1

Financing Islamic Terror Groups

Abstract

Since September 11th, 2001 the United States and coalition NATO countries around the world

have cracked down on foreign terror groups around the world. Islamic terror groups simply cannot exist

and function without a constant supply of funding. Since the United States Treasury Department started

cracking down on African, Middle Eastern, and Southeast Asian financial institutions and charities, terror

groups have been limited in their capabilities. To this day, donations and charities make up a bulk of the
 2

income that Islamic terror groups profit from. Groups such as Boko Haram, the Islamic State of Iraq and

Syria, and Al-Qaeda have benefited from the substantial amount of donations that foreign countries and

individuals have supplied. The covert money transfer system known as hawala has enabled individuals

to move money without it being traced. Islamic terror groups have also used extortion, kidnapping, and

theft as ways of funding their enterprise. I will examine the various methods of how these three terror

groups are financed while scrutinizing their most lucrative sources of income. Charities have allowed

terror groups to purchase weapons, supplies, ammunition, food, and vehicles while ensuring the group

operates on a continuous basis. Extracting and selling oil on the black market has been the Islamic

State’s go to method for financing their operation and they continue to do it by smuggling oil

throughout the Middle East. There have been various countermeasures in order to halt funding to these

groups and the Treasury Department and the Financial Action Task Force have taken proactive steps in

order to freeze funds and find individuals accountable for transporting, and laundering money that is

connected to terror groups.

Boko Haram’s financial approach in West Africa

Boko Haram who operates mainly in Western Africa, specifically in Nigeria has used various

methods in order to secure a constant source of revenue for its organization. The group who was

founded in 2002 with goals to support Islamic education throughout the country, and establish an

Islamic state in Nigeria has grown into one of the most intimidating and deadly terror groups in the

world. 1 Boko Haram uses extortion as its main source of revenue. The group will move into an area and

burn and pillage a village or kill a certain amount of people in order to exert control over the area. They

will then tax the villagers an absorbanent amount of money in return for protection. In order to benefit

from the extortion of towns and business, Boko Haram must control large swaths of territory.

1
FATF-GIABA-GABAC (2016), Terrorist Financing in West and Central Africa, FATF, Paris Pg. 43 www.fatf-
gafi.org/publications/methodsandtrends/documents/terrorist-financing-west-central-africa.html
 3

Extortion and taxation of villages has also been used by the Islamic State of Iraq and Syria (ISIS)

in order to maintain is revenue stream. Boko Haram uses a variety of methods to fund its enterprise and

kidnapping and robbery are among tactics uses. During Boko Harams upcoming, they pillaged business

and vessels off the African coasts, as a way of obtaining a large amount of money in a short period of

time. Boko Haram has been known to attack police stations and army barracks in order to steal copious

amounts of weapons and ammunition. Although the group is not as sophisticated as Al-Qaeda in its

financing, the group is quite effective. Through their raiding of homes and villages they often stumble

across gold coins and artifacts of substantial value. These items are then taken to various markets where

they are sold. Boko Haram also steals local livestock and resells it often in their own market. The group

doesn’t steal large amounts of cattle; they often steal no more than 5 at a time to avoid suspicion and

detection. They then harbor the cattle in neighboring countries to avoid detection by law enforcement.2

The group is able to operate autonomously without detection from law enforcement because

Nigeria and other African countries do not have a sophisticated and regulated bank system. The

country’s military also lacks resources and contains corrupt individuals who sometimes feed information

to Boko Haram operatives. Often Boko Haram members carry cash across the border into Cameroon

unnoticed. Boko Haram, along with other notorious terror groups use a money transfer system known

as Hawala. This system is very effective because brokers and individuals rarely use receipts or keep a

hard copy of their transactions. The individuals also do not have to go through a bank or financial

institution to transfer funds. If person A wanted to transfer cash to person B then person A and B would

each get a broker in their respective region. Person A would then give the money to broker A and broker

A would then give the cash to broker B who would then give the cash to person B. So person A is

ultimately transferring the money to person B, but indirectly. Usually there are passwords involved but

