Charles Lister writes: The Islamic State (or ISIS) is “the best-funded terrorist organization we’ve confronted,” but “we have no silver bullet, no secret weapon to empty ISIS’ coffers overnight.” These were the words of David Cohen, the undersecretary for Terrorism and Financial Intelligence at the U.S. Department of the Treasury in a speech yesterday, in which he outlined the U.S. government’s assessment of ISIS finance and a strategy to counter it.

According to Cohen, ISIS’ principal source of finance is still derived from its control and sale of oil, which he assessed was still bringing in $1 million a day. Additional funds come from kidnap for ransom, extortion networks, criminal activities, and donations from external individuals, the latter being of least significance in terms of scale. In order to counter this broad base of financial incomes, Cohen explained that U.S. strategy is focused on disrupting ISIS revenue streams, restricting ISIS access to the international financial system, and targeting ISIS leaders, facilitators and supporters with sanctions.

Despite vastly underestimating ISIS’ potential in the months and years leading up to the organization’s 2014 offensives in Syria and Iraq, the Treasury’s, and by extension the U.S. government’s assessment of ISIS finance and how to combat it does seem largely in tune. It is indeed right that external financial donations are of minimal significance to ISIS. Since as early as 2005, ISIS predecessor organizations Al-Qaeda in Iraq (AQI), Majlis Shura al-Mujahideen, and the Islamic State in Iraq (ISI) all consistently sought to develop internal structures dedicated to maintaining financial self-sufficiency and an independence from potentially vulnerable external donors. In the current climate, however, a diminished capacity to earn from the sale of oil may elevate the importance of external sources of funding for ISIS to sustain its internal durability. [Continue reading…]