By Hans-Jakob Schindler, ISIL, Al-Qaida and Taliban Monitoring Team, United Nations Security Council
On the occasion of the participation at GLOBSEC 2017 Bratislava Forum
The global threat from the Islamic State in Iraq and the Levant (ISIL) is evolving. The sustained military pressure on the group in Iraq and the Syrian Arab Republic, as well as setbacks in Libya and Afghanistan in combination with difficulties in Yemen and Somalia forced ISIL to adapt. In addition to a greater emphasis on external attacks outside the conflict zones, a move to encrypted communication and a diversification of its command and control structure, ISIL is also adapting its financial strategy.
Although ISIL’s financial situation has steadily declined over the last year and a half, it continues to rely chiefly on two revenue streams, hydrocarbons and extortion. While the loss of territory, in particular population centers in Iraq, the Syrian Arab Republic and Libya, diminishes ISIL income sources based on extorting the local economy, this is partially compensated by a reduction in costs for the administration of territories. Income from the sale of hydrocarbons has steadily declined and according to the assessment of Member States is now less than 50% compared to 2015, due to military operations targeting ISIL controlled infrastructure.
The group has partially offset these losses by increasing extortion from the local population. However, as ISIL is extorting a war economy, this income stream cannot be increased indefinitely. ISIL is also drawing income from antiquities smuggling, agricultural products, sale of electricity, exploitation of mineral resources such as phosphates and sulfuric acid, external donations and kidnapping for ransom.
According to the assessment of Member States, the group still controls an income of tens of millions of dollars per month and continues to be able to procure weapons, ammunitions as well as other materials for its military operations. However, regularly Member States report that ISIL has now difficulties regularly paying its fighters, which leads to an increase in internal corruption and theft.
“(…)ISIL has now difficulties regularly paying its fighters, which leads to an increase in internal corruption and theft.”
Despite these financial challenges, according to several Member States, ISIL has continued to send financial support to its affiliates. In addition, the group seems to send money out of the Syrian Arab Republic and Iraq to areas where no affiliates are present, apparently to place money as part of a longer term strategy.
It is expected that ISIL will continue to use extortion and criminal activity as a funding tactic while its control over territory diminishes. This has been the group’s financial modus operandi in the past, when it called itself Al-Qaida in Iraq. Therefore, Member States have indicated that ISIL is likely to depend more on kidnapping for ransom. Some Member State also emphasize that ISIL may increase its reliance on external donations to secure further funding.
Money services businesses (MSBs), including exchange houses, continue to be a preferred method for ISIL and its supporters to move funds across borders, according to several Member States. In addition, ISIL seems to have set up a system of money couriers and in certain cases transactions involve both professional couriers and MSBs at different junctures of the transfer. While the use of sophisticated technology for funding is currently a rare occasion, Member States only reported a handful of cases in which ISIL sympathisers used bitcoin, this trend should be carefully monitored.
“While the use of sophisticated technology for funding is currently a rare occasion, Member States only reported a handful of cases in which ISIL sympathisers used bitcoin, this trend should be carefully monitored.”
Consequently, it is of increasing importance to analyse and counter these new aspects of ISIL’s financial strategies. One particular challenge will be to manage the flow of reconstruction and stabilizations funds to flow into liberated areas and the reconnection international financial structures to these territories, without also enabling ISIL remnants to abuse these structures and exploit this new liquidity, including through extortion and the formation of front companies.
“A strong and well targeted global sanctions regime is an important corner stone of the global response against the activities of ISIL, its sympathisers and affiliates.”
With the ISIL (Da’esh) & Al-Qaida sanctions regime, the United Nations Security Council has set up a powerful global tool for all Member States to counter the threat posed by ISIL, in particular ISIL financing and the group’s attempts to place and transfer funds internationally. In order for this instrument to be effective, the ISIL (Da’esh) & Al-Qaida sanctions list of the Council needs to be targeted appropriately. Since these global sanctions list is public and since its implementation is mandatory for all Member States, financial facilitators of ISIL are particularly vulnerable. Their work relies on secrecy as well as access to the licit economy to launder and transfer funds. Being named on a globally available and mandatory sanctions list significantly disrupts their ability to operate. Consequently, proposing ISIL financial facilitators for sanctioning under the ISIL (Da’esh) & Al-Qaida sanctions regime can be a valuable part of any national counter terrorism strategy. A strong and well targeted global sanctions regime is an important corner stone of the global response against the activities of ISIL, its sympathisers and affiliates. The Monitoring Team stands ready to support Member States in this endeavour.