2
FATF-GIABA-GABAC (2016), Terrorist Financing in West and Central Africa, FATF, Paris Pg. 12 www.fatf-
gafi.org/publications/methodsandtrends/documents/terrorist-financing-west-central-africa.html
 4

not always. This system is very difficult for law enforcement officials to track because money is not

wired electronically and the brokers can use several couriers to transfer the cash if they wish. Hawala is

used in African as well as Middle Eastern and Southeast Asian countries. It is very difficult for law

enforcement and intelligence agencies to track the movement if illicit funds, but hawladars do keep very

accurate financial records. Hawaladers operate on small margins of profit so keeping track of these

transactions is vital to them maintaining a reputation among fellow hawaladers.3

In southern Nigeria Boko Haram terrorists are being accused of siphoning off oil pipelines in the

region. The group takes advantage of the conflict in the Niger Delta located in southern Nigeria to

siphon off oil. Nearly 200,000 barrels of oil a day are siphoned off each day.4 All of these methods lead

to the financial continuation of the terror group. Ultimately it is up the country of Nigeria and its law

enforcement personnel to take control of the problem and get a grasp on how the group obtains its

money. If the group can’t maintain a constant and steady income then the group can no longer function.

The group has also resorted to kidnapping as a means of obtaining ransom payments to further its

operation. The group has recently been accused of kidnapping 300 women from a school in the town of

Chibok. Boko Harams request is that the entire country of Nigeria is to accept the Islamic religion and

way of life.

Al Qaeda’s Mysterious Benefactors

Al-Qaeda’s way of financing their operations has dazzled intelligence agencies across the globe for years.

They move money in an efficient manner usually through a series of various couriers who lay low and

are very discreet. They also move their money through the hawala system which uses various brokers,

passwords, and runners to transport money. Through hawala, there are no bank statements or online

3
THE SECRETARY OF THE TREASURY, THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, and THE
SECURITIES AND EXCHANGE COMMISSION. "Evolution of the Bank Secrecy Act as a Tool to Combat Money Laundering and
Terrorist Financing." UNITING AND STRENGTHENING AMERICA BY PROVIDING APPROPRIATE TOOLS REQUIRED TO
INTERCEPT AND OBSTRUCT TERRORISM ACT OF 2001 (USA PATRIOT ACT) (n.d.): 3. Web.
4
Gambrell, Jon. "Oil Bunkering Threatens Nigeria’s Economy, Environment." The Washington Post. N.p., n.d. Web. 30 Nov. 2016.
 5

transactions or any sort of written documents that detail the movement of cash. Contrary to popular

belief Bin Laden did not finance Al Qaeda through his own personal fortune. He often supported the

group financially through a series or donors, most of whom knew what they were involved in and many

who had no idea they were financing the group. Many of these charities function for a long time until

law enforcement and intelligence agencies started cracking down on them. Some of the corrupt

charities include, the Child Foundation, the Holy Land Foundation for Relief and Development (HLF), ,

detailing several of Al Qaeda's donors, the Tamils Rehabilitation Organization, the Islamic American

Relief Agency (IARA) (self described as the U.S. affiliate of the Islamic African Relief Agency), and Care

International and the Benevolence International Foundation (BIF).5 Perhaps one of the biggest treasure

troves of information uncovered by law enforcement was the golden chain found during a raid in Bosnia.

During a search of a branch of the Benevolence International Fund in Sarajevo, Bosnia officials found a

list of many donors in the Gulf who contributed to Al Qaeda. The list was promptly left out of the 9/11

commission report in fear that there would be backlash from the Saudi government threatening US

interests in Saudi Arabia.

Financial facilitators often raised funds for the group and a bulk of their income came from

donations. The CIA estimated that prior to 9/11 it cost Al Qaeda nearly 30 million dollars a year to

support its movement.6 Through the use of donors and financial facilitators the extremist group was

able to move money from country to country and then eventually send money to the United States in

order to support the terrorists who would eventually hijack and guide the plans into the World Trade

Centers. The United States was even accused of contributing to the Afghan mujahedeen in the 1980’s in

order for them to fight off the invading Soviets. The United States Central Intelligence Agency did not

directly provide funds to the mujahedeen. They provided money to the Pakistani ISI or their Inter Service

5
Burr, Millard, and Rachel Ehrenfeld. "Saudi Arabia: The Golden Chain and The Missing 28 Pages." ACD. N.p., n.d. Web. 12 Dec.
2016.
6
"Al Qaeda's Financing: Sources, Movement, Uses." Chapter 2. N.p.: n.p., n.d. 19+. Print.
 6

Intelligence Agency. The ISI would then determine where and how the funds should be allocated. Many

of the soldiers that fought in the Afghan war remained loyal to Usama Bin Laden and are now members

of Al Qaeda. Many of the weapons provided by Pakistan and several other countries to the mujahedeen

in the 1980’s can still be found among Al Qaeda members today.

