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US Treasury Department Declares Financial War on ISIL

At a press briefing on October 23, White House Press Secretary Josh Earnest and Under Secretary of the Treasury Department David Cohen told the media that the United States will be using the deadliest strategy of all against the terrorist organization ISIL–they are attacking its financing.

Cohen said, “ISIL presents a somewhat different terrorist financing challenge for a couple of reasons. One, it has obviously amassed wealth at a pretty rapid clip. Much of its funding, unlike some of al Qaeda and al Qaeda-type organizations, does not come from external donations but is gathered–internally gathered locally in the territory in Iraq and Syria where it currently operates.”

Accordingly, one target is ISIL’s sale of smuggled oil, which has garnered about $1 million a day. Airstrikes on some of the ISIL oil refineries have somewhat damaged that source of cash.

Another major cash cow bringing in $20 million this year has been the kidnapping for ransom of innocent civilians and journalists.

“Third, ISIL earns up to several million dollars per month through its various extortion networks and criminal activity in the territory where it operates. One of these is to charge import taxes for use of highways with discounts for transport of goods into the Iraqi capital. [where does this quote end? And who’s speaking? Cohen?]

Finally, while external donations are not right now a significant source of funding for ISIL, said Cohen, it does maintain significant links to Gulf-based financiers. ISIL is reaching into every country to get donors, said Cohen, often by using social media. Appeals appear on “Twitter in particular from well-known terrorist financiers, ones that we’ve designated, that have been designated at the UN, asking for donations to be made to–and they’re quite explicit–that these are to be made to ISIL for their military campaign.”

[Is this a continuation of previous paragraph’s quote?] “So we are leading an effort to combat ISIL’s financial foundation, closely linked up with the other members in the U.S. government of the anti-ISIL coalition, as well as with international counterparts.”

The first prong is cutting off ISIL’s funding streams. “With respect to oil, we are looking very carefully at who the middlemen are who are involved in the sale of the oil that ISIL is smuggling. At some point, there is someone in that chain of transactions who is involved in the legitimate or quasi-legitimate economy. They have a bank account. Their trucks may be insured. They may have licensing on their facilities. There is someone who our designation tools can influence. And so we are looking very carefully at identifying who the people are that are involved in this chain of transactions that we can apply our tools against.” Cohen said the smuggling networks being used are not new. It’s just that now they’re being used to smuggle oil that finds its origin with ISIL

The second prong is working to turn the growing international norm against paying ransom to terrorist organizations into a reality. “This year there were two UN Security Council resolutions that very clearly came out and said that paying a ransom to terrorist organizations is something that no country, no member state, should be involved in. This is something that has been longstanding U.S. policy, longstanding UK policy, and something that we’re trying to get our partners around the world to turn from a norm into a reality.”

This may be the hardest goal to accomplish as the United States Treasury Department stated in a news release that ransom payments, almost exclusively from European countries to terrorist kidnappers, reached $165 million since 2008.

A New York Times article stated that the money is sometimes masked, despite governmental denials, as developmental aid, according to interviews with former hostages, negotiators, diplomats, and government officials from Europe, Africa, and the Middle East. According to the Times report, France has paid out $58.1 million–though more of their nationals have been killed than from other countries–Qatar and Oman, $20.4 million; Switzerland, $12.4 million; Spain, $11 million; Austria, $3.2 million; and $21.4 million from undetermined sources.

Earnest said, “The President has on a number of occasions made the case to other world leaders about the benefits of the position that’s taken by the United States. And that is specifically that no one should pay ransom to extremist organizations or terrorists who are holding hostages. And as painful as that policy decision is, it is clearly in the best interest of the global community for that policy to be in place.” [Are this and the next two paragraphs a continuous Earnest quote? If not, clarify. If so, fix punctuation.]

“Third, we are looking at these external funding networks. Although it is not currently a significant source of revenue, there is obviously a big pool of money out there that has historically funded extremist groups. We are very focused on ensuring that this does not become a more significant means by which ISIL is able to fund itself.

