Consortium Against Terrorist Finance Feb. 22, 2016, 4:09pm

In his speech at Chatham House, Assistant Secretary for Terror Daniel Glaser argued that countering ISIS terror finance is a two part effort: “cut terrorists off from their sources of revenue to limit their ability to make money” and “focus on isolating them from the international financial system so they cannot spend their money.” Both of these tactics are global tactics, because they assume terror financing is, at base, combated by cutting off terrorist ties from the rest of the globe; or that fighting terror finance can be managed from the outside. These efforts also assume the existence of a unified, tactile, traceable entity that functions in predictable ways. In order to successfully fight terror financing, however, it is crucial to think not only globally but locally as well. This is why we were hearted by the part in his speech where Mr. Glaser addressed Al Nusra (or, Al Qaeda) and ISIS as distinct entities requiring dissimilar tactics. Al Nusra attains financing from wealthy Gulf countries outside of the borders where they operate. Thus, targeting international banking institutions works (to an extent) to combat Al Nusra financing. ISIS, on the other hand, largely attains financing from primary sources: oil and gas, taxation and agriculture, and Iraqi Banks. Differences, in this case, should matter to strategies of combat. But while Glaser is wise to note the differences between these two terror cells, the U.S. Treasury efforts used to fight ISIS and Al Nusra remain, ironically, the same (limit their ability to make money; isolate them from international banks). After listening to Glaser’s speech one comes to the conclusion that current efforts to fight ISIS focus too much on the global at the expense of the local. 

Drawing from the structure of his two pronged effort, Glaser speaks about what the U.S. government has done so far, and what goals they have accomplished, in order to prevent ISIS from gaining revenue. The first effort he mentions is that the U.S. conducted airstrikes against financial and commercial activities surrounding the sale of oil and gas. He argues that because oil is the primary source of revenue for ISIS, “the strikes have undoubtedly impeded ISIL’s ability to produce, sell, and profit from oil as it has been doing.” Two main problems stem from the global nature of such an approach. First of all, as New York Times reporter C.J. Chivers discusses at a recent Q&A at the Center for Strategic and International Studies (CSIS), ISIS is not a unified entity that functions globally and in tandem across borders between Iraq and Syria. They also exist and function on a local level, interacting with local people, often traveling on foot with empty oil cans which are filled on one side of the border with Turkey and sold on the other side. Targeting tanker trucks would not prevent local members of ISIS along the borders from having access to revenue from oil and gas. The second problem is Glaser’s overestimation of oil as the primary source of income for ISIS.

Chatham House
Chatham House |

Glaser puts oil at $500 million annual revenue for ISIS. However, a recent report in the Financial Times argues that “taxation and confiscation … rivalled oil as the group’s main source of revenue.” And, as Chivers points out, because local funding (selling commodities gathered from the spoils of war; agriculture; trade; customs duties; and taxation) is the name of the game for ISIS, their income is not so easy to, “dry up from afar.” The U.S. government must recognize the enormity of the funds that flow into ISIS on a local level because they have partnered with the Iraqi government to halt the flow of payment to government employees who live inside ISIS occupied areas. In this way, ISIS cannot take taxes out of government funds. This would be a perfect example of the U.S. government functioning on a local level to stop the flow of money to ISIS. However, in effect, what this example shows is the difficulty of reaching ISIS financing from outside ISIS territory. On the one hand you now have Iraqi government employees in ISIS territory who are being denied their salary - and what better way to recruit for ISIS? On the other hand people who are suffering from poverty, as a result of being denied their salary, are receiving hundreds of dollars a week from family members living abroad. Portions of these funds are going right back to ISIS through taxation. This leads us to the last effort that is discussed by Glaser, the effort that takes up the most time within the context of his talk, and that is our government’s efforts to block ISIS from having access to international financial systems.

Glaser writes, “The first step is working to deny ISIL access to the Iraqi financial system.” To achieve this, the U.S. and Iraqi governments cut off 90 bank branches from Iraqi and international banking systems. But how much does ISIS use the traditional banking system? There are reports that ISIS has tried to implement their own currency (gold and silver coins), and that that they do not use traditional banks so much as Western Union type financial houses (hawala) many of which are impossible to trace. In parts of Syria, ISIS has even outlawed Syrian currency. In addition to this, there is the problem of internet transferring systems like Bitcoin, likewise impossible to trace. Since at least 2014 we have known that, in the words of David Cohen, ISIS does not “depend principally on moving money across international borders,” but “obtains the vast majority of its revenues from local criminal and terrorist activities.” The Treasury needs to acknowledge that targeting the international banking system at this point is a fruitless effort and to address the very specific ways that ISIS transfers funds on a local level.

What is particularly worrisome, within the context the U.S. Treasury speech on countering terror financing, is that fact that Glaser immediately loses the nuance that he stresses as important in the very beginning. The situation, as he states, is not a simple one, so why talk about it in such simplistic terms? Americans need to know that our government has a handle on the complexity of this situation, that they recognize the disjointed and fractured nature of ISIS. We need them to show us that they realize that ISIS does not follow traditional systems for transferring and collecting money. We need to see that the government is, in kind, addressing this situation through non-traditional means. During the course of his speech, Glaser notes that it is impossible to quantify the effect of U.S. efforts to cut off financing to ISIS. This is pointing out the obvious: it is impossible to take global stock of local terrorist entities.

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