ISIS Uses Mafia Tactics to Fund Its Own Operations Without Help From Persian Gulf Donors

When fighters from the Islamic State of Syria and al-Sham (ISIS) stole tens of millions of dollars from a bank in Mosul earlier this year, it wasn’t simply a startling symbol of the collapse of Baghdad’s control over Iraq’s second-largest city. The brazen theft was instead a stark illustration of one of the most alarming aspects of ISIS’s rise: the group’s growing ability to fund its own operations through bank heists, extortion, kidnappings, and other tactics more commonly associated with the mob than with violent Islamist extremists.

In its early years ISIS — like the Taliban and other Sunni militants — received most of its funding from wealthy donors in Kuwait, Qatar, and other Persian Gulf countries. Extremists in those U.S. ally states continue to send money to ISIS, but American counterterrorism officials believe that the group now finances the bulk of its recruitment, weapons purchases, and attacks without outside help. In other words, even if the United States and its allies somehow stopped the flow of money from the Persian Gulf to the battlefields of Iraq and Syria, it would be too late to prevent ISIS from banking enough money to fight on for years.

"The overwhelming majority of their money comes from criminal activities like bank heists, extortion, robberies, and smuggling," said one U.S. counterterrorism official. "They’re getting some money from outside donors, but that pales in comparison to their self-funding."

The exact amount of money in ISIS’s possession is the subject of intense debate among Western intelligence officials. At the high end, some analysts estimate that the group may have access to at least $500 million in cash drawn from bank robberies, oil smuggling, and old-fashioned extortion and protection rackets. Other analysts believe the number is far lower, with one official putting it at between $100 million and $200 million. Those numbers are moving higher as the group conquers more cities on its seemingly inexorable drive toward Baghdad and is able to loot the local private and government banks. On Monday, ISIS fighters took the strategically important town of Tal Afar, adding to the territory under its direct control.  

Calculating the true size of ISIS’s coffers is complicated by the lack of U.S. intelligence assets in the areas the group controls in Syria and Iraq and by the difficulty of sorting through the group’s sophisticated propaganda efforts. In closed-door briefings on Capitol Hill, senior officials from the intelligence community dismissed the initial reports that ISIS may have stolen more than $400 million from the bank in Mosul and said those figures were highly exaggerated. "We’re talking tens of millions from Mosul, not hundreds of millions," one official said.

Either way, ISIS is one of the best-funded extremist organizations in the world. The group’s immense cash holdings, meanwhile, don’t paint a full picture of the group’s resources. The Iraqi military has largely collapsed since ISIS launched its surprise offensive earlier this year, allowing an array of major cities — including several within striking distance of Baghdad — to fall into the hands of the insurgents. The fleeing Iraqi troops left behind enormous quantities of American-donated armored vehicles, weapons, ammunition, and other military supplies. All of that is now in the hands of ISIS fighters.

Juan Zarate, a former assistant Treasury secretary who led the department’s crackdown on terrorism financing, said ISIS was carrying out significant amounts of smuggling operations, extortion, kidnapping, and other run-of-the-mill crimes in the growing swaths of Syria and Iraq that it controls. Foreign donors, he added, were stepping up their support for the group because of its successes against the hated secular government of Syrian strongman Bashar al-Assad and the equally unpopular Western-backed, Shiite-dominated Maliki government.

"It’s the worst of all worlds: external funding from wealthy outside donors, state sponsorship from across the Persian Gulf, and the ability to raise large amounts of money locally," Zarate said.

ISIS’s ability to self-fund its operations comes from its willingness to blend traditional criminal techniques like kidnapping with the lucrative smuggling opportunities that come from controlling oil-rich swaths of land.   

A recent research note from the Council on Foreign Relations concluded that even before the group’s conquest of Mosul, ISIS "extorted taxes from businesses small and large, netting upwards of $8 million a month, according to some estimates."

An April report from the Carnegie Endowment for International Peace, citing the work of Syrian journalist Malik al-Abdeh, said that rival rebel groups had taken control of Syrian oil fields in Hasakah and the Euphrates Valley. The report said that six refineries in the border town of Tal Abyad were being used to produce diesel and gasoline that was then smuggled into Turkey. All told, the report estimated, the groups could be raking in $50 million per month in oil revenues.

ISIS’s success at funding its own operations is indicative of a broader trend. Extremist groups throughout much of the world, particularly Africa, are beginning to reduce their dependence on outside donors. In a speech earlier this month, David Cohen, the undersecretary of the Treasury for terrorism and financial intelligence, said the success of Western interdiction efforts meant that terror groups were increasingly reliant on kidnapping to fund their operations. "Aside from state sponsorship of terrorism, ransom payments are the greatest source of terrorist funding today," he said.

In the case of ISIS, Western intelligence and counterterrorism officials believe that the group is using the money to pay its fighters, buy more weaponry, and bribe Sunni tribal leaders to either openly or tacitly support their offensive against Maliki. Zarate said the group’s bulging coffers meant that ISIS’s leaders now have the resources, if they chose to use them, to begin setting up training camps or command-and-control infrastructure in the areas they control and to look for ways to extend their fight to other regions and countries.

"This kind of money allows them to start thinking bigger and broader, and about a long-term strategy for where they want to go," Zarate said. "That begins to give them reach, which is really dangerous."