‘The financial war on terrorism and Islamic State of Iraq and Levant’ Nicholas Ryder Professor in Financial Crime, Bristol Law School, UWE University of Sussex, March 9th, 2017

Centre for Research and Evidence of Security Threats This work has been conducted under the Centre for Research and Evidence on Security Threats through an ESRC grant which is funded in part by the UK security and intelligence agencies. FYI: (ESRC Award: ES/N009614/1) The Financial War on Terrorism

The Financial War on Terrorism Abstract The aim of this paper is to critically consider the effectiveness of the “Financial War on Terrorism” on the funding streams of the Islamic State of Iraq and Levant (ISIL). The paper identifies the “Financial War on Terrorism” and it then moves on to determine if it is able to tackle and restrict the funding avenues of ISIL.  The final part of the paper comments on how ISIL will need to adapt its funding streams as it continues to lose its previously controlled areas . The Financial War on Terrorism

The Financial War on Terrorism Introduction What is terrorist financing? Sources of terrorist Funding, Cheap terrorism, What is the Financial War on Terrorism? International Legislative Measures: The Financial War on Terrorism 4

The Financial War on Terrorism Introduction Islamic State of Iraq and Levant Funding Stream 1: The Control of Oil Reserves Funding Stream 2: Kidnapping for Ransom Funding Stream 3: Foreign and Private Financial Benefactors Funding Stream 4: Criminal Activities Lessons Learnt The Financial War on Terrorism

The Financial War on Terrorism Terrorist Financing International Convention for the Suppression of Terrorist Financing: “assets of every kind, whether tangible or intangible, movable or immovable, however acquired, and legal documents or instruments in any form” (Article 2, 1999). World Bank: “the financial support, in any form, of terrorism or of those who encourage, plan, or engage in it”. The Financial War on Terrorism

The Financial War on Terrorism Terrorist Financing Terrorist financing has been referred to as ‘reverse money laundering’, which is a practice whereby ‘clean’ or ‘legitimate’ money is acquired and then funnelled to support terrorism The Financial War on Terrorism

Traditional Sources of Financing State Sponsors of terrorism: Sudan, Iran and Syria Private terrorist moneys may be classified into two categories : legitimate, and unlawful funds The Financial War on Terrorism 8

Sources of Terrorist Financing Corporate donations, Non-profit organisations, Drug trafficking, Extortion, Organised retail theft, Fraud, Kidnappings for ransom, Oil refining, The Financial War on Terrorism

The Financial War on Terrorism Cheap Terrorism Bishopsgate bomb (1993) £3,000, £1bn worth of damage to property World Trade Centre bomb (1993) $400, Ramzi Yousef “we ran out of money to bring both towers down” Oklahoma City bombing (1995), $5,000 USS Cole (1999) $10,000 Sari Club Discotheque in Denpasar, Bali (2003) $74,000 The Financial War on Terrorism

The Financial War on Terrorism Cheap Terrorism Madrid Bombings (2004) €8,000 (EU Commission) London bombings (2005) Between £100 and £200 Official estimate £8,000 (HMG 2005) Westgate Mall (2013) $5,000 (US Department of Treasury) Boston Marathon bombings (2013) $500 (several media sources)   Paris, France (November 2015) Orlando, United States (June 2016) Nice, July 2016) The Financial War on Terrorism

The Financial War on Terrorism President George Bush declared what has commonly become referred to as the: ‘War on Terror’ or the ‘Global War on Terror’ on September 20 2001. Instigated by President George Bush on September 24 2001: “we will starve terrorists of funding, turn them against each other, rout them out of their safe hiding places, and bring them to justice” The Financial War on Terrorism

What is the financial war on terror? International Convention on the Suppression of Terrorist Financing (1999) UN Security Council Resolutions: 1267 1269 1333 1373 Recommendations Financial Action Task Force (February 2012) The Financial War on Terrorism 13

What is the financial war on terror? Council Resolution 2580/2001. Framework Decision 151 [2002] OJ L164/3. Council Regulation 881/2002 Council Common Position 2001/931/CFSP The Financial War on Terrorism

