Main Image Credit Image courtesy of US Department of Defense/Air Force Technical Sergeant Brigitte N Brantley
The relentless targeting of Daesh and its funding has had a considerable impact. Oil production is depleted, swathes of territory have been lost, key towns have fallen, and salaries and services have been cut. Now the real counter-terror finance work should begin.
All the evidence suggests that the critical elements on which Daesh (also known as the Islamic State of Iraq and Syria, ISIS or ISIL) has relied for financing its activities are under considerable threat from the latest stages of the US-led Operation Tidal Wave II aerial bombardment. For although efforts to target, disrupt and reduce Daesh’s sources of funding – in particular its oil business and cash storage facilities – were belated, since they got underway in October 2015 the financial pressures on the terrorist group have escalated. Combined with the diminishing opportunity to raise funding via ‘tax’ and extortion as the group loses territory, Daesh’s finances are considerably less buoyant than they were two years ago, when leader Abu Bakr al-Baghdadi declared the Islamic State ‘caliphate’.
Consider the facts. Brett H McGurk, special US presidential envoy for the Global Coalition to Counter ISIL, recently reported to the US Congress that Daesh has lost 47% of its territory in Iraq and 20% in Syria. Key cities such as Fallujah have been recaptured by Iraqi forces, and others, such as Mosul, are surrounded. The oil infrastructure on which Daesh has relied so heavily has been targeted and destroyed by coalition airstrikes, resulting in refining now limited to makeshift ‘teapot’ facilities. Valuable historic sites such as Palmyra (if they ever were a material source of revenue) have been lost by Daesh, and the Iraqi authorities have taken steps such as withholding salary payments to civil servants in Daesh-held territory and excluding affected foreign exchange agents from US dollar currency auctions. Fighters’ salaries have been cut and the promise of welfare and services, previously prevalent in Daesh publications such as Dabiq magazine, are no more.
For the past fifteen years since the 9/11 terrorist attacks on the US, the global effort to tackle terrorist financing has greatly expanded. Standards have been driven up by the recommendations and evaluations of the global anti-money laundering and counter-terror finance standard-setter, the Financial Action Task Force (FATF). Still, in a report prepared for the G20 Leaders’ meeting last November, the FATF noted that following a review of 194 countries, almost all have criminalised terrorist financing, but relatively few have made terrorist financing-related convictions. Simply put, while countries may be passing laws against terrorist financing, effective implementation is poor.
This brings us back to Daesh and its financing. The terrorist financing emphasis of the international community over the past two years has been entirely placed on disrupting the financing of Daesh and its foreign fighters, providing a widely supported focal point for international collaboration. Central to the application of this effort is the Counter-ISIL Finance Group (CIFG), a gathering of 36 countries and multilateral bodies led by the US, Italy and Saudi Arabia, focused on disrupting Daesh’s finances by prohibiting access to the international financial system, denying access to resources, and restricting the group’s ability to send or receive funding.
Although this partnership is certainly welcome, it has seemingly now reached a decision point. As long as the emphasis remains on intervening in Syria and Iraq to degrade Daesh’s sources of funding, all nations involved with the CIFG can find a mutual purpose. However, as the focus shifts from primarily targeting finance in Daesh-held territory to include broader efforts to identify and address counter-terror finance (CTF) weaknesses in member countries themselves, the international unity displayed thus far is likely to fray. It is arguably the case that, for countries that continue to fall short of global CTF expectations, and particularly those in the Middle East, the effort to target Daesh financing has provided a convenient distraction from their own deficiencies. Witness also the recently published UK Government counter-terrorism strategy (Contest) annual report that focuses three of its four paragraphs on Daesh funding.
So what should the CTF architecture that has been constructed over the past twelve months do now, since its initial mission ‘to cripple ISIL’s ability to make money and undermine its ability to move and use the money it raises’ appears to be nearing its end? As originally envisaged, the CIFG’s objectives included developing new countermeasures, providing technical assistance, and strengthening internal anti-money laundering and counter-terrorist financing measures. Assessed against these objectives, although Daesh appears to have suffered significant financial loss since the CIFG was formed in March 2015, the original objectives of the CIFG provide plenty of scope for further action.
While the FATF has provided policy implementation assessments, the lack of a co-ordinated response to addressing implementation shortcomings remains an important gap in the global CTF architecture. Given the CIFG’s mission includes developing practical responses and providing training, this would seem a gap that the CIFG is ideally suited to fill, shifting its focus from targeting Daesh’s funding in Syria and Iraq to strengthening the integrity of both the formal and informal financial systems against abuse for the purpose of terrorist financing more generally.
The momentum and focus brought to CTF efforts by the singularly unifying opposition to Daesh and foreign terrorist fighters must not be squandered. It also must not distract from the very real and continued failings of countries, identified by the FATF, to implement counter-terrorist finance measures effectively, such as making use of terrorist financing legislation to obtain convictions. As global leaders digest the counter-terrorism financing findings of the FATF and the impact of the CIFG-led efforts, a more proactive, forward-looking global CTF strategy needs to be defined, based not only on FATF-led policy, but also the analysis of threats and the development of intervention strategies that anticipate rather than simply react.
The threat of Daesh has engendered collaboration and a unifying focal point for the international community. Still, as this focus shifts, the efficacy and commitment of a number of countries involved in the CIFG will once again be questioned, as the convenient distraction of disrupting Daesh financing fades.
Centre for Financial Crime and Security Studies