Global Fraud Focus

ISIL is unprecedented in its fraudulent 'fundraising'

ISIL, or ISIS, needs lots of currency, of course, to expand its terrorist reach into the Middle East. And it's not above committing fraud to raise funds.

The Financial Action Task Force (FATF) — an international, inter-governmental body that develops and promotes policies to protect global financial systems — has published a 48-page report, "Financing of the Terrorist Organisation Islamic State in Iraq and the Levant."

"It should be emphasized," the report notes in the executive summary, "that terrorism and those who support terrorism can never be associated with any religion, nationality, civilization or ethnic group."

Worldwide caliphate

ISIL is the self-proclaimed Islamic State in Iraq and Levant. (The group is also known as ISIS — Islamic State of Iraq and Syria or the Islamic State of Iraq and ash-Sham.) Levant refers to a large area in the eastern Mediterranean, which includes Cyprus, Israel, Jordan, Lebanon, Palestinian territories and southern Syria. ISIL, the successor to Al-Qaida in Iraq, has undermined stability in Iraq, Syria and the Middle East, and it has global aims.

According to The Independent, on June 29, 2014, the group proclaimed itself to be a worldwide caliphate and named Abu Bakr al-Baghdadi its caliph. (See Iraq crisis: Isis declares its territories a new Islamic state with ‘restoration of caliphate' in Middle East, Adam Withnall, June 30, 2014, 2014.) Charlie Cooper, a researcher for the Quilliam counter-extremism think-tank, said the naming of Baghdadi as caliph was particularly controversial.

"There hasn't been a Caliph since the Ottoman Empire outside of the Ahmadiyya sect of Islam," he told The Independent. "And the Caliph is appointed as the only legitimate successor to Prophet Mohammed."

ISIL is different

The FATF report explains that the financing of ISIL is different than that of other terrorist organizations in that its funding is critical to its existence, and it mainly derives it from illicit proceeds in territories it occupies. Their crimes include bank looting and extortion, control of oil fields and refineries, and robbery of economic assets, according to the FATF report.

According to the FATF report, other money sources include donors, kidnapping for ransom and cash smuggling, and foreign terrorist fighters paying their way to travel to the area. ISIL also raises funds using websites and Twitter (with hashtags like #islamicfront and #isis).

ISIL's conquest of land is perhaps even more alarming than its "fundraising" techniques. Aljazeera reported on June 1 that ISIL controls half of Syria's land area. The area it controls in Syria and Iraq is the size of Italy. And it's using the controlled lands for raising currency. (See ISIL ‘controls half' of Syria's land area, Aljazeera.)

ISIL tops Forbes Israel's top 10 richest terrorist organizations with an estimated turnover of some $2 billion per year, although some analysts think the figure could be as high as $3 billion. (See The World's 10 Richest Terrorist Organizations, by Itai Zehorai, Dec. 12, 2014.) The risk of terrorist attacks will increase with such a wealthy jihadist organization in play.

The Guardian reported on May 26 that the UN has declared that more than 25,000 "foreign terrorist fighters" from 100 countries are in jihadi conflicts and pose an "immediate and long-term threat." A UN Security Council report said that the number of fighters might have increased by 70 percent in the previous nine months from May. The FATF report said the figure could be 15,000 fighters from 80 countries. If these numbers are correct, the rise and spread of ISIL is alarming. (See Islamist fighters drawn from half the world's countries, says UN, by Jason Burke.)

The UN Security Council report, according to The Guardian article, noted continuing problems with understanding the processes of radicalization, but despite a concentration on the Internet, social networks in conflict zones and Western cities play a key role.

"Those who eat together and bond together can bomb together," the report says. The screen shot of a web page from the dark net below, even though it's old and the listed email address is defunct, raises two issues. First, jihad fundraising is alive and well, and terrorists can present their campaigns as a form of crowdfunding, and, second, that old favorite, Bitcoin, is center stage once again.

The small print on the site reads:

"We are a group of young Muslim brothers that have no affiliation to any politicized movements or groups, (sic) Many of us live within the United States and some are prominent with the community on both coasts. We are currently working with recent reverts to islam (sic) and generally training brothers to struggle to establish a new islamic (sic) front both in the US and around the world. there (sic) is a lack of appropriate facilities and funding for the muslims (sic) in both The United States and in South America (sic), particularly the youth who need support in their desire to struggle in a defensive way against our enemies. We have found that asking for money indicated for these activities attracts far too much surveillance and have decided that we would begin to gather resources through the internet (sic). Donations may be made through various means both monetary and physical, though anything besides economic support through "Bitcoin" must be approved by the board and taken with much caution due to the security aparatus' (sic) recent crackdown on any and all islamic (sic) change fronts here in the United States. Brothers and sisters we are at a pivotal point in history and need anything that we can get. please (sic) get in communication with us, through the point of contact listed. Uncommincated (sic) contribution can be made through the bitcoin adress (sic) included below."

A search of the blockchain (a public ledger of all Bitcoin transactions that have ever been executed) shows that just more than five bitcoins were sent to this website during 2012 — a very small amount. And, of course, my brief search was limited to the English language. Obviously, sites exist in many languages. A search for ISIL in Arabic garners some 604,000 results.

Controlling banks, farmers' extortion and more

The FATF report says the U.S. estimates that ISIL has had access to at least a half billion dollars in cash alone. It controls banks in areas of occupied Iraq and also taxes 5 percent on each customer cash withdrawal. This form of extortion (which abuses the concept of Islamic Alms) to support its activities provides an opportunity to profit while ensuring continuity of business — a necessity when attempting to establish a functioning, self-sustaining terrorist state.

ISIL also profits from human trafficking by targeting women and children. It boasts of these activities in its own publication, Al Dabiq. The group has provided internal guidance to its fighters on how many female slaves they're allowed to keep.

The FATF report also describes how ISIL is extorting farmers by taking portions of wheat and barley crops. It says ISIL operates in a part of Iraq that accounts for more than 40 percent of its wheat-cultivating land. Since June 2014, ISIL reportedly took control of 16 wheat silos, including the largest, which holds 8 percent of Iraq's annual production, according to the FATF report. ISIL also has seized mines producing sulfuric and phosphoric acid, which again could generate millions of dollars, the FATF report says.

The FATF report claims ISIL has stolen antiquities and artifacts from Syria, which could pour millions of dollars into its coffers. According to the report, in September 2014 an ISIL official received a $2 million donation (listed and sanctioned by the U.S. Department of Treasury) from someone in the Persian Gulf area. U.S. individuals and groups that have pledged allegiance to ISIL might develop stronger organizational ties that could lead to the provision of funding from a group to ISIL or vice versa, according to the report.

The FATF report gives an example of an individual diverting money from an established charitable foundation to aid terrorists and their families under the pretext of collecting donations for Syrian refuges. A Russian financial intelligence unit's regular monitoring of domestic terrorists entities and information provided by law enforcement identified this example. The report also acknowledges the real humanitarian need for those displaced by fighting and now in need of care.

ISIL is like no other terrorist organization in its fundraising techniques and the amount of currency it has illegally amassed. As CFEs we always need to be alert to suspicious movement of funds — especially to areas near those controlled by ISIL — and immediately report activity.

Tim Harvey, CFE, JP, is director of the ACFE's U.K. Operations and a member of Transparency International and the British Society of Criminology. His email address is: