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ISIL - Sources of Funding

ISIL poses a different terrorist financing challenge. It has amassed wealth at an unprecedented pace, and its revenue sources have a different composition from those of many other terrorist organizations. Unlike, for instance, core al-Qaida, ISIL derives a relatively small share of its funds from deep-pocket donors, and thus does not, today, depend principally on moving money across international borders. Instead, ISIL obtains the vast majority of its revenues through local criminal and terrorist activities.

The terrorist group is bringing in around $80 million every month, according to analysts at IHS. Most of its funding around of 50%comes from taxation and confiscation of areas it controls. Despite international airstrikes, by late 2015 oil revenue funded 43% of the terrorist groups revenues. ISIL imposed rent and price controls on a variety of goods across the region it controls, and put a great deal of effort into an anti-corruption drive to placate the people living in the region.

By February 2015 oil was no longer the primary way that the Islamic State (IS) funded its terrorist operation, Pentagon spokesperson Rear Admiral John Kirby said during a press briefing on 04 February 2015. "We know that oil revenue is no longer the lead source of their [the Islamic State's] income in dollars. So, they are changing," Kirby said. He said that donations and the group's "black market program" were likely new ways the terrorist organizations was relying on funding.

In October 2014, Spanish intelligence said that European cells of the Islamic State group and other extremist groups were using ties to the illegal drug trade to finance operations in Iraq and Syria. Spanish intelligence sources said that extremists in the country also used knowledge of drug-smuggling routes to export arms and other contraband to Iraq and Syria from the European Union.

Russias Federal Drug Control Service (FSKN) has claimed that the Islamic State (IS) extremist group is obtaining a fabulous income by providing half of the supply of heroin from Afghanistan to Europe. In comments widely reported in the Russian media on 26 November 2014, FSKN head Viktor Ivanov said that the large-scale transit of Afghan heroin acts as a renewable financial base for the functioning of the Islamic State group, which obtains fabulous profits by providing half of the total heroin supply to Europe via destabilized Iraq and some African countries.

ISIL also kidnaps innocent civilians to profit from ransoms paid to obtain their release. ISIL did not pioneer kidnapping for ransom it has been around for thousands of years. And other terrorist organizations, including al Qaidas affiliates in Yemen and north Africa, also rely on ransom payments as a key revenue source. Kidnapping for ransom is one of the most significant terrorist financing threats today. For ISIL, these ransom payments are irregular, but each one can be a significant boon. In spring 2014, ISIL released captured journalists and other hostages from several European countries. In return, according to press reports, ISIL received several multi-million dollar payments. All in all, ISIL has taken at least $20 million in ransoms in 2014.

Third, like its predecessor, al Qaida in Iraq (AQI), ISIL raised money up to several million dollars per month through a sophisticated extortion racket. In Iraq and Syria, ISIL extracts payments from those who pass through, conduct business in, or simply seek to live in the territory where it operates.

In the Iraqi city of Mosul, for instance, accounts have surfaced of ISIL terrorists going home-to-home, business-to-business, demanding cash at gunpoint. A grocery store owner who refused to pay was warned with a bomb outside his shop. Others who have not paid have seen their relatives kidnapped. Religious minorities have been forced to pay special tributes. There are also reports that when customers make cash withdrawals from local banks where ISIL operates, ISIL has demanded as much as ten percent of the value.

The Islamic State extremist group would see its sources of funding dwindle if it is not able to seize additional territory, according to a report by a French group that studies terrorism financing released 27 February 2015. The report by the Financial Action Task Force noted that the Sunni Muslim extremist group "obtains the vast majority of its revenues through local criminal and extortion activities in the territory where it operates... [This] presents unique challenges for the international community, but also presents a declining revenue base if it is unable to find alternative sources of revenue or take additional territory".

ISILs ability to make the most effective use of money that it raises depends on its access to the banking system in Syria, Iraq, and internationally. Operating entirely in cash is both cumbersome and risky cash is bulky, vulnerable to theft, and requires complicated logistics to transport. Moreover, ISIL will have a hard time funding external operations, including facilitating the movement of foreign fighters, without access to the international financial system.

In November 2014 the Islamic State (IS) released plans to mint its own coins. The currency will be used in IS-held "caliphates." The jihadist terrorist group Islamic State (IS) announced plans to begin minting its own gold, silver and copper coins, which will be used in areas under IS control in Syria and Iraq, often referred to as a "caliphate." The statement, published on jihadist forums, said the aim of the jihadist monetary system was to counter the widely-used US dollar and replace "the tyrannical currency system that was imposed on the Muslims and leads to their oppression." The coins would free Muslims from "profiteering, satanical economic oppression," the statement added.

Pictures released of the coin designs show the words "Islamic State" and "a caliphate following the model of the Prophet" (Muhammad, the founder of Islam) engraved on one side, as well as the value and weight of the coin. On the other side of the coins various symbols are used. A world map appears on the gold five-dinar coin, while the al-Aqsa mosque in Jerusalem where Muhammad prayed is detailed on the silver 10-dirham. The copper coins portray the crescent moon and three palm trees, which are also significant symbols in Islam. Unlike the modern form of the dinar, used today in some Muslim countries, the Islamic dinar would, like the ancient dinar, be made of pure gold and silver. It currently remains unclear, however, as to how IS intend to obtain the precious metals to make the coins. Experts believe IS is financed predominantly through crude oil sales, ransoms for kidnappings and the extortion of local populations under IS control.

Dinar and Dirham have been the currency (known as Shariah currency) of the Muslim Ummah from the beginning of Islam until the fall of the Khalifate. The Gold Dinar is piece of gold of a weight known as the mithqal, that is, 4.25 gr. Gold is a commodity like potatoes and rice. When used in an exchange is not a promise of payment, but a payment. Unlike paper money it does not require to be backed up by any legal authority, nor does it seek to be backed. Its value, unlike paper money, does not depend on legal compulsion but freedom. IS asserted that replacing the dollar with gold would push major powers such as China and Russia, who had bought US Treasury bills, to sell these bills, leading to a complete collapse of the US financial system.

The Islamic State promoted its new currency in a 55-minute video released in August 2015. Condemning the U.S. Federal Reserve as a Satanic financial system, it took great pains to explain the evils of capitalism and monetary interest while advocating the restoration of gold-backed money. But plans to replace the dollar and Syrian pound with the locally minted Islamic State currency known as the dinar failed.

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Page last modified: 08-07-2016 19:51:47 ZULU