ISIS Reeling Under Financial Scarcity Post Loss Of Territories

ISIS Reeling Under Financial Scarcity Post Loss Of Territories

Washington:  As the ISIS group sees its territory shrink to half its original size and its dreams of a caliphate evaporate, the extremist fighters are losing access to the sources of revenue that once gave them their power, prompting them to turn to extortion, kidnapping or foreign donations like their predecessors, the terrorist group al-Qaeda.

The ISIS group had a unique ability to capitalise on the natural resources of its territory in Iraq and Syria and swiftly implement a system of taxation and governance that allowed it to rule an area that once was the size of Switzerland.

As the battle gets underway to retake Mosul, the group’s largest stronghold in Iraq, the ISIS group is being denied access to revenue sources such as oil and gas and cash reserves that once amounted to more than $1 billion in 2014, said Daniel Glaser, the Treasury Department’s assistant secretary for terrorist financing. With those resources slipping away, the ISIS group is expected to revert to “traditional methods we see al-Qaeda using – whether it’s deep-pocket donors, whether it’s charities, whether it’s NGOs, whether it’s criminal activity,” Glaser said in a recent discussion at the Washington Institute for Near East Policy.

Beyond oil and gas sales, the ISIS group also generated some $30 million per month in Iraq from taxation and extortion in 2015. Hisham al-Hashimi, an expert on ISIS who advises the Iraqi government, said the militant group currently makes about $4 million per month from taxes in Mosul alone. Al-Hashimi said the group charges a 4 percent income tax on salaries less than $600 per month, and 5 percent on monthly salaries between $600 and $1,000.

Bank robberies made up the ISIS group’s third biggest source of revenue, mainly in Mosul, where there was more than $500 million in state-owned bank vaults when they captured the city in June 2014, but that was “a one-time take for them,” Glaser noted, and they are quickly burning through that cash.

Glaser says the ISIS group is under financial duress. Fighter salaries have been cut in half in some areas, including in Raqqa, Syria, its de facto capital. The group also set up an internal corruption agency, suggesting corruption may be a factor, Glaser and al-Hashimi said. To compensate, there’s been a noticeable spike in the ISIS group’s revenue from criminal activity, such as extortion – the Paris-based Center for the Analysis of Terrorism says extortion accounted for a third of its revenue in 2015, compared to 12 per cent in 2014.

Beyond criminal activity, Fanusie said ISIS will likely pursue money through any number of sources as its territory shrinks, from charities to nonprofit groups, sympathetic, wealthy donors, or the hawala system, an alternative remittance system used in countries around the world that allows the transfer of funds domestically and internationally without using formal financial institutions.