still totals tens of millions of dollars. Conversely however, the commodities-based stream of funding is staggering, and merits closer attention. A focus on disrupting the funds generated from the sale of oil would have the biggest impact. And one way to do that is for all banking and financial institutions to more closely scrutinize financial transactions related to oil, and especially transactions involving Turkey. Robust execution of anti-money laundering compliance efforts would go a long way towards this end, if banks would only step up to the plate and do their part. That may be an uphill battle in and of itself, but it is one worth fighting.


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