The bulk of their donations came from wealthy gulf countries, Saudi Arabia in particular. In the

early 1980’s three people founded the Afghan Services Bureau known as Maktab al Khidmat. The bureau

provided funding to foreign and domestic fighters who wished to fight against the Soviets during their

invasion of Afghanistan. The resistance tapped into several banks for financial assistance. Two Saudi

banks contributed heavily to the effort, Dar al Mal al Islami and Dalla al Baraka. According to “Al Qaeda’s

Ideology by Rohan Gunarant, Rohan states that, “the banks channeled funds to Afghanistan through 20

non governmental organizations, the most famous of which was the International Islamic Relief

Organization.”7 Bin Laden had many outlets to launder his money in the gulf such as honey stores in

Yemen and various charities. Bin Laden also seized vessels in the Persian Gulf carrying illicit drugs to

finance his terror operation.8 Bin Laden was more of a people person than a business tycoon. He was

able to convince wealthy Saudi nationalists to contribute to his terror campaign. He relied on these

wealthy Saudi nationalists because he had made connections with them during his time fighting the

Soviets in Afghanistan.

Other than contributions from wealthy nationalists in Gulf countries, Al Qaeda was able

to siphon off money from charities during the holy month of Ramadan. Zakat is one of the five pillars of

Islam where Muslims are required through their faith to contribute 2% of their annual earnings to

charity. According to the article, “Al Qaeda’s Means and Methods to Raise, Move, and Use Money”, “The

7 Gunaratna, Rohan. "Al Qaeda's ideology." Current Trends in Islamist Ideology, vol. 1, 2005, p. 59+. Academic
OneFile, scroll.lib.westfield.ma.edu/login?url=http://go.galegroup.com/ps/i.do?p=AONE&sw=w&u=mlin_w_westsc&v=2.1&id=GALE
%7CA348311769&it=r&asid=6df2dee632ecf90eab88ae2b51f07d7e. Accessed 2 Dec. 2016.
8
Gunaratna, Rohan. "Al Qaeda's ideology." Current Trends in Islamist Ideology, vol. 1, 2005, p. 59+. Academic
OneFile, scroll.lib.westfield.ma.edu/login?url=http://go.galegroup.com/ps/i.do?p=AONE&sw=w&u=mlin_w_westsc&v=2.1&id=GALE
%7CA348311769&it=r&asid=6df2dee632ecf90eab88ae2b51f07d7e. Accessed 2 Dec. 2016.
 7

financial facilitators also appeared to rely heavily on imams at mosques, who diverted Zakat donations

to the facilitators and encouraged support of radical Islamic causes.”9 While infiltrating local mosques

and diverting funds to facilitators who would then send the funds off to other venues, Al Qaeda was

able to provide itself with a reliable and constant flow of cash from a variety of mosques. Although most

of their funding came during the Holy month of Ramadan, the group was forced to pull money from

other venues.

A lack of oversight, structure, and regulation led Al Qaeda to tap into notorious, international

charities, as well as smaller local charities. In order for the group to execute this effectively they had to

have employees who worked on the inside. These large internationally recognized charities would often

send money to smaller charities in remote areas of the Middle East where Al Qaeda had operatives

working who would then pilfer money from the institution. A lack of oversight, security, and regulation

allowed these operatives to steal a substantial amount of money. In other cases the entire charity had

several employees who would siphon off funds.10 The amount of money channeled to Al Qaeda from

charities depended on the amount of Al Qaeda operatives who infiltrated the charities. It should be

noted that in the Islamic world, banks and financial institutions are not necessarily intended to appease

the financial needs of their constituents or act as for profit entities, but rather to spread the world of

Islam through the community.11

Intelligence agencies have yet to determine other sources of funding by Al Qaeda but some

agencies think that the group may have trafficked illicit drugs or even been involved in conflict or blood

diamonds to launder the money. There is not enough actionable intelligence to substantiate these

claims and evidence is hard to come by. The vast network of people involved with siphoning off money

9
Al Qaeda's Financing: Sources, Movement, Uses." Chapter 2. N.p.: n.p., n.d. 21+. Print.
10 Al Qaeda's Financing: Sources, Movement, Uses." Chapter 2. N.p.: n.p., n.d. 21+. Print.
11 Dishman, Chris D. "Bankrolling terror." Bulletin of the Atomic Scientists, vol. 60, no. 3, 2004, p. 2. Academic

