Unregulated banking favours the IS group: An Iraqi man at one of the country's many exchange shops counts out US dollars. (photo: يوري كورتز)
Over the past year, the extremist organisation known as the Islamic State has suffered many setbacks in its attempt to found a version of its own country within the borders of Iraq and Syria. These military losses of terrain have also translated into a loss of funding.
The cities that the extremist Islamic State, or IS, group used to control were helping to fund activities through the collection of tax from residents as well as various businesses, oil fields and farms that the IS group had co-opted and was running to make money.
But in a recent interview with a senior officer in Iraqi military intelligence, whose focus is on money laundering and Iraqi banks, it seems that the IS group also has investments outside of its own areas.
“Interviews with members of the IS group who were arrested and documents that were retrieved after the IS group was driven out of certain cities, have revealed an enormous amount of information about the extremists’ administration,” the senior officer, who must remain anonymous because he was not authorized to speak to media, told NIQASH. “This information has the names of the group's leaders, not only in Iraq but also in Syria and Libya. But the most important information is that on the group's alternative sources of funding.”
The Islamic State couldn't launder all the Iraqi dinars they had, so they started to invest in Iraqi businesses.
Basically this shows that the IS group has invested millions of dollars in commercial projects around Iraq, including in the country's capital, Baghdad.
“Our investigations show that the IS group is not yet suffering from a financial crisis,” the officer said. “It is still getting funding from more hidden sources, sources that are very difficult to trace, and we believe this is money coming from ordinary business investments around the country.”
“Since 2014, the leader of the group and his assistants have invested huge amounts of money in Iraq, including into car sales showrooms, shopping malls, farms on the outskirts of Baghdad and private hospitals.” They have also participated in foreign exchange auctions and bought and sold medicines, he says.
MPs in the Iraqi government did not wish to comment on this matter, saying it was classified as it is related to national security and was within the jurisdiction of the Central Criminal Court of Iraq. Spokespersons at the Central Criminal Court of Iraq refused to give any details but confirmed that there were several cases under investigation based on suspected extremist investments. However, the details had to remain private as it was a matter of national security.
“Ordinary people – merchants and businessmen – who don't actually have any ideological connection to the IS group are running these businesses,” continued the military officer, and they do this under the supervision of the IS group's Bayt Al Mal, or the House of Money in English, which acts as a kind of ministry of finance.
“These middlemen are the ones who collect the profits and transfer money, using exchange shops, to cities inside and outside Iraq,” the officer explains.
When the IS group first took control of the northern city of Mosul, there were a lot of rumours floating around that the extremists had managed to break into bank vaults in that city and that they had taken all the money stored there; this allegedly amounted to around US$4 billion, a source at the Iraqi Ministry of Finance told NIQASH.
The military intelligence officer points out that the IS group couldn't launder that many Iraqi dinars so started to invest them inside the country instead. Foreign exchange that the IS group collected from the Iraqi Central Bank offices in Mosul and also from the sale of oil from fields in their territory was more likely to be invested outside of Iraq, and particularly in Turkey.
The IS group's internal documents also give further details about where the extremists' money goes. The Bayt Al Mal has nine members, all of whom have specific jobs. This includes collecting and accounting for all of the funds collected every month. This “finance ministry” then also works out expenditures – they pay salaries to fighters and other functionaries, including those who run their social media and create media campaigns, they pay pensions to deceased fighters' families and to purchase ammunition and weapons.
“It has been quite easy to track the main sources of the group's funding,” says Ziad Ahmad, a local political analyst.
But the biggest problems lie in tracking the group's less extraordinary investments. “Thanks to the undeveloped banking system in Iraq and weak control over banks and exchange offices, it is very difficult to track transfers and profits,” Ahmad explains. “It seems more likely that these kinds of investments will continue to supply the IS group with some funding for years to come,” he concludes.