The Financial Fight Against Daesh

2015 will be a critical year for the financial battle against Daesh. The focus on the group’s financing will undoubtedly restrict Daesh in Syria and Iraq, but the group is proliferating abroad. The international community needs to get ahead of the financial curve.

A little over a year ago Daesh was dismissed as 'jayvee' by President Obama. Yet within a few months, Daesh controlled a vast and valuable swathe of territory across northern Syria and Iraq and had been elevated to ‘Hall of Fame’ status by former US Secretary of Defense Chuck Hagel as being ‘…as sophisticated and well-funded as any group that we have seen. They’re beyond just a terrorist group…they are tremendously well funded.’

Much of the effort to ‘degrade, and ultimately destroy’ Daesh has focused on its financing, either diplomatically via efforts to restrict money flow from neighbouring states, or via law enforcement arresting supporters and donors, or militarily via the destruction of earnings generating assets such as oil refineries and smuggling tankers. Yet all this effort presupposes that the financial battlefield is centred on Syria and Iraq.

Whilst there is no doubt that finance is a critical ingredient for Daesh and that restricting its funding is a valuable exercise, it is well known that the group raises funds from a number of sources beyond the reach of the international community. Local taxation and extortion, kidnap-for-ransom, and looting of antiquities will continue to defy attempts at disruption by the international community. Yet an arguably more concerning financial flow has the potential to emerge, a flow that is directed by Daesh but does not support Daesh operations in Syria and Iraq, a flow that fuels the two main fears of the international community, namely the spread of Daesh to other fragile states and Daesh-inspired attacks on Western nations.

Redirected Money Flows

Consider two scenarios. The willingness of private individuals in countries such as Kuwait and Qatar to donate funds to jihadi causes is well documented. Their fundraising ability is considerable as demonstrated by the US Treasury Department’s designation of Abd Al-Rahman bin 'Umayr Al-Nu'aymi in December 2013, accused of funnelling US$600,000 to Al-Qa’ida in Syria. To date, these funds have been directed towards the conflict in Syria and Iraq. Much of the funding has been used for humanitarian purposes but a significant portion has been drawn to support the extreme ideology espoused by groups such as Daesh. The international community has placed considerable pressure on Gulf States to ensure that counter-terror finance legislation is being imposed and that regional banks are alert to illicit financing they may be facilitating. This financial highway has been restricted, if not entirely cut.

Yet what about flows to other unstable regions? Could funds that might previously have fuelled Daesh in Syria and Iraq now be redirected, at the behest of Daesh leadership in the knowledge of the restrictions in place, to support the group’s new front in Libya? Might these funds be used to buy loyalty to the Daesh cause and ideology from nascent groups in other countries? Just as money shaped alliances in the early stages of the Syrian conflict, so this model can be deployed elsewhere.

Consider further the Daesh sympathiser in a Western nation, keen to display support and fealty to the group. Sending donations to Daesh is dangerous. Banks and remittance companies are alert to such transactions and finding a cash courier is challenging. Might not this money be better used in support of a domestic individual known to Daesh to be preparing a terrorist act and in need of financial support? Or could the money be paid to the families of a foreign fighter ‘martyrs’ who have lost their lives in Syria or Iraq as suicide bombers in support of Daesh? There is no need for these few hundred Pounds, Dollars, or Euros to make their complex way to the Middle East where they will have limited impact. These donations can provide much greater impact at home.

Get Ahead of the Curve

Throughout the Syrian conflict, the international community has been one step behind in its efforts to disrupt illicit financing. Private donations were a key financial tool in 2012 and much of 2013 but sanctions on individuals were not applied until late 2013 and international pressure on key funding centres only gathered momentum in 2014; despite strong rhetoric from the US and UK, multi-million dollar ransoms continue to be paid; the US-led airstrikes to disrupt Daesh oil revenue only materialised after US jets had been deployed to avert the fall of the Kurdish capital Erbil and relieve trapped Yazidis trapped on Mount Sinjar; and the international effort via the United Nations to tackle the threat of foreign fighters waited until tens-of-thousands had travelled to the region.

2015 will be a critical year in the financial battle for both Daesh and the international community. The focus on the group’s financing will undoubtedly restrict Daesh in Syria and Iraq as it spends funds and resources mounting campaigns, defending its positions, and providing diminishing welfare to the population under its control. As we are already witnessing just two months into the year, for the international community 2015 will see a proliferation of Daesh-inspired conflict. Restricting the spread of funding in support of this proliferation is a crucial task. The international community needs to get ahead of the financial curve.


Tom Keatinge

Director, CFCS

Centre for Financial Crime and Security Studies

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