In taking financial war to Islamic State, U.S. developing new tools

WASHINGTON Since last month, U.S. warplanes have struck Islamic State’s oil infrastructure in Syria in a stepped-up campaign of financial warfare that the United States estimates has cut the group’s black-industry earnings from oil by about a third.

In locating their targets, U.S. military planners have relied in portion on an unconventional source of intelligence: access to banking records that provide insight into which refineries and oil pumps are producing money for the extremist group, current and former officials say.

The intent is to choke off the Islamic State’s funding by tracking its remaining ties to the global economic method. By identifying cash flowing to and from the group, U.S. officials have been capable to get a glimpse into how its black-marketplace economy operates, people with understanding of the effort have stated.

That in turn has influenced choices about targeting for air strikes in an work that began just before Islamic State’s Nov. 13 attacks on Paris and has intensified given that, they stated. Whilst Islamic State’s access to formal banking has been restricted, it retains some ties that U.S. military and economic officials can use against it, the existing and former officials mentioned.

“We have completed a truly excellent job of largely keeping the Islamic State out of the formal monetary system,” said Matthew Levitt, who served as deputy assistant secretary for intelligence at the U.S. Treasury in the George W. Bush administration. “But we have not been completely successful, and that may possibly not be a undesirable factor.”

Reuters was unable to verify crucial aspects of the campaign, which includes when it started or exactly which facilities have been destroyed as a result. Two present officials who confirmed the operations in outline declined to comment on their information.

It was unclear how U.S. intelligence, Treasury, and military officials operating on what the government calls “counter threat finance” operations have used banking records to determine lucrative Islamic State oil-associated targets in Syria and whether that involved local banks.

A report this year by the intergovernmental Economic Action Job Force identified there were much more than 20 Syrian financial institutions with operations in Islamic State territory. In Iraq, Treasury has worked with government officials to cut off bank branches in the group’s territory from the Iraqi and international economic systems.

Gerald Roberts, section chief of the FBI’s terrorist financing operations section, mentioned that Islamic State’s recruits from outside Syria usually come with monetary trails that officials tracking them can “exploit.”

“We are seeing them employing classic banking systems,” he mentioned at a banking conference final week in Washington, adding that young, tech-savvy Islamic State members are also familiar with virtual currencies such as Bitcoin.

Islamic State, also known as IS, ISIS or ISIL, is often forced to use commercial banks simply because the amounts involved are as well big to move employing other implies, mentioned Levitt.

The U.S. Treasury’s Monetary Crimes Enforcement Network (FinCEN) makes use of a set of “company guidelines” to screen the roughly 55,000 reports it receives everyday from economic institutions for signs of activity involving Islamic State, a spokesman said. He declined to describe the guidelines, but law enforcement sources say names, IP addresses, e-mail addresses, and telephone numbers are amongst the data that intelligence authorities try to match.

The matches allow FinCEN “to connect the dots amongst seemingly unrelated men and women and entities,” the FinCEN spokesman stated. At present, FinCEN finds about 1,200 matches suggesting possible Islamic State-linked financial activity each month, up from 800 in April, the spokesman mentioned.

Bank of America (BAC.N), JP Morgan (JPM.N) and Wells Fargo (WFC.N) declined to comment on no matter whether they supplied financial reports to the U.S. government. Such reports are supplied confidentially.

Citigroup (C.N), HSBC (HSBA.L), and Standard Chartered (STAN.L) did not immediately respond to requests for comment.


The use of financial records linked to Islamic State is only a single element of the intelligence-gathering exercise for air strikes in Syria that also includes methods such as aerial surveillance by drones, officials stated.

One former military official familiar with the procedure stated that any financial intelligence collected by FinCEN would need “considerable vetting” ahead of the military acted on it.

Earlier this month, U.S.-led coalition planes struck 116 fuel trucks employed to smuggle Islamic State oil 45 minutes right after dropping leaflets warning drivers to flee, a Pentagon spokesman said. Coalition strikes destroyed another 283 Islamic State fuel trucks on Saturday, the Pentagon mentioned.

On Nov. eight, a coalition air strike destroyed three oil refineries in Syria close to the border with Turkey.

U.S. defense officials estimate that Islamic State, an adversary the United States calls the wealthiest terrorist group of its kind in history, was earning about $ 47 million per month from oil sales prior to October.

That month, the U.S. military launched an intensified effort to go soon after oil infrastructure, dubbed “Tidal Wave II,” named soon after the bombing campaign targeting Romanian oil fields in Globe War Two.

The Pentagon estimates the strikes have reduced the Islamic State’s revenue from oil sales by about 30 %, one U.S. defense official with expertise of the previously unreported estimate stated. Reuters was unable to confirm this.

The use of monetary records in helping to pick U.S. targets was initial disclosed last week at the banking conference in Washington. At the conference, Kurt Gredzinski, the Counter Threat Finance Group Chief at U.S. Special Operations Command, cited the significance of data provided by banks in the war against Islamic State.

“That to me is the 1st time in my recollection that we strategically targeted primarily based on threat finance details,” he mentioned at the conference. He declined to comment additional on which strike he had been referring to.


U.S. officials believe that diminished funding could steadily undermine Islamic State’s grip on the region it controls in Iraq and Syria, because it requirements revenue to pay salaries and preserve public infrastructure operating, said two former officials with expertise of the Obama administration’s thinking.

Experts caution that Islamic State, which guidelines an location the size of Austria, has surprisingly deep pockets due to the a variety of revenue streams it controls. It has constructed up what amounts to a “durable and resilient monetary portfolio,” funded by oil sales, extortion, and sales of antiquities, mentioned Thomas Sanderson, an expert on terrorism at the Center for Strategic and International Research.

“Funds can be strapped to the backs of mules,” Sanderson stated. “It really is straightforward to move factors across a border in the course of a time of deprivation and chaos.”

In spite of some initial accomplishment, cutting off its funding will call for deeper cooperation from governments from Turkey to Russia, experts say. The group has shown the ability to bounce back from prior U.S. strikes on its oil facilities.

Counter-terrorism authorities say that Islamic State appears to have discovered from U.S. successes in cracking down on funding for al-Qaeda, which relied heavily on assistance from wealthy donors in the Gulf region.

“IS has learned that you don’t want to be reliant on as well several outdoors sources,” said Sanderson. “Donors are fickle and subject to pressure and (IS) desires to be in handle.”

(Reporting by Yeganeh Torbati in Washington and Brett Wolf of Thomson Reuters Regulatory Intelligence. Additional reporting by Joel Schectman, Warren Strobel, and Jonathan Landay in Washington. Editing by Kevin Krolicki and Stuart Grudgings)

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