U.S. cutting into Islamic State’s revenue stream

The Treasury Department’s top official for tracking terrorist financing says money continues to flow to the Islamic State, but Washington is beginning to bite hard on the group’s revenue streams and its ability to pay fighters in Iraq and Syria.

“We should not confuse funding with financial strength,” Treasury undersecretary for Terrorism and Financial Intelligence David S. Cohen told lawmakers on the House Financial Services Committee on Thursday morning.

While the Islamic State — also known as ISIL and ISIS — remains “well funded,” Mr. Cohen said, “a terrorist group’s overall financial strength turns not just on its income but also on its expenses and its ability to spend money freely.”

“In that regard,” he said, “ISIL faces significant financial burdens. Paying its fighters and attempting to govern sprawling territory is expensive, and ISIL does not have the money to meet its costs.”

Mr. Cohen’s claim comes just weeks after he made international headlines by announcing that, with the exception of a handful of state-sponsored militant groups, the Islamic State is likely the “best-funded terrorist organizations” the U.S. has ever faced.

Appearing in late-October before an audience at the Carnegie Endowment for International Peace, the Treasury undersecretary said the group gets roughly $1 million a day from black-market oil sales, has raised some $20 million in ransoms over the past year and millions a month through extortion in Syria and Iraq.

On Thursday, Mr. Cohen appeared eager to update those statements, saying the Obama administration is now implementing a multi-pronged strategy to cut ISIL’s revenue streams — with a key portion of the effort depending on U.S.-led air strikes that have struck Syrian oil fields controlled by the group during recent weeks.

“From mid June until recently, ISIL’s daily oil revenue was approximately $1 million, although it is now likely lower, thanks mostly to coalition air strikes,” Mr. Cohen said. “To further disrupt this market, we are targeting for sanctions anyone who trades in ISIL’s stolen oil.”

U.S. officials are “working with our Turkish and Kurdish partners as well as with regional companies to clamp down on ISIL’s cross-border [oil] smuggling,” he said, adding that another prong of the Obama administration’s strategy involves urging foreign partners to “subscribe to a no-ransoms policy.”

“Refusing to pay ransom to terrorist organizations not only makes it less likely that innocent civilians will be kidnapped, it also deprives terrorists of funding critical to their deadly aspirations,” Mr. Cohen said.

Separately, he said, U.S. officials have begun targeting “external financial supporters” of the group.

Another prong of the U.S. strategy, Mr. Cohen said, centers on “breaking ISIL’s hold on territory” inside Syria and Iraq, where the group currently generates revenue through “crime and extortion essentially by demanding cash at gunpoint.”

In order to limit the group’s ability to succeed in this area, U.S. officials are implementing sanctions “restricting ISIL’s access to the international financial system in order to impair its ability to collect funds from abroad and to store, move and use the funds it acquires locally,” Mr. Cohen said.

“We are working with the Iraqi authorities, Iraqi banks and international banks and regulators to prevent ISIL from using bank branches located in territories where it operates,” he said, adding that U.S. officials are implementing “targeted sanctions on [the Islamic State’s] leadership and financial facilitators.”

“This will make it harder for ISIL to conduct commercial activity and also clearly identify who stands behind this evil organization,” Mr. Cohen said.