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29 Jun, 2015 07:19

​World govts secretly trade with Islamic State - terror financing expert

The struggle against Islamic State has been going on for months – and yet, the end of the conflict is by no means near. Armored vehicles, weapons, explosives – the jihadi group is well supplied, and wages war not only in the physical world, but also on a digital battlefield. But all of that needs money, a lot of money, and there is very little information on where it comes from and how it appears in the hands of the militant group. To shed some light on the mystery surrounding Islamic State’s funding, we speak to a leading expert on terror financing. Christine Duhaime, a lawyer, founder of the Digital Finance think-tank, is on Sophie&Co today.

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Sophie Shevardnadze:Christine Duhaime, a leading expert on the financing of terror, lawyer, founder of Digital Finance think-tank, welcome to the show, it’s really great to have you with us.

Christine Duhaime: Thank you, I’m happy to be here.

SS:Now, you’ve said Islamic State has the potential to expand its terror campaign, cause massive damage to Western economies and democracy. How exactly can IS harm businesses and industries, create chaos in the West – I mean, what action would they have to undertake to do that?

CD: I think, most monumental one is of course damage in which they’ve said that they intend to actually come to the West and blow up our critical infrastructure, so, not just hacking like we’ve seen them do, but in terms of the bridges and highways and the banking infrastructure that we have, so they get more serious about attacking our critical physical infrastructure and of course it’s going to be devastating for our economy – because we’ll have to rebuild that, we’ll have to get into emergency mode and shuffle a lot of our critical infrastructure elsewhere, and rebuild – and it will be horrendously expensive and we saw with 9/11. That’s what I mean by “they have the potential to cause significant harm and damage”.

SS:But after 9/11, with all the respect, it has become extensively difficult to attack anything that’s “central” or an infrastructure, because everything is so much more protected right now. How exactly would they attack?

CD: I disagree that everything is much more protected. What we did do after 9/11 is we protected air travel and we protected train travel. What we have not done is protected our ports, we haven’t protected our airports per se, we haven’t protected our bridges, we haven’t protected our highways, we haven’t protected our electricity infrastructure – those are the types of things that are really expensive to rebuild, that are expensive to have put in place and if those types of critical infrastructure, as we call it, are attacked, that’s what is horrendously expensive to rebuild and that’s what we have not protected and we need to be looking at it in terms of protection against terrorist attacks.

SS:So, you actually have in mind some home-grown terrorists, right?

CD: Yes. In order for them to decimate Western economies, what I mean by them having a potential to affect our economies, is when they start to move into the West and attack our critical infrastructure, including our banking infrastructure, including our Internet, our infrastructure – all of those things that are critical to keeping our economy working. If they start to go after those types of things, that’s what’s going to cost us a lot of damage and will be very harmful to us. When it comes to attacking some of our critical infrastructure, they can do it from where they are, because we’re very much of an inter-connected society on the Internet – so it doesn’t take a lot for them to bring down some of our infrastructure – as we see with the Internet hacking already.

SS:Now, we’re seeing a ground war against IS, an air campaign against IS, we’re seeing Western troops training Iraqi soldiers, but terror cannot survive without one thing – and that’s financing. Why aren’t main efforts aimed at cutting financing of Islamic State?

CD: that’s a really good question that I think the whole world is asking, because we are, as I said earlier, very inter-connected world, including our banking system – it’s extremely interconnected, and group like ISIS can’t survive unless they’re able to get goods and services from outside of the area that they control. They need armored vehicles, they need weapons, they need money that’s exchanged, they actually just succeeded in issuing their own gold currency and tweeted that all over the Internet, and they were able to buy a mint from someone in Europe. So those are the things, trade-based money laundering and trade-based terrorist financing that is going on and nobody has the answer to why we haven’t been able to effectively shut down ISIS in terms of terror financing. So, it’s a great question but no answer.

SS:So, you don’t understand why it is so difficult and impossible to trace and cut IS funding? Do you have supposition about that?

CD: It is not difficult to trace per se, and it is not difficulty to shut down. What I think the un-answered question is why we’re not doing more. A group like ISIS is an organized criminal group, at its base, and a terrorist group, and they need bank accounts to survive and to buy things from outside of their area. For example, they issued a paper, a couple of weeks ago, saying that they were able to buy cars, KIA cars from all over the place and Toyotas. How did those cars get into their territory? It shouldn’t be that difficult to find out and it shouldn’t be that difficult to shut down. Those are things we are not doing, we are not looking at those types of things.

SS:We’re certainly not doing enough, but do you have your version of why we’re not doing enough? I mean, it can’t be just laziness, can it? Or disregard of IS… Why do you think, in your personal opinion, we are not able to do more?

CD: I think we’re not devoting the resources to tracing the source of funds for ISIS, for example, when we see that there are shiploads of trucks going there and cars imported into Syria, I think we’re not devoting the resources to find out where they’re going, who sent them, who sold them, who bought them, what their bank accounts are. It would allow us to trace that back to organization like ISIS, and that’s where we’re not devoting the resources to follow that trail of money and figure that out.

SS:Describing Islamic State funding, you’ve said it’s being funded in completely different ways – what is it being funded through? What kind of systems?