What is the financial war on terror? “as attacking, whether via criminalisation, confiscation, forfeiture, freezing, sanctioning the financial assets of known or suspected terrorists … [it] also contains the use of preventative methods … and the collection of financial intelligence from suspicious activity reports” (Ryder, 2015) The Financial War on Terrorism

Islamic State of Iraq and Levant This terrorist organisation has been described as ‘the wealthiest terrorist organisation’, Matthew Levitt stated that “estimates put ISIL’s daily income at around $3m, giving its total value of assets between $1.3bn and $2bn” and It has more assets than many nation states. The Financial War on Terrorism

Islamic State of Iraq and Levant By September 2014, ISIL had revenues of at least $2bn from internal and external sources (Duhaime, 2015), ISIL’s total assets exceed $2tn, with an annual income totalling $2.9bn and ISIL “approved a $2bn budget” for 2015” (Humud et al, 2015). The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 1 – The Control of Oil Reserves: This involves selling what they have captured to local consumers and black marketers, ISIL has used the same smuggling methods and routes that were used by Saddam Hussein during the 1990s, that generate daily revenues between $1m and $3m, The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 1 – The Control of Oil Reserves: The international community has threatened to impose sanctions on countries that purchase oil from ISIL and However, the effectiveness of sanctions on this funding stream must be questioned. The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 2: Kidnapping for Ransom This has seen many nation states paying ISIL between $20m and $45m for the release of their citizens, The Congressional Research Services estimated that ISIL has amassed between $35m and $45m in ransom fees in 2014) and Kidnapping for ransom payments have been made despite the approval of UN Security Council Resolution 2133. The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 3: Foreign and Private Financial Benefactors ISIL are also able to acquire finances from foreign investors and private benefactors, ISIL receives funding from private donations or via non-profit organisations, thus adopting a similar funding strategy as al Qaeda (FATF) Sympathetic supporters in other countries appear to have also provided ISIL with financial support. The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 3: Foreign and Private Financial Benefactors Department of Treasury took the view that ISIL “derives some funding from wealthy donors” and it been estimated that ISIL has collected up to $40m from private donors. However, it has been suggested that the amount of funding provided by private sponsors from has “diminished and is at most only a tiny percentage of the total income that flows into ISIL coffers in 2014”. The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 4: Criminal Activities imposition of illegal taxation measures which raises approximately $360m per year, the sale of artefacts has become ISIL’s second largest funding stream (approximately $100m p/a) In February 2015, the United Nations Security Council passed Resolution 2199, which prohibited the trade of artefacts illegally removed from Syria (since 2011) and Iraq (since 1990) The Financial War on Terrorism

Islamic State of Iraq and Levant Funding Stream 4: Criminal Activities Extortion Bank robberies (similarity with the domestic terrorist groups in the United Kingdom) The unprecedented evolution of the funding streams of ISIL is also illustrated by the creation of its own currency The Financial War on Terrorism

The Financial War on Terrorism Lessons Learnt The unprecedented scale of Islamic State’s finances has been underscored by the development of its own currency: an unparalleled development in the financing of terrorism. The Islamic State is an extremely well-funded terrorist group that whilst reminiscent of al Qaeda in its pomp, belittles their achievements and those of other terrorist groups. The Financial War on Terrorism

The Financial War on Terrorism Lessons Learnt Evaluations the wealth of illicit organisations relies at best on educated guess work, However, if the most accepted estimates are accurate, and IS indeed earns approximately $1m per day, then from a financial perspective it has the financial capability to operate for many years. The Financial War on Terrorism

The Financial War on Terrorism Lessons Learnt This financial resilience has come about because IS’s financial infrastructure is significantly more advanced than any other known terrorist organisation and the existing counter-terrorist financing measures – the ‘Financial War on Terrorism’ – is not fit for purpose when it comes to IS. The Financial War on Terrorism

The Financial War on Terrorism Lessons Learnt Even with more consistent implementation of counter-terrorism financing measures the fact remains that Islamic State’s funding model has proved to be extremely flexible and adaptable, and so it is only when the territorial reach of Islamic State is defeated that we are likely to see their funding streams significantly reduced. The Financial War on Terrorism