Inside the Treasury Department’s Financial War on Terror

Five hundred million dollars is a modest valuation of how much the terror group ISIS is estimated to be worth. ISIS, short for the Islamic State of Iraq and Syria, has captured news headlines and shocked the world by seizing vast swaths of territory and committing acts of cruelty against people of many nationalities, ethnicities and faiths.

ISIS requires steady funding to control and expand the territory it has claimed. For this reason, a fight against ISIS should involve not only military action and humanitarian aid, but also an understanding of how ISIS brings in revenue.

ISIS has become the top-financed terror organization in the world through oil piracy, bank robberies, hostage taking, human trafficking, antiquity pawning and extortion. Various estimates claim ISIS is worth between five hundred million to two billion dollars – more than Al-Qaeda and the Taliban combined. The Taliban and Al-Qaeda have existed since the 1980’s while ISIS has only come onto the world stage in the past few years.

Currently, the United States Treasury Department appears to be leading the financial war on ISIS. David Cohen is the undersecretary for terrorism and financial intelligence at the United States Treasury Department. In late 2014 he spoke at the Carnegie Endowment for international peace, giving broad encompassing remarks entitled “Attacking ISIL’s Financial Foundation.” Cohen spoke of pursuing financial policies in conjunction with military action and humanitarian aid to undermine the Islamic State’s expansion.

The Treasury Department is working to degrade the financial strength of ISIS through three mutually supportive elements. The first is disrupting their revenue streams in order to deny them money in the first place. The second element is limiting what ISIS can do with their money by creating methods to bar them from participating in the economy. Lastly, the Treasury Department will impose “sanctions on ISIL’s senior leadership and financial facilitators to disrupt their ability to operate.”

In his speech, Cohen stated that ISIS earns approximately one to four million dollars per day from oil smuggling alone. In addition to oil smuggling, kidnappings and ransom payments have brought in at least $20 million in 2014 according to the Treasury.

ISIS utilizes existing infrastructure in its claimed territory and supplies oil to black market networks, undercutting prices and selling in Turkey and Syria through middlemen. By using financial sanctions, the United States wants to target all those who trade stolen oil originating in ISIS controlled territory. The Treasury Department is working to identify those “middlemen” that deal with ISIS pirated oil in order to isolate them from the US financial system and freeze their assets.

Furthermore, the United States is working with the Turkish government and historically pro-American Kurds and their provisional government in Iraqi Kurdistan to prevent oil originating in ISIS controlled territory from crossing their borders.

Cohen also stated that the Treasury department will work to make it impossible for ISIS to find a bank that will touch their money or process their transactions. The implications for financial institutions are wide ranging. Given the global influence and importance of the U.S. financial system, it is in the best interest of financial institutions and corporations that operate in the region to cooperate. According to Cohen, the Bank Secrecy act reports filed with the Treasury Department by financial institutions provide intelligence agencies and the United States government “valuable insight into financial activity in areas where ISIL operates.”

ISIS does not just rely on stolen oil to make money. Cohen claims that they raise several million dollars per month through a sophisticated extortion racket.  In Iraq and Syria, ISIS “extracts payments from those who pass through, conduct business in or simply seek to live in the territory where it operates.” It is much harder for the Treasury Department to combat extortion.

Moreover, the Treasury Department is not equipped to fight human trafficking or antiquity pawning. According to National Geographic, ISIS has been looting and selling artifacts of ancient civilizations with ruins located in Syria and Iraq. The loss of these historic artifacts cannot be valued, and the artifacts will never be replaced. ISIS is laying waste to thousands of years of civilization and profiting from it.

The Treasury Department also plans on working in conjunction with U.S. Intelligence agencies to make it nearly impossible for ISIS to store or move large sums of money acquired from the trafficking of women and children, but they cannot prevent the trafficking itself.

There is no single solution that will lead to defeating ISIS. Developing a wide encompassing and effective financial strategy to combat the expansion and accumulation of wealth by ISIS in the region could be one piece in a larger strategy that includes military action and humanitarian assistance. Both the public and private sector will have to cooperate.

The Treasury Department’s financial war on terror is a high stakes operation. The policies that the United States does implement and their effectiveness will have consequences not only on how ISIS makes its millions, but on people living throughout the Middle East who have had their lives devastated by years of war and instability.