Counter Threat Finance in the Age of ISIL

By Amanda Zeidan

The Islamic State of Iraq and the Levant (ISIL) is the best-funded terrorist organization in the world. ISIL presents a policy and intelligence challenge because it derives its financial strength largely from internal sources. This non-state actor's ability to survive and grow independent of external funding and exploitation of ungoverned spaces make it difficult for the U.S.-led coalition to target the group's funding using traditional measures. To date, U.S. policy to counter ISIL financially has focused on disrupting the group's main sources of funding, restricting access to the international financial system and imposing sanctions on its senior leadership and financial facilitators. However, with no concrete metrics in place to measure the effectiveness of counter threat finance, it is difficult to gauge the need and appropriate tools required to dismantle ISIL. As a result, the United States should focus on forming a concerted effort among international partners to identify key nodes within ISIL's financial system. When financial choke points are identified, local law enforcement efforts can help to dismantle entire networks of criminal activity.

After the terrorist attacks of September 11, 2001, the United States sought to enhance its national security through military interventions in Iraq and Afghanistan, strengthen its surveillance laws, and strong arm diplomacy. The United States Department of the Treasury also embraced new powers and tools as means of undermining security threats. Many of these tools have proven remarkably effective in isolating rogue actors in the international arena. However, ISIL has shown the ability to adapt and it is becoming increasingly necessary to make full use of current national security tools in order to identify financial choke points and dismantle ISIL movements.

An effective counter-threat finance strategy includes not only cutting off funding to terrorist organizations, but also understanding the financial architecture, relationships, and expenditures terrorist entities use to achieve their goals. Who are the sympathizers and purchasers of ISIL goods in trade-based money laundering? Who turns a blind eye at the border to movements of oil, antiquities, and body parts for sale by ISIL? Such analyses require a broad agreement among law enforcement agencies and information sharing partners in different countries. However, questions arise as to how to enforce such efforts effectively.

Post 9/11, the Department of the Treasury - empowered by new financial tools and legal structures - intensified its efforts to undermine terrorist financing. The first financial strike on the 'global war on terror' came in the form of Executive Order 13224, which targeted the financial bases of 27 terrorist-related entities. These led to over 315 entities designated as actively funding terrorist activities, and ultimately resulted in the seizure of over $136 million dollars in assets from over 1,400 accounts worldwide.

When President Bush signed the USA PATRIOT Act into law in 2001, as former Treasury official Juan Zarate noted in his book Treasury's War, the Act "ushered the most sweeping expansion of anti-money laundering regime since the 1970 Bank Secrecy Act." Moreover, new legal guidelines outlined in the Anti-Terror Act, Bank Secrecy Act and USA PATRIOT Act augment these partnerships. Sections 326, 238, and 300 of the USA PATRIOT Act broaden and deepen information sharing and the regulatory net for the United States financial system through the Egmont Group, an informal gathering of financial intelligence units, and Financial Action Task Force, an inter-governmental body made up of ministers from member districts tasked with setting standards and promoting effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The civil lawsuit in the U.S. district court for the Eastern District of New York, Linde v. Arab Bank, marked the first time a financial institution was held liable for aiding terrorist activities. On September 22, 2014, a jury found Arab Bank liable for knowingly providing financial services for Hamas. The case is largely responsible for setting a legal precedent for cases involving terror financing and the obligations banks have to monitor their clients. The case resulted in a settlement of over a billion dollars.

Cooperation among criminal groups and terrorist groups is a multifaceted threat to global security. In a broad sense, terrorists are just a certain type of criminal--they will use illegal methods to achieve their goals. The distinction lies in the ultimate purpose of each group. Entities engaged in terrorist activities may borrow methods from criminal enterprises, but ultimately the two groups have different aims. Criminal networks aim to maximize profit, relying on a relatively stable, functioning state to provide a consumer base. Terrorist entities seek to undermine that stability to achieve a new status-quo. They tend to be more political than their traditional criminal counterparts. Though the interaction between traditional criminal networks and terrorist groups is mostly ad hoc and short-term, understanding the point where that collaboration stops is crucial to creating more effective targeting methods. After 9/11, according to Dr. Nikos Passas, Professor of Criminal Justice at Northeastern University, "we shifted away from ordinary crime prevention and specialized in terrorism--- this kind of over specialization leads to missing things that can otherwise be captured. The London Bombings, where terrorists were originally screened as merely criminals, is an example of this."

On December 17, 2015 for the first time in the United Nations' 70-year history, the U.N. Security Council brought together finance ministers to bolster and encourage efforts to disrupt ISIL's revenue and further isolate the terrorist organization from the formal global financial system. These efforts, led by the United States, culminated in a strategy that focuses on four points: 1) Ensure ISIL cannot procure goods. 2) Separate ISIL from its source of wealth. 3) Destroy oil reserves and cash reserves. 4) Track cross border financial flows to ISIL affiliates through The Counter ISIL Finance Group.

Despite actions taken by the United States to date, questions remain as to whether the United States is exercising its resources, mainly data collection/analysis and partnerships, to full potential. Dr. Passas claims, "despite rhetoric, not everyone is on board with going after the same target." Currently, information collected on ISIL, be it financial intelligence or human intelligence, is fragmented and dispersed among different countries and jurisdictions. To do this effectively, enemies of ISIL need to collaborate and contribute to efforts. If there is sufficient political will between the United States and partners in the region, enforcement should illustrate this. Political will manifests itself in the form of a concerted effort to ensure data points are collected and analyzed to avoid prematurely going after the target.

Without meaningful political will and a coalesced database of private sector financial intelligence and human intelligence, ISIL will continue to grow in power. The economic assets in ISIL-held areas include banks, natural resources such as oil and phosphates, agriculture, and historic and antiquities sites. Clearly, degrading ISIL's financial strength requires cross-national intelligence-sharing. And the United States has also pursued collaboration with international partners through international intelligence sharing. The key difference between the financial activities of ISIL and its predecessors is not the type of revenue accrued, but rather the scale of financial activities. There is still a need to better identify the origin, middlemen, buyers, carriers, traders, and routers through which oil produced in ISIL- held territory is trafficked. This can only be achieved through multiagency cooperation.

Financial measures such as regulation of banks and seizing assets of actors and institutions conducting shady deals dismantled Al-Qaeda in Afghanistan and Pakistan, the group responsible for the 9/11 attacks. In 2004, the U.S. Drug Enforcement Agency (DEA) cracked down on illicit cigarette smuggling across state lines by Hezbollah operatives. Cigarette diversion, where traffickers purchase a large volume of cigarettes in states where tax is low and drive it across state lines to sell for a profit, accounts for millions of dollars directly funding the Iranian-backed Lebanese terrorist group Hezbollah. The DEA continues to tackle illegal trade and funding of terrorist networks with significant arrests of Hezbollah officials linked to South American drug cartels, but the success of enforcement is dependent on the United States' partners' ability to collect, share, and implement counter terrorism strategy. In the age of ISIL, a coalition of intelligence sharing units, backed by political will, and local law enforcement partners are key to identifying and dismantling the network that provides ISIL revenue.

Amanda Zeidan is pursuing a Master of Science in Foreign Service at Georgetown University, where she is pursuing a concentration in Global Business and Finance. She is currently an Allen W. and Allen M. Dulles Graduate Fellow at the Institute for the Study of Diplomacy and a Middle East Fellow at Young Professionals in Foreign Policy.