All ISIS Has Left Is Money. Lots of It.
The Atlantic
Dated March 24,
2019
All ISIS Has Left
Is Money. Lots of It.
BEIRUT—If you’re looking to transfer money here,
there’s a chance you will be directed to Abu Shawkat. He works out of a small
office in a working-class suburb of the Lebanese capital, but won’t give you
its exact location. Instead, he’ll direct you to a nearby alleyway, and whether
he shows up depends on whether he likes the look of you.
Abu Shawkat—not his real name—is part of the hawala system, which is often used to transfer cash
between places where the banking system has broken down or is too expensive for
some to access. If he agrees to do business, you’ll set a password and he will
take your cash, then provide you with the contact information of a hawala broker in the city where your money is
headed. Anyone who offers that specific password to that particular broker will
get the funds. Thus, cash can travel across borders without any inquiry into
who is sending or receiving it, or its purpose.
In the case of neighboring Syria, U.S.-
and British-funded projects have sent millions of dollars into the country
using the hawala system, humanitarian organizations use it to
pay staff, and Syrians working abroad depend on it to get money to impoverished
relatives.
But Abu Shawkat runs the hawala equivalent of a mom-and-pop store: One of the
giants of the industry, which analysts believe owns a network of money-services
businesses and has moved millions of dollars a week, is the Islamic State.
Even as U.S.-backed forces wrest back the Islamic
State’s last strip of territory in Syria, the United States and its allies are
nowhere close to bringing down the terrorist organization’s economic empire.
The group remains a financial powerhouse: It still has access to hundreds of
millions of dollars, according to experts’ estimates,
and can rely on a battle-tested playbook to keep money flowing into its
coffers. That continued wealth has real risks, threatening to help it retain
the allegiance of a committed core of loyalists and wreak havoc through
terrorist attacks for years to come.
The Islamic State’s financial strength offers a
window into the broader challenge facing the United States and other
governments. In its effort to squeeze the group financially, Washington has
been forced to rely on a fundamentally different strategy than it employed in
its military campaign: The main weapons at its disposal are not air strikes and
artillery barrages, but subtler tools, such as sanctioning Islamic State–linked
businesses, denying them access to the international financial system, and
quietly cooperating with governments across the globe. Successes will be less
visible, the campaign against the group will likely take years, and there is no
guarantee of victory.
The end of the Islamic State’s days of holding and
governing territory represents a double-edged sword for officials looking to
starve it of resources. On the one hand, its dramatic losses have made it far
more difficult for the group to rely on two major sources of revenue: the
exploitation of oil fields in Iraq and Syria, and the taxation of citizens
living under its rule. These methods played a key role in allowing the Islamic
State to raise roughly $1 million a day, a senior Iraqi security official, who
declined to be identified discussing intelligence issues, told me, transforming
the group into the world’s richest terrorist organization.
On the other hand, the Islamic State’s loss of
territory has freed it from the costs associated with trying to build its
self-declared “caliphate,” allowing it to focus exclusively on terrorist
activity. A U.S. Treasury Department official, who spoke on condition of
anonymity, said that the group is operating increasingly like its insurgent
predecessor, al-Qaeda in Iraq, and no longer requires the same resources it did
when it governed territory. Oil still brings in revenue too: While the Islamic
State no longer controls individual fields, the Treasury official added that a
key source of the group’s income is the extortion of oil-supply lines across
the region.
The Islamic State is also still sitting on the
massive windfall that it built up during the height of its power. “What we know
is that they accumulated large amounts of cash and other assets,” said Howard
Shatz, a senior economist at the Rand Corporation and co-author of several
studies on the Islamic State’s finances. “We don’t know where it all went.”
Some of those funds appear to have been invested in
legitimate commercial enterprises. In October, a series of raids on Islamic
State–linked businesses in the Iraqi city of Erbil uncovered a paper trail that
suggested the group had invested in everything from real estate to automobile
dealerships. These businesses are often run by
middlemen who partner with the group not out of ideological sympathy but for
profit, and then funnel revenue to the Islamic State when called upon.
The senior Iraqi security official told me that the
bulk of the Islamic State’s assets had been transferred to Turkey, though the
Treasury Department has sanctioned its
money-services businesses in Syria and Iraq, which have connections as far away
as the Caribbean. Some of these funds are reportedly held in
cash by individuals in Turkey, while a portion has also been invested in gold.
There is precedent for Ankara turning a blind eye toward the terrorist
organization’s activity on its soil: The group used to make millions
of dollars by selling smuggled oil to Turkish buyers. The October raid in Erbil
also targeted the financial network built up by Fawaz Muhammad Jubayr al-Rawi,
an Islamic State leader who the Treasury Department claims owned and
operated Syria-based money-services businesses that exchanged money with
Turkey. The Turkish government has consistently denied providing safe harbor to
either Islamic State individuals or the group’s assets.
The war-ravaged states of Syria and Iraq also
provide the Islamic State with ample opportunities to revive the tactics that
financed its predecessor organization. From 2008 to 2012, when al-Qaeda in Iraq
was driven underground, it operated much like a mafia: It skimmed construction
contracts, particularly in the northern Iraqi city of Mosul; stole goods and
resold them; and kidnapped members of wealthy families for ransom. Despite its
straitened circumstances, the group was recording monthly
revenues of nearly $1 million just in Nineveh province, of which Mosul is the
capital, in late 2008 and early 2009.
Today it has even more factors working in its
favor. The destruction of areas of northern Iraq once controlled by the Islamic
State has necessitated a massive reconstruction effort. At a conference last
year, countries pledged $30 billion to
rebuild the area, a figure that is still well below what the Iraqi government
said it needs. Perversely, such a massive injection of funds provides the Islamic
State with even more opportunity to benefit from corruption. Declassified
documents show that senior
Iraqi, Kurdish, and Turkish politicians had dealings with al-Qaeda in Iraq in
2009; oversight of how funds are spent is likely even worse now, given the
magnitude of the task. Second, the Islamic State kept meticulous records about
the approximately 7 million to 8 million people living under its rule during
the height of its power. If it retained control of those records, it could use
them to extort Iraqis and Syrians.
“If you lived in ISIS territory, they know where
you live, they know much money you make, and they know what your business is,”
Shatz told me. “They can go to a businessman and say, ‘You must be very proud
of your son. It would be a pity to see something happen to him.’”
Like any smart multinational conglomerate, the
Islamic State has diversified its streams of revenue. Even if the United States
and its allies manage to cut off, for example, the group’s kidnap-for-ransom
business, it can turn to those commercial enterprises and extortion rackets.
The situation is far from hopeless. The United
States has already made a dentin the
Islamic State’s finances by targeting its oil network, and the group may find
that its meticulous records can be used against it: Once captured, those
records could provide a detailed overview of its personnel and sources of
revenue. But there are no silver bullets.
Abu Shawkat’s market advantage is that he can send
money to places where formal institutions have crumbled. The Islamic State’s
business model relies on similar factors, only on a much grander scale. It aims
to exploit state breakdown as a way to fund its main product: political violence.
That violence then weakens the state further, creating more financial
opportunities for the terrorist organization.
The military victory against the Islamic State is
cause for celebration, but it also allows the group to fall back on an economic
strategy that has served it well for years. Don’t expect it to go out of
business anytime soon.
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