OneFile, scroll.lib.westfield.ma.edu/login?url=http://go.galegroup.com/ps/i.do?p=AONE&sw=w&u=mlin_w_westsc&v=2.1&id=
GALE%7CA116340093&it=r&asid=7a11b015e04fa3b34ab1434b799f8f4a. Accessed 2 Dec. 2016.
 8

willing to keep their mouth shut about their operations has confused and bewildered intelligence

agencies. Many Saudi nationalists and wealthy donors are often willing to supply funding to terrorists in

fear that if they don’t, then more Western style politicians with liberal, democratic agendas will

eventually gain control of the region.12

The Islamic State of Iraq and Syria’s Sources of Revenue

Evers since the Islamic State of Iraq and Syria (ISIS) began its campaign in northern Syria and Iraq

in 2014 it has decimated towns and villages, kidnapped yazidi women and children and sold them into

sex slavery, stolen ancient artifacts, and leveraged taxes on people where the group has gained control.

Unlike Al Qaeda their main source of funding comes from oil sales. They receive a relatively small share

of funding from donations and charities. ISIS takes a more primitive approach in regards to financing.

Once the group inhabits a town, city, or village it leverages heavy taxes on business in exchange for a

vigilante form of protection. ISIS has also been in the business of robbing banks. When they took over

the city of Mosul, Iraq they looted several banks. Coalition forces and local militias have tried several

times to force the terror group out of its stronghold in Mosul with little to no avail. ISIS has two

approaches to how they control the bank in Iraq and Syria. The group treats privately own and state

owned banks differently. The Financial Action Task Force comprised of several countries around the

world whose mission is to combat terrorism financing, and money laundering describes in detail how

ISIS differentiates between state owned and private banks.13 The cash at state owned banks falls directly

under ISIS control while cash at private owned banks is available for local citizens to withdraw. When a

12
Dishman, Chris D. "Bankrolling terror." Bulletin of the Atomic Scientists, vol. 60, no. 3, 2004, p. 4. Academic
OneFile, scroll.lib.westfield.ma.edu/login?url=http://go.galegroup.com/ps/i.do?p=AONE&sw=w&u=mlin_w_westsc&v=2.1&id=
GALE%7CA116340093&it=r&asid=7a11b015e04fa3b34ab1434b799f8f4a. Accessed 2 Dec. 2016
13
"Who We Are." About - Financial Action Task Force (FATF). N.p., n.d. Web. 02 Dec. 2016.
 9

citizen wants to withdraw money from a private owned bank they are taxed very heavily. According to

the FATF a 5% tax is levied on citizens when they make a withdrawal from a private owned bank.14

Al Qaeda, ISIS finds revenue streams from several different sources. The group is also involved in

human trafficking where ISIS operatives kidnap yazidi women and children and sell them at slave

auctions. Experts contend that this is not a strong source of revenue for the group but rather a way to

satisfy the needs of ISIS men. ISIS members also kidnap men, women, and children and hold them for

ransom. They will kidnap pretty much anyone they can while putting an emphasis on foreigners,

especially foreign military members, diplomats, and American citizens. Ransom payments have counted

for a substantial amount of revenue for the group and Financial Action Task Force members (FATF)

estimate that the group has raised roughly 20 million to 45 million dollars.15 Although the Islamic State

does not generate as much revenue from charitable donations as Al Qaeda does, that does not exclude

them from gathering funding from charities altogether. Again much like Al Qaeda, ISIS has been known

to collect cash from wealthy individuals in Gulf countries such as Saudi Arabia. Funds are not sent

directly to Islamic extremists in the Middle East, Africa, or Southeast Asia. Instead they are sent to

several other people first before being handed off to an Islamic extremist in Syria. For example,

someone that lives in the United States that wants to send money to an ISIS official in Syria would wire

transfer his money to someone in Turkey, who would then withdraw the money in cash and take it over

the border to be given to the individual in Syria. The Financial Action Task Force explains how an

individual might transfer funds to an ISIS operative in the Middle East. “The account at an Italian bank of

an organisation based in Northern Italy promoting charitable activities (e.g., distance adoptions) in Syria

received cash deposits and wire transfers (mostly involving small amounts) sent by numerous individuals

and entities in located in Italy and Europe. Once credited, funds were sent to Turkey, where they would

