FINANCING OF THE TERRORIST ORGANISATION ISLAMIC STATE IN IRAQ AND THE LEVANT (ISIL)
12
2015
II. SOURCES OF FUNDING
ISIL earns revenue primarily from five sources, listed in order of magnitude: (1) illicit proceeds from
occupation of territory, such as bank looting, extortion, control of oil fields and refineries, and
robbery of economic assets and illicit taxation of goods and cash that transit territory where ISIL
operates; (2) kidnapping for ransom; (3) donations including by or through non-profit
organisations; (4) material support such as support associated with FTFs and (5) fundraising
through modern communication networks. These revenue streams are inconsistent and shift based
on the availability of economic resources and the progress of coalition military efforts against ISIL.
1. ILLICIT PROCEEDS FROM OCCUPATION OF TERRITORY INCLUDING EXTORTION
AND THEFT
ISIL manages a sophisticated extortion racket by robbing, looting, and demanding a portion of the
economic resources in areas where it operates, which is similar to how some organized crime
groups generate funds. This vast range of extortion, including everything from fuel and vehicle
taxes to school fees for children, is done under the auspices of providing notional services or
“protection.” The effectiveness of ISIL's extortion relies on the threat or use of force within its
operational territory. The economic assets in ISIL-held areas include banks, natural resources such
as oil and phosphates, agriculture and historic and archaeological sites. As a result, ISIL's significant
wealth from extorting the population under its control derives from both non-monetary economic
assets as well as physical cash.
ISIL has attempted to demonstrate a degree of sophistication and a formalized, structured internal
financial management system by providing receipts for levies paid. While ISIL frames its activities
as “taxation” or “charitable giving,” it in fact runs a sophisticated protection racket where
involuntary “donations” purchase momentary safety or temporary continuity of business.
1.1 BANK LOOTING, EXTORTION AND HUMAN TRAFFICKING
ISIL has derived a significant portion of its wealth from controlling the bank branches in Iraq where
it operates. In its perceived role as the local governing body, ISIL treats state-owned and private
banks differently. The cash at state-owned banks are ISIL “property” while the cash at private banks
largely remains in the vaults, to be taxed by ISIL upon customer withdrawals.
The US estimates that ISIL has generated, or has had access to the equivalent of at least a half billion
US Dollars (USD) in cash alone as it has taken control of state-owned bank branches located in the
Ninevah, Al-Anbar, Salah Din, and Kirkuk provinces in Iraq over the latter half of 2014.
14
Much of
this cash is denominated in dinar, the local Iraqi
currency, making it difficult for ISIL to use
externally. Any use of these cash assets outside of Iraq would require ISIL to exchange the cash for
foreign currency.
14
US Department of Treasury (2015).
FINANCING OF THE TERRORIST ORGANISATION ISLAMIC STATE IN IRAQ AND THE LEVANT (ISIL)
2015
13
According to press reports, ISIL has focused its attention on bank looting activities in Mosul, Iraq’s
second largest city and a major financial centre, and has reportedly installed managers at many
bank branches located there.
15
From this perch, ISIL operatives have taken the cash deposits of
local Christians and Muslims and have also levied a tax of 5 percent on all customer cash
withdrawals, thus providing another form of extortion by abusing the concept of “Zakat,” or Islamic
alms, to support ISIL’s activities.
16
This provides an opportunity for ISIL to profit from bank
transactions while ensuring continuity of business, a necessity when attempting to establish a
functioning self-sustaining terrorist state.
The threat of bank robberies is also relevant in other developed areas where ISIL operates freely,
such as Fallujah and Ramadi in Iraq, and Raqqa, Aleppo, and Deir al-zor in Syria. More than 20
banks operating in Syria have branches in areas within ISIL-held territory, although insight into
ISIL's looting or robbing of these branches is limited, as is the degree to which they continue to
service the Syrian population in these areas.
Human trafficking has been another source of revenue for the group. ISIL has boasted in its own
publication, Al Dabiq, of its involvement in human trafficking, specifically targeting women and
children.
17
The BBC interviewed women from the minority Yazidi community in northern Iraq in
December 2014 and they described how they were bought and sold in ISIL “slave auctions.”
18
The
group has provided internal guidance to its fighters regarding how many female slaves they are
allowed to maintain, however, the prices ISIL fighters are paying for their slaves appear to be
relatively low (approximately 13 USD).
19
In one case a Yazidi woman was freed when her family
agreed to pay a ransom of 3 000 USD.
20
Given the small amounts cited, it is difficult to envisage
human trafficking as a lucrative
source of revenue for ISIL, but it may be more important as a means
of meeting the demands of its fighters.
1.2 CONTROL OF OIL AND GAS RESERVOIRS
Recognizing the importance of energy assets as a reliable and sustainable revenue source, ISIL seeks
to operate local oil infrastructure, underlining its desire to capture and utilize existing assets and
expertise rather than destroy it. However, ISIL cannot effectively manage these assets due to lack of
resources and technical capacities. Operating in large swathes of territory in eastern Syria and
western and northern Iraq allows ISIL to control numerous oil fields from which it continues to
extract oil for its own use, its own refining, and for onward sale or swap to local and regional
markets.
ISIL benefits mostly from using the petroleum and petroleum products it controls or by earning
revenue from sales of these resources to local customers. The remaining portion of ISIL’s oil
15
Di Giovannu, J. et al (2014).
16
Salmon, R. and Bayoumy Y. (2014).
17
Monitoring Team Report on ISIL and ANF, at 26.
18
Wood, P. (2014).
19
Id.
20
Id.