Tracking terror funding enters a new era

The sources of funding for the Islamic State are many and varied. The U.S. Department of the Treasury estimates ISIS looted between $500 million to $1 billion from banks in 2014. Earlier this year, the agency believes the extremist group was making about $40 million a month from the sale of oil. Additional hundreds of millions come from extortion, the taxes it levies on the people and businesses in the territory it controls, looting antiquities, and kidnapping for ransom.

How does the Treasury know about the items on this list?

The agency is tasked with following the money in the global fight against terrorism – a task that has become more complex in recent years.

“To follow the money, what you need in front of you is data,” said Juan Zarate, chairman of the Financial Integrity Network and author of “Treasury’s War: The Unleashing of a New Era of Financial Warfare.”

Zarate, a former deputy national security adviser, said that after the September 11 attacks, the United States created an international architecture using financial tools, sanctions and intelligence to isolate terrorists and their supporters from the global financial system.

“That grows more difficult when these groups are running local economies and using local resources to their benefit,” he said. “You can’t push a button magically in New York or London or Washington to constrict their resources.”

Because ISIS makes money from the territory it controls – from taxing goods that cross its borders to selling oil –  Zarate said following its financing “requires on-the-ground intelligence gathering in an environment that we do not control, requires dislodgement of groups from resources and populations that they lord over and profit from, and it really  becomes very much a physical effort.”

He says investigators still look for places where terrorists connect to the traditional financial and commercial system, but instead of passing through big global banks, those connections might now be more local or regional. ISIS could access banks in Mosul, Iraq’s second largest city — which is under ISIS control — or via a broker smuggling oil or looted antiquities.

Zarate said tracing these connections is one challenge, containing them is another.

“And I’m not sure that we’ve figured that out, because these are groups that have grown quite innovative,” Zarate added. 

Louise Shelley, the director of the Terrorism, Transnational Crime and Corruption Center at George Mason University, said she thinks the U.S. and its allies need to shift their approach. “We need to increasingly focus on the relationships of crime and terrorism so that we don’t see these as two separate problems,” she said, since very little modern terrorism doesn’t involve some other crime.

“It’s become a familiar pattern,” she added. “For example, one of the terrorists who attacked Charlie Hebdo was trading in counterfeit sneakers. The terrorist who attacked on the Thalys train between Brussels and Paris, he was a small scale drug trafficker.”

Therefore, terrorism investigators need to better coordinate with their counterparts – those investigating illegal trade, drugs or human trafficking – in other agencies, departments and countries.

Follow money transfers, she said, but also map the network of counterfeit sneaker suppliers.

“You begin to see the convergence of these activities because terrorists are functioning like diversified business people,” she said.

Both the White House and the U.N. have called for prioritizing the links between crime and terrorism. Shelley said she thinks New York and Los Angeles are already doing this well, but broader efforts are still too limited.

“I don’t think we’re doing this well enough on the national level or in many other cities where it needs to be done,” Shelley said.

Understanding terrorism financing and improving coordination between agencies is an ongoing issue, said Raymond Kelly,  the former commissioner of the NYPD, and now the vice chair of K2 Intelligence and author of "Vigilance: My Life Serving America and Protecting Its Empire City." “But I have to stress that the amount of money needed for a terrorist event is sometimes shockingly small.”

Following the money is one tool, but shouldn’t be used in isolation, agreed Matthew Levitt, a former Treasury official, now with The Washington Institute for Near East Policy.

“The sad fact is that there are lots and lots of ways to make, raise, move, access, [and] launder money,” he said. “Sometimes people assume that following the money will be a panacea and it’s powerful, yes, but it’s no panacea.”