14
Report, Fatf. Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (n.d.): 12-13. Financial Action Task
Force. Web.
15
Report, Fatf. "Kidnapping for Ransom." Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (n.d.): n.
pag. Web.
 10

be withdrawn for their final legitimate use (most descriptions associated with the transactions referred

mainly to “adoptions”.16

Oil bunkering has also been a lucrative way for ISIS operatives to generate some extra cash to

finance their operation in Syria and Iraq. The rich oil reserves located in the Middle East are a perfect

way for ISIS members to support their caliphate. The only problem is that ISIS members do not have the

sophisticated technology or resources to extract oil. In many instances coalition airstrikes have

destroyed the oil fields and technology by which ISIS needs to properly extract the oil. ISIS primarily

generates much of its revenue from selling oil that is currently owns. Although they cannot get their

hands on most of the oil fields in the territory it controls, they do have control over a small number of oil

fields. They sell oil to black market middlemen who then pay the group a profit. Syria has a history of

smuggling networks in and around the borders of the country, and the Islamic State sells a good portion

of their oil to the Syrian regime operating in western Syria. Since ISIS uses primitive techniques to

extract the oil it cannot properly reap the potential benefits of the oil field. Many private sector oil

companies have left the region since the start of the civil war in Syria, taking their oil extracting

machinery with them.17

The Islamic State uses extortion to their upmost advantage. Not only do they heavily tax citizens

for bank withdrawals, and simple cost of living expenditures, it also taxes agriculture. The Islamic State

has a tendency to justify their actions through the Holy word of Islam. ISIS operatives tax agricultural

goods under the name of Zakat, which is the annual giving of roughly 2%-2.5% of your total annual

income. ISIS operatives often take sections of a farmer’s wheat and barley crops and then steal farming

16
Report, Fatf. "Kidnapping for Ransom." Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (n.d.): n.
pag. 19 Web.

17
Report, Fatf. "Controlling of Oil and Gas reserves." Financing of the Terrorist Organisation Islamic State in Iraq and the Levant
(ISIL) (n.d.): n. pag. 14 Web.
 11

machinery which they then rent back to the farmers at a heavy price.18 Other than just simply stealing

from local citizens and extorting money from them, these techniques act as intimidation to keep local

citizens under their control.

People who reside in the United States who want to become a part of the Islamic terror organization

have been known to defraud the IRS and use the money to travel to Syria and fight alongside the Islamic

State while also using the leftover cash to fund operations in the Middle East. The Financial Action Task

Force tells about how an individual named Jonathan Paul Jimenez was sentenced to 10 years in prison

after he falsely claimed 3 dependants of his co conspirator as his dependants stating that he was living

with them all of 2010 and the IRS rewarded his $5,587.19

ISIS has also been notorious for using social media to recruit and facilitate the transfer of funds to its

group. The Federal Bureau of Investigation has had its hands full dealing with domestic and foreign

individuals who create fake accounts in order to recruit people to fight for the Islamic State. By creating

a fake profile and interacting with individuals all over the globe on several different social media

platforms the group has been able to successfully recruit people to fight for its cause. Law enforcement

officials have detected people using facebook and twitter to ask for money. In one case, an individual

was accused of asking for money via twitter. The individual representing the Islamic State asked for

people to donate as much as $5,000 or for people to donate as much as a third of their annual salary.20

Multiple individuals representing the group have been known to not only ask for money but instead for

weapons. The most common way for extremists to gain access of money is by cash. Individuals or

18
Report, Fatf. "Extorting Agriculture." Financing of the Terrorist Organisation Islamic State in Iraq and the Levant (ISIL) (n.d.): n.
pag. 15 Web.
19
Report, Fatf. "Material Support to Include Foreign Terrorist Fighters." Financing of the Terrorist Organisation Islamic State in Iraq
and the Levant (ISIL) (n.d.): n. pag. 24 Web.
20
Report, Fatf. "Use of Social Media to Raise Funds." Financing of the Terrorist Organisation Islamic State in Iraq and the Levant
(ISIL) (n.d.): n. pag. 25 Web
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charities will send money to neighboring countries such as Turkey which has a very porous border, and

then withdraw cash and carry it right across the border into Iraq and Syria through the use of couriers.

Although ISIS operates differently from Boko Haram and Al Qaeda, many of the techniques found in this

analysis are overlapping among the three groups. All three groups are known to use extortion,

kidnapping, thievery as a way to access funding for their group. Charitable donations from donors

around the world continue to pour in everyday to these groups. If the international law enforcement

community can find an effective way to inhibit their financial growth then the groups will suffer

tremendously because without the money coming in the groups are significantly disabled in what they

can accomplish.

