Down and Dirty: ISIS’s Criminal Enterprise

Author’s note: This article is a brief summary of a section of a paper I wrote for my Master’s program at IDC. This article is very brief and will have gaps in information but it is my belief that what I included provides enough of a foundation to give you, our readers, a critical preview of ISIS’s criminal enterprise. If you would like a more in-depth analysis, please comment on the article and if there is enough feedback I will expand on this article in the future and maybe make a series out of it. The information is condensed and just touches on a few of the components of ISIS’s criminal enterprise. This is not in in-depth or complete analysis in any sense.

At its prime ISIS was generating millions of dollars monthly through a variety of illicit streams via its criminal enterprise. ISIS engages in all levels of criminal activity whether it be large or small. They steal livestock, sell the passports of foreign fighters, rob banks, run a sophisticated extortion rackets, conduct kidnappings for ransom, and sell stolen antiquities, among countless other crimes. According to Matthew Levitt, ISIS generates between $70 million and $200 million annually primarily through its criminal enterprise.

The Financial Action Task Force (FATF) indicates five major sources of income for ISIS. The first two, “illicit proceeds from occupation of territory” and kidnapping for ransom are both components of ISIS’s criminal enterprise.

ISIS is very deliberate in the operation of its criminal enterprise. They consider every component when operating illicitly and find every opportunity to expand its income.  For example, the group differentiates between cash at state-owned banks and privately owned banks within its territory. ISIS considers the cash at state-owned banks to be its own property while customers at private banks are taxed when they withdraw money. This “tax” is known as a Zakat, which is being abused as extortion by ISIS to fund its operations. When ISIS captured Mosul, Iraq they stole $425 million from its central bank. Additionally, ISIS seizes farming equipment and rents it back to the farmers and collects a zakat by taking a portion of their wheat and barley crops.

ISIS conducts kidnappings for a variety of reasons, primarily for financing their operations. It is estimated that in 2014 ISIS generated between $20 million and $45 million in ransom payments alone. Additionally, ISIS kidnaps women and young girls for recruitment purposes. ISIS manages an elaborate and highly successful sex-trafficking operation. It is estimated that between 2,500 and 4,000 Yazidi women and girls have been kidnapped and sold for as low as $10 to attract more recruits. These women are forced into marriage or sex slavery. There is one reported case of a Yazidi woman kidnapped to be sold as a sex slave being freed after her family paid a $3,000 ransom payment.

The narcotic industry is extremely important and highly lucrative for ISIS. Money is extorted from all levels of the industry from farming and cultivation to securing the transport of the final product. According to the Russian Federal Drug Control Service (FSKN), ISIS annually generates $1 billion from drug trafficking in the territory it controls alone ISIS sells narcotics globally with a heavy concentration and reliance on the European market which generates $50 billion annually primarily though heroin sales.

This article does not cover additional revenue sources for ISIS. For example, private donations accounted for 5% of ISIS’ operating budget from 2005 until 2010 according to the Department of Defense’s Harmony Database.  What lessons can be learned from this brief overview of their criminal enterprise? How does this affect American national security? Does it even affect our national security if ISIS is fighting on the other side of the world?

First of all, understanding the changing dynamics of terrorism fundraising is extremely important for our national security. As the financing of terrorism shifts from private donations to self-reliance the methods for combatting the groups changes. For example, freezing or blocking access to banks can be ineffective when the groups control their own banks or steal money from them. Additionally, the groups utilize non-traditional money moving mechanisms such as the Hawala system. Secondly, focusing on these organizations criminal acts can have a twofold effect. First of all, dismantling or disrupting their criminal and illicit operations can cut off a major source of funding for group. Second of all, arresting those associated with these organizations for criminal acts will empty their ranks, even if for a shorter term than for terror-related charges.  A downside to this approach is that it may lead to an up rise in recruitment. ISIS being nearly self-reliant on funding is a major concern for our national security. This money enables them to spread their ideology through their significant online presence, influencing Americans to follow the group’s ideology and beliefs.

Terrorist organizations as we know them are changing. Many groups that we refer to as “terrorist entities” are operating more like states and/or insurgent organizations than as terrorist organizations. As Rachel Hayes wrote in her article, Freedom-Fighting Terrorists? Confusing Tactics and Motives, “Terrorism is a tactic.” There is a need to redefine what we a fighting. Defining the enemy is the first step in any conflict Knowing the enemy is next. ISIS relies heavily on terrorism but it is not a terrorist organization, calling it so ignores the complexity of the organization. The group may even conduct more criminal acts than terrorist acts (without considering terrorism a criminal act).