Financial Transparency Coalition

The Islamic State of Iraq and Syria, or ISIS for short,[1] recently became the world’s wealthiest terrorist organization. In fact, with an estimated net worth of $2 billion, according to the International Business Times, ISIS may have more cash than the gross domestic product of several small countries including Gibraltar, the Virgin Islands, and Palau.

ISIS has achieved this feat in a relatively short time span. Over the last few years, ISIS has made a lot of money in some traditional avenues: mainly through activities like plundering, pillaging, and extortion. ISIS has also gained controlled several oil wells in Syria since late 2012, from which it makes a sizeable profit, and the organization has also been involved smuggling from all types of raw materials and antiquities. In its early days, the bulk of ISIS’s support came from wealthy donors in Kuwait, Qatar, and Saudi Arabia (more on this later). However, the organization’s latest exploits are what really have ballooned its cash flow.

ISIS’s big financial injection came earlier this month when it captured the Iraqi city of Mosul. During that invasion, ISIS broke into the city’s central bank, stealing close to $500 million, and it looted millions more. As a senior intelligence officer told the Guardian, “By the end of the week, we soon realized that we had to do some accounting for them. Before Mosul, their total cash and assets were $875 million. Afterward, with the money they robbed from banks and the value of the military supplies they looted, they could add another $1.5 billion to that.”

Much of this money goes to its considerable expenses, in cash. For example, ISIS pays its fighters a salary. It buys allegiance from trial leaders and expensive weapons, uniforms, and vehicles for its soldiers. ISIS has developed a reputation for “taking care of” its soldiers’ families, especially if they die in battle.

We don’t know much about what ISIS is doing with the wealth it isn’t spending, however. Of course, that’s a good example of a failure of our opaque international banking system. Although there is evidence that ISIS has brokers, and the ability to access the banking system.

What we do know is that in the years that ISIS was getting started,  much of its support came from wealthy individuals in the Arab Gulf States. In fact, according to a December 2013 report by The Brookings Institution, these channels supported hundreds of millions of dollars in donations to a host of Syrian rebel brigades, including ISIS. We also know that these donors exploited these nations’ weak anti-money laundering controls and financial rules to channel money to ISIS.

As Andrew Tabler, a senior fellow at the Washington Institute for Near East Policy, put it: “Kuwait’s banking system and its money changers have long been a huge problem because they are a major conduit for money to extremist groups in Syria and now Iraq.”

At the end of the day, money is the lifeblood of any terrorist organization like ISIS. These organizations must spend money on training and recruiting. Terrorist cells spend significant sums on procuring reliable and secret channels of communication. ISIS, for example, has used its cash to develop an extensive online presence, including a website, social media accounts, and a smartphone app. Most importantly, terrorists must spend money on disseminating their ideology, winning support, and creating social legitimacy. This comes in a variety of forms including propaganda, charitable activities, subsistence living costs for recruits and family members, and payments to terrorists’ surviving family members.

Fortunately, this is a problem that the world does take seriously, albeit it still has not made significant strides toward solving. In a trip to the Middle East this week, U.S. Treasury Secretary Jack Lew noted that “”The events in Iraq also underscore the importance more broadly of redoubling our efforts to combat the financing of terrorist organizations.”

Secretary Lew’s sentiment is an important one. Following through on its specifics, though, involves a variety of actions that would bring more transparency and accountability to the global financial system. And it is the follow-through on these specifics that really matters.