Oil Reserves and their Value to Islamic Terrorism

Ever since the Islamic State took center stage in early 2014 they have been an international

terror sensation claiming responsibility for attacks all over the world from Europe to the United States.

They operate mainly in Iraq and Syria but they have operatives all over the world, in Germany, France,

Great Britain, and the United States. They generate revenue from a variety of sources but one of their

most lucrative sources of income is from oil sales. The IHS Markit LTD (Information Handling Services) is

a company that provides business and analytical support to governments and companies around the

world. Some of the areas they are skilled in are, defense and security, chemical, and aerospace. IHS

states that the revenue from the Islamic State selling oil is estimated at nearly 800 million per year and

comprises nearly 43% of its annual income.21 The Islamic State relies heavily on its oil sales to fund its

enterprise. The group does not have sophisticated technology or machinery in order to properly extract

oil from the refineries in areas it has taken control, but what oil it can access is sold on the black markets

21
"ISIL Oil Production Is Worth Estimated $800 Million Per Year, IHS Says." ISIL Oil Production Is Worth Estimated $800 Million
Per Year, IHS Says | IHS Online Newsroom. N.p., n.d. Web. 03 Dec. 2016.
 13

in and around Syria and Iraq. Syria has extensive smuggling routes and ISIS operatives are able to sell

their oil at a low price, therefore increasing the demand on the black market.

According to IHS Markit, ISIS sells its oil at nearly half the price or even the third of the price per

barrel compared to legitimate, international oil companies. ISIS is selling their oil for $25-$30 a barrel,

averaging around $40 a barrel compared to the international benchmark which is $85 a barrel.22 They do

this because their oil is considered contraband and there is very strict sanctions placed on it. In Syria, the

Islamic State must ship their oil by truck to the Turkish border where oil brokers and sellers pay cash for

it.23

In order for ISIS to keep their machinery running such as tanks, trucks, and automobile is uses

they must keep their oil sales continuous. Syria has a tremendous potential to produce as much as

350,000 barrels a day but due to civil war in the country they are only able to process around 50,000-

60,000 barrels a day. The Islamic States ability to produce oil is based on their ability to refine the oil,

process it and ship it. Coalition airstrikes targeting oil fields as well as the group’s transportation

methods have significantly limited the group in this capacity. A drop in oil prices has also negatively

affected the sales of oil. ISIS officials guard various oil fields under its control and they register each

person and vehicle that enters the oil field to fill their truck with barrels. The al-Tanak and the al-Omar

oil fields in Syria provide a majority of the oil that is exported out of Syria into Turkey. International

coalition forces have urged the Turkish government to intervene and stop the illegal smuggling of oil by

the terror group but Turkey is afraid to get involved because ISIS operatives that live in Turkey might

retaliate. Coalition forces have also tried to persuade Kurdish Peshmerga forces located in northern

Syria as well as northern Iraq and southern Turkey.

22
"ISIL Oil Production Is Worth Estimated $800 Million Per Year, IHS Says." ISIL Oil Production Is Worth Estimated $800 Million
Per Year, IHS Says | IHS Online Newsroom. N.p., n.d. Web. 03 Dec. 2016.
23
Humud, Carla, Robert Pirog, and Liana Rosen. "Islamic State Financing and U.S Policy Appraoches." (2015): 4-5. Print.
 14

The Islamic states biggest source of funding is from its oil sales under territory it controls. If

coalition forces, Peshmerga forces, and the Iraqi and Syrian government cannot shut off the group’s oil

sales and smuggling networks then it will have a very hard time eliminating the group from the region.

The smuggling networks are hard to stop because they have existed since Sadam Hussein was in power

in the early 1990’s when he would smuggle oil out of Iraq.24 As much as people think that the Islamic

State extracts the oil and is in total charge of the oil, this is certainly not the case. ISIS operatives merely

oversee the operations and provide security for the oil field, monitoring who comes and goes and

keeping records of who is entering and stocking their truck with oil barrels. They are also registering

each vehicle and person into their own database. ISIS hires engineers, and oil field technicians to extract

the oil, and they keep the original manager or whoever oversees the usual operation in charge.

Sometimes they often give the manager or supervisor a hefty percentage of the profits to keep the oil

coming at a steady rate.

