Islamic State financing needs a crackdown, U.S. expert says

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The Obama administration has dented the Islamic State’s money-making operations with airstrikes against the terror group’s oil-smuggling empire and blacklisting its known financial facilitators from the international banking system.

But far more needs to be done, a former top Treasury Department official argues, to disrupt the group’s use of informal and less regulated schemes for funneling assets from the terror group’s base in Syria and Iraq to clandestine cells and affiliates that have sprouted around the world.

“It is essential to cut the financial links between ISIS leadership and operations from the so-called ’caliphate,’” said Juan Zarate, who served as a deputy national security adviser for combating terrorism in the George W. Bush administration from 2005 to 2009.

“The long pole in the tent for this effort is intelligence,” said Mr. Zarate, who was also Treasury Department’s first-ever assistant secretary for terrorist financing and financial crimes, and now advises the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies in Washington.

In a one-on-one interview with The Washington Times as part of this series of articles examining all the battlefronts in the war against Islamic State — also known as ISIS and ISIL — Mr. Zarate said there had been some key recent intelligence successes against the jihadis.

But he broadly lamented that Washington’s ability to gain true insight on the group’s finances was undercut years ago by the total withdrawal of U.S. combat forces from Iraq under President Obama.

“Unfortunately, after the withdrawal of U.S. troops in 2011, the U.S. also dismantled the Iraqi Threat Finance Cell that had been established in 2006 to discover and disrupt al Qaeda in Iraq,” he said, referring to the terror operation from which Islamic State emerged between 2012 and 2014. “We have been playing catch up to understand the ISIS financial networks ever since.”

The Obama administration acknowledges that despite recent territorial gains against Islamic State, the group still has vast revenues to underwrite its activities.

Daniel Glaser, the current assistant secretary of terrorist financing, declined to be interviewed for this article. But he told Congress in June that Islamic State had made nearly $1 billion during 2015 — mainly from illicit oil sales and extortion from businesses in territory held by the group.

The Center for the Analysis of Terrorism, a Europe-based think tank, puts the figure far higher, at roughly $2.4 billion.

Mr. Zarate suggested the Obama administration’s estimate may be more accurate. “The U.S. and coalition have been doing much more over the past couple of years to disrupt ISIS’ financing, though they still make millions of dollars,” he said. “Fortunately, the military campaign has been joined more squarely with the fight against terrorist financing. U.S. forces have destroyed mobile oil refineries, bombed several ISIS cash distribution centers, helped Iraqis take back key oil infrastructure and targeted key financiers.”

He added, however, that “this is important but not sufficient.”

Busting the ’hawalas’

Mr. Zarate stressed the need for better intelligence to cut the group’s “nodes of connectivity” to the regional and global economies, saying it “should be a priority” for America’s next president.

He pointed to Islamic State’s use of a vast global network of underground bartering brokers that funnel everything from cash and jewelry to livestock values through what are known as “Hawala” houses.

“The use of cash couriers, hawalas and other means of value transfer gives terrorists an opportunity to move resources across borders,” he said. “Since 9/11 the U.S and [the] international community have tried to understand and regulate hawala networks and shut down those that have facilitated nefarious financial transactions. This remains a work in progress.”

Mr. Zarate also called for a deeper push by Washington to block money flowing in from wealthy jihadi sympathizers, particularly in the Persian Gulf.

“ISIS has not only attracted thousands of fighters and recruits, but it has animated the broader global jihadi movement and the financing networks that had been suppressed and deterred after 9/11,” he said. “The establishment of the so-called caliphate and the fight against the brutal Assad regime [in Syria] have motivated funding to extremist causes and ISIS networks.”

The Obama administration has praised restrictive new fundraising laws passed recently by several Gulf nations — even claiming that Saudi Arabia has emerged as “a regional leader” in the effort.

But Mr. Zarate said U.S. officials should exert “more intense pressure” on source countries, especially in the Gulf. “This has,” he said, “been a challenge for the U.S.”