“And finally, on the crime and extortion networks, the best way to address this, again, is through military activity and other activity on the ground to push ISIL out of the territory in which it is currently operating. But it does sort of play into our second line of activity, which is to prevent ISIL from gaining access to the international financial system. So, as it has funds at its disposal, it’s critically important that it does not get access to the financial system through the bank branches that are in the territory where it’s currently operating.”

Preventing that may be more difficult now than it would have been prior to 2003, as the United States had sent officials of the Federal Reserve to help the Iraqis develop a banking infrastructure more compatible with western and European systems.

Raleigh Tozer, former Deputy General Counsel and Senior Vice President of the Federal Reserve Bank of New York, worked at the Central Bank of Iraq in Baghdad replacing a colleague in 2004. He said up until that time Iraqis dealt mostly in cash and their check system was antiquated at best, credit cards were not used that much, and most monetary transfers were handled manually, making them easy targets for insurgents. “Banks made little use of automation and were not actively engaged in taking deposits and making loans. Similarly, they did not provide many ways of making payments.”

Tozer helped set up a system where money could be easily transferred from bank to bank throughout Iraq.

Cohen said there are dozens of bank branches in Iraq where ISIL is currently operating. “We’re working closely with the Iraqis and with others around the world, both in the private financial sector and in the public sector, to ensure that ISIL is not able to gain access to the international financial system,” the same system that was built to give Iraq a stronger economy.

Cohen said blocking this access will throw roadblocks in front of ISIL’s ability to pay the travel expense of recruits.

Another line of effort is to apply sanctions against the key leaders in ISIL. “It has a relatively sophisticated, complex organizational structure. We’re going to look to designate the leaders, designate the people who act in CFO-like capacities, as well as to designate those outside of Iraq and Syria who are providing support to ISIL.”

Cohen pointed out that the more territory ISIL has and the more people it attempts to subjugate, the more money ISIL needs to spend on maintaining its control, which limits its ability to expand.

ISIL, while a terrorist organization, has taken a page from Hamas’s playbook and is attempting to act as if it is a country unto itself, which means it has to provide services for its population but so far has not been too successful. While ISIL is getting millions, Cohen said the area it controls in Iraq cost the government $2 billion in services.

“Its ability to continue to hold that territory against a population that in the past has shown a willingness to push back against al Qaeda-types is going to be stressed.”

A problem the Department of the Treasury has to work around is that not many of the ISIS financiers have assets in the United States. Earnest said that the U.S. is working with 60 members of the broad international coalition to pursue this strategy, of which shutting down the financing of ISIL is part.

Charles Lister, Visiting Fellow, Foreign Policy, Brooking Doha Center, said in his blog that while presently external financial donations are of minimal significance to ISIS, in the current climate ISIL is experiencing a diminished capacity to raise funds any other way. He said that Kuwait and Qatar remain “permissive jurisdictions” for such activities (as donations to ISIL) and that “both countries have more work to do” to countering this activity. It [what?] “has been slow to make an impact, or is simply not powerful or as far-reaching as is necessary. Whatever the case, it remains evident that more needs to be done by Qatar and Kuwait to enforce their laws.”

Lister said that despite the donations that flow from Qatar and Kuwait, “ISIL has periodically singled out Qatar and its Ministry of Foreign Affairs in particular, as being kuffar (nonbelievers) for its role in apparently providing humanitarian aid through member groups of the Islamic Front in northern Syria. Lister said, “It remains extremely difficult, nigh on impossible for external actors to totally defeat terrorist organizations. Instead, such groups tend to eventually destroy themselves from within. Countering their sources of finance can expedite this process, but only when done gradually and when based on a genuinely accurate assessment of the organization and its surrounding dynamics–both the fish and the sea, to use Mao’s famous words.”

By Anne Phyllis Pinzow

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