Initiatives taken to disrupt Islamic Terrorism Funding

Several countermeasures have been taken to stop the flow of funding to groups such as the

Islamic State, Al Qaeda, and Boko Haram. The Financial Action Task Force has identified areas where the

United States Treasury Department could intervene or freeze accounts and NATO (North Atlantic Treaty

Organization) countries have stepped up airstrikes in Iraq and Syria in order to prevent ISIS from reaping

the benefits of the oil fields under its control. There are several ways to combat financing to radical

Islamic terror groups and it must start with a multilateral approach. The more countries that are on

board to combat terror groups and the ways by which it finances its group, the better. More

importantly, law enforcement personnel within the area of conflict must step up and do a better job at

limiting the ways in which each group operates. Nigerian military and law enforcement must crack down

24
"ISIS Inc: How Oil Fuels the Jihadi Terrorists." ISIS Inc: How Oil Fuels the Jihadi Terrorists. N.p., n.d. Web. 04 Dec. 2016.
 15

and incarcerate Boko Haram members accused of robbing, stealing, and murder. The Nigerian

government has had their hands full because they simply cannot crack down on charity donors to

suffocate their funding and their overall operation. Boko Haram takes a much more hardcore approach

to financing their operation than Al Qaeda does. Boko Haram murders, steals, and assaults police

stations in order to get supplies. The Nigerian government must be much harder on this group than any

other sort of criminal element within their country.

Al Qaeda on the other hand must be stopped by other means. Al Qaeda acquired much of its

funding from siphoning off funds from charities and banks, and they also collected large sums of money

from wealthy individuals in Saudi Arabia and other wealthy Gulf countries. The Financial Action Task

force must do a good job of identifying which charities and banks the group is pilfering money from so

that local governments and banks and charities can become aware. Charities and banks must also do a

better job of vetting their employees so that they do not have corrupt employees stealing from them,

and sending the stolen money to a known Islamic Terror group. In many instances Al Qaeda members

infiltrated banks and embezzled thousands of dollars. Unlike Al Qaeda, the Islamic State of Iraq and Syria

acquires most of its funding from oil sales. Coalition airstrikes have somewhat slowed down the

smuggling and sale of oil but it hasn’t done much to stop it altogether. More recently, Russia has

stepped up its airstrikes against the terror group and has targeted some of its bigger oil fields. Russia has

been at the forefront of activity in Syria allegedly backing Bashar al Assad’s Syrian regime, but Russia has

also taken steps to bomb ISIS oil fields, in fact, since Russia initiated its counterterrorism efforts in the

region it has destroyed roughly 200 oil producing and refining facilities that had been seized by Islamic

State and Al-Nursa Front operatives.25 It is easy for Islamic terrorists to operate in these areas of the

25
@RT_com. "Russian Fighter Jets Destroy ISIS Oil Facilities Close to Turkish Border (VIDEO)." RT International. N.p., n.d. Web.
05 Dec. 2016.
 16

world because most of these countries have a weak political system, economy, infrastructure, and law

enforcement presence.

The Financial Action Task Force (FATF) has taken steps to counter ways that Islamic terrorists

finance their operations. They have also taken steps to stop their money laundering efforts. The FATF

has outlined three main areas that the task force needs to concentrate on in order to combat terrorism

financing. Since the political and military climate is changing rapidly in Syria the FATF must understand

the impact of recent action against ISIS, they must also work on improving the exchange of information,

and they must strengthen international standards for countries that do not have any laws that

criminalize money laundering or funneling money to terrorist groups.

The Nigerian military has struggled immensely in the fight against Boko Haram. The group

bombs marketplaces and villages and uses extortion and fear as instruments of power. The Nigerian

military has had a difficult time fighting the group and intelligence experts think that it’s because of the

high level of corruption in the Nigerian military. Also, a lack of funding and resources has set back the

country’s military in the fight against the terror group. Boko Haram has been limited to carrying out

attacks in western Africa but since their most recent pledge to the Islamic State, there has been

international concern that the group could influence attacks outside of western Africa.

The terror group Al Qaeda has been substantially beaten down by United States and coalition

forces since 9/11. Since the invasion of Afghanistan in late 2001 the United States has been in a long,

tiring war with Al-Qaeda. The group’s guerilla warfare style of fighting has killed and injured thousands

of United States troops and has kept the United States military in the Middle East the past 15 years.

Although the extremist group has not been entirely eliminated, their resources, funding, and ability to

carry out attacks has largely diminished.

