Inside the financial structure of the Islamic State

Friday 28/08/2015
Recovered coins at the National Museum of Iraq in Baghdad. The United States handed back to Iraq antiquities it had seized in a raid on Islamic State position in Syria, saying the haul was proof the militants were funding their war by smuggling ancient tr

London - Described by counterter­rorism experts as the most organised and af­fluent terrorist organi­sation in history, the Islamic State (ISIS) has managed to build a murderous empire through both criminal enterprise and im­plementing traditional Islamic eco­nomic concepts and systems.

US intelligence agencies conclud­ed in June that ISIS is no weaker than it was a year before, despite months of a US-led bombing cam­paign in Iraq and northern Syria where the group controls large ar­eas.

So how has ISIS managed to not only stay financially afloat but, in some cases, actually thrive in its moneymaking endeavours? A re­cent report by Dubai-based security firm Five Dimensions Consultants revealed an elaborate, yet Islami­cally traditional, financial structure used by ISIS to fund activities and recruitment efforts.

For external financing, ISIS uses traditional methods of Islamic fun­draising, such as Sadaqah, which means “voluntary charity”. A glob­al network of dedicated fundraisers receives donations from ISIS sym­pathisers, including from mosques.

According to Five Dimensions, the contributions are collected un­der the guise of raising funds for necessities such as the upkeep of mosques. This method “is one of the most effective ways for jihad sympathisers to get hold of unac­countable and untraceable cash”, the consultancy said.

What is also worrying is that the report highlights that legitimate charities have had funds diverted towards funding ISIS.

In areas controlled by ISIS, a number of Islamic and secular fundraising concepts are in place, including taxation of trade routes between Syria, Iraq, Turkey, Jordan and areas controlled by the Kurd­istan Regional Government. Those taxes are worth about $9 million a month. Moreover, the concept of zakat, one of the five pillars of Is­lam, which entails donating a por­tion of one’s income to a religious authority, which dispenses it to the needy, is also a part of ISIS’s mon­eymaking schemes. ISIS has put together an army of 1,900 zakat collectors, including 800 women, tasked with collecting from the 10 million people under its control, netting the terrorist group an esti­mated $350 million annually.

The report also reveals that ISIS has established a business network that includes investments in land, legitimate business enterprises and services.

According to the report, Turk­ish and Syrian ISIS members have bought “existing businesses with well-established relationships with existing suppliers to avoid the due diligence process new customers go through”.

These businesses include phar­maceutical wholesale dealers, car and spare parts dealers, gold and gold workshops, technology equip­ment and food wholesale dealers.

Because the terror group func­tions like a state, it has a high ex­penditure to fund big-ticket items such as hospitals, schools and wel­fare.

In its effort to maintain its rev­enue stream the Islamic state cur­rently has a lucrative oil-smuggling business that according to US coun­terterrorism officials nets the group $8 million-$10 million a month.

“The oil smuggling black market has been operating since the days of Saddam Hussein’s time in the 1990s, when Iraq was under sanc­tions. And it isn’t just in Turkey, but in Jordan and Syria, even the Assad regime is buying some of the oil, when they can get a hold of it, through intermediaries,” Hassan Hassan, Chatham House associate fellow and co-author of ISIS: Inside the Army of Terror, told The Arab Weekly.

“In Turkey they have trucks that take it to the border through cer­tain routes, according to recent documentations seized by the US government,” Hassan said. “Some corrupt Turkish officials are work­ing with [ISIS] to get all this cheap oil that is half the price of oil in the market.

They sell to all neighbouring ar­eas and countries. They also sell it to the rebels in the north and the Assad regime and the Kurds as well, Turkey, Jordan and so on.”

Hassan said more people are be­ing driven to ISIS out of despera­tion.

“Families are sending them their sons to join and fight with ISIS in order to get a monthly salary,” he said. “If they are living in urban centres, there are no jobs or sources of income, so the only thing they can do is either try to flee to Europe by sea or join ISIS, otherwise they die of hunger. The more you do try to disrupt ISIS finances, it only em­powers ISIS and they can still get money,” he said.