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One of the main jobs of the Financial Action Task Force is to work with cooperating countries to

highlight countries of risk. The United States, Russia, some European countries, and other countries

around the world attempt to establish guidelines and policies and recommendations for countries that

do not have the capability of provide oversight to their banks and financial institutions. The FATF has

some existing policies that help to stop the funneling of funds to terrorist groups. The FATF “has

targeted financial sanctions and terrorist asset freezing, they have equipped law enforcement agencies

and financial intelligence units with all the necessary powers and resources, detected and prevented

illicit cross border transportation of cash, ensured domestic and international cooperation, and taken

preventative measures to protect sectors that could be misused such as financial, non financial and

nonprofit organizations.”26 The United States Treasury Department has done an excellent job of freezing

assets that various charities allegedly send to terror operations in the Middle East, Southeast Asia, and

North Africa.

Public Policy Implications

The United States has failed to implement democracy in war torn countries that are hotbeds for

Islamic extremists. If the United States wants to stabilize these areas of the world then they should look

to work with, observe, and respect the leaders that govern these countries. The ousting of Saddam

Hussein in Iraq by the United States military has left Iraq without a strong leader and has caused the

country to become a socioeconomic disaster. Al-Qaeda, the Islamic State, and other small faction terror

cells have taken advantage of the fat that the country doesn’t have a strong leader anymore and they

have taken power into their own hands. The same thing is going on in Syria where the United States is

backing Syrian rebels in an effort to expel Bashar al Assad and his Syrian army from power. Syria is a war

torn country dealing with civil war, and Islamic extremists jockeying for power. The United States is not

26
"Existing FATF Actions to Combat Terrorist Financing." CONSOLIDATED FATF STRATEGY ON COMBATTING TERRORIST
FINANCING I. INTRODUCTION (n.d.): n. pag. Web.
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only trying to expel the countries leader, but they are also engaged in a proxy war with Russia,

furthermore antagonizing the long time rival of the United States. The United States is making a huge

mistake supplying arms to rebels who are not thoroughly vetted. This could result in the rebels using our

own weapons against us as seen in Afghanistan in the present day. The United States Central

Intelligence Agency supplied funding to the Pakistani Interservice Intelligence Agency who then

distributed funding during Operation Cyclone to the Afghan mujahedeen to fight off the invading Soviets

during the Soviet invasion of Afghanistan. It would be in the best interest of the United States

government to not oust a leader, who they deem is unpredictable, but rather to monitor them and try

and build a good relationship with them. Ousting a leader from a country who doesn’t have a strong

economy, infrastructure, or government is a recipe for disaster and could lead to becoming a failed

state. The United States government also has been accused of supplying funding and resources to Libyan

rebels in an attempt to get rid of the country’s leader, Moammar Gaddafi.

The amount of revenue Islamic terror groups obtain on an annual basis is vital to their

operations. Without funding these groups cannot exist. They cannot feed their soldiers, buy weapons,

ammunition, tanks, and they cannot continue their operation. Law enforcement agencies and

intelligence agencies must work together to share information on their whereabouts the organizations

that enable these terror groups to continually operate. Most often these terror groups law low under

the radar by using cash and using couriers to transfer their money. Most of the transactions are done

face to face and information is not given over the phone or on the internet. Intelligence agencies have

had their hands full trying to determine the individuals who have infiltrated financial institutions and

charities and they have had a difficult time determining where the money is coming from. The Islamic

State finances their operations mainly from the sale of oil from oil fields that are under their control. To

stop that operation law enforcement and local militaries must regain the territory. Stopping Al Qaeda

falls under a certain set of rules. If law enforcement agencies can find a way to cut off their funding then
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the group’s operations will diminish severely. Different approaches must be taken depending on the

terror group, but there is one underlying theme. Intelligence and law enforcement agencies across the

globe must find a way to accurately, safely, and quickly share information. It takes an organization like

the Financial Action Task Force comprised of several countries around the world to stop the funding of

Islamic Terror groups. Often these groups receive funding from countries outside their area of

operations and many times cash travels through several countries before it ends up in the hands of

Islamic extremists. Financial institutions and communication methods must be monitored closely in

order to stop the illicit funding of terror networks. Corruption among financial facilities is not exclusive

to the East. Financial institutions in the West, in Mexico and Latin America called “casas de cambios” or

exchange houses have been known to harbor illicit funding as well. The Treasury Department and the

Financial Action Task Force are currently investigating exchange houses under ISIS control to determine

their credibility and legality. The Secretary of State under our next President Donald Trump will have to

decide how he wants to handle radical Islamic terrorism. He can take a classic unilateral approach to

combating terrorism or he can work to make sure critical countries in the Middle East, North Africa, and

Southeast Asia have a strong leader capable of ensuring peace, cooperation, and security in their

respective country.
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