CD: Some of the ways that they have raised money, like, the old fashioned way is through kidnaping, so what I mean by that is when they kidnap someone they ask for ransom payment, they want American dollars in cash paid. So those American dollars are acquired somewhere in the EU, in cash, bulk cash, transported on a private plane to somewhere close to Iraq so they can get the money. All of those transactions require the banking system. An insurance company or person, or government agrees to pay, they go to the bank, the get the money – all of that requires our modern banking system, and that is a way our banking system is used to, unfortunately and unwittingly, used to assist ISIS in its financing. If we were to make sure that our policies prohibit those types of things, then we will be able to stop the financing of ISIS.

SS:You say we need to totally rethink the way we tackle terror financing when it comes to IS. What is it about IS that we haven’t seen before, with other terror groups?

CD: I think that they are much more sophisticated, I think that they’ve got going before we realized they were a threat, and they obviously set up bank accounts before we realized that, to be able to engage into trade, still, to this day, without us being able to define where they are and what they are doing exactly. So I think that they are much more sophisticated and much more integrated into our networks of terrorism and networks of organized crime and that is something that we haven’t seen before. It’s just the level of sophistication of this particular group.

SS:According to report by RAND corporation, IS rakes up to 1 million per day in extortion and taxes. How much money does the Islamic State have at its disposal right now? Have airstrikes or falling oil prices hurt IS finances at all?

CD: People say they have two billion dollars cash in bank accounts. It’s hard to know whether or not that’s accurate. They certainly have said that they have that much money. I think that the airstrikes have helped in terms of reducing the amount of revenue that they were able to get from trading in terrorist oil, for example, but not enough to put a dent in their finances, and every time we damage them in some way, they manage to find a different way to raise money – such as antiquity sales, they engage in human trafficking… so, there are all sorts of ways that they have found to bring in financing. The more territory they acquire, the more they engage into extortion from locals, so their pot of money just seems to be growing, unfortunately.

SS:Do IS leaders have bank accounts, you say? Or do they store their money in cash? Where does money get wired to?

CD: I don’t think they store it in cash, because that’s a lot of money to be stored in cash, and it will be an easy target to be taken out. I would suspect that they have bank accounts… I mean, ISIS is a terrorist organization and as I said before, an organized criminal organization – they all follow the same typologies where their leaders collect significant amounts of money early on and stash it in save havens, they stash it in bank accounts, and so I suspect that they are no different, they have money put away for themselves, to send their families, you know, away. In fact, Al-Baghdadi’s former wife, you probably know, she travelled under fake ID back and forth to Lebanon, to carry money through, and she had significant amounts of money on her as she travelled across the border. There’s no reason to suspect that she doesn’t have a bank account in Lebanon that was used for their financing.

SS:But what do they hold their money in? Dollars? Bitcoins? Maybe, diamonds or gold?

CD: Diamonds and cash, I would suspect, but I’m sure they have bank accounts, in which they, they are, in terms of money they acquire, bringing that money across the border and putting it into bank accounts and transferring it out. I mean, it’s difficult to transfer huge amounts of money in Syria and Iraq, so I think they’re transporting it all physically.

SS:But do you think they hold their money in dollars? Sorry for being particular, but I’m just really curious.

CD: I don’t think that they’re holding significant amounts of money in dollars. It’s too bulky, it’s too much of a target and it would be inconvenient for them. I think that when they get cash, bulk cash, they transfer it out to bank account. There are bank accounts that continue to operate in Syria, in areas controlled by ISIS and those bank accounts continue to be connected to our financial system, so it would be easy to wire out money for them, because they control the banks.

SS:A group as big and powerful as IS is bound to have some major sponsors. Do we have any idea who they might be? Where they may be coming from?

CD: The U.S. government thinks Qatar… nobody really knows for sure. I mean, I think if we knew, we’d shut that down, but I think just the U.S. government has theories that haven’t been substantiated at this point, from what I understand, on where they think some of this money is coming from. In terms of huge volumes of dollars, not the little donations – they come from all over the place.

SS:But what do these major sponsors want? What are they after? Are they making money off Islamic State? Do they want power? Or it’s the ideology they’re supporting?

CD: What they’re paying for is the legacy. Even if we take out IS for the next 100 years, the reason they get funded is that terrorist groups like them, that are sympathetic to them, are going to be able to say “Look, we’re actually created a physical state, we created a country, we actually became a Central Bank and have a monetary policy, and we had our own government, we issued our own IDs, we have our own police force, we have our own hospitals, we have our own infrastructure” – that is a little country, and that’s the unfortunate legacy that they’re creating, that is why they are being funded is because people that support them love that legacy. And that’s kind of what we’re fighting, the more they do things that set them as a state, the more their legacy is going to on for hundred years and it will be more and more difficult to counter terrorism, because they’re setting us a legacy that I think we should be working really hard to undo as quick as we can.

SS:You’ve mentioned oil sales and antiquities as source of IS revenue – who exactly is buying all that?

CD: With respect of oil sales, apparently, Turkey, apparently, the Syrian government, from what we understand, and I think it’s one of those issues where… some of U.S. Senators have said “when we see the oil sales occurring in trucks going through the Turkish border, why we not taking out these trucks?” – which is a really good question, as of yet unanswered. With respect to antiquities, apparently it’s European collectors, from Switzerland and Germany, we know that much – just a few, and they tend to buy in bulk – a million dollars, half a million dollars -so it tends to be a small group of people that really are buying this, potentially to resell to their own people that buy from them.

SS:Now, according RAND one more time - report on IS finances, they made 20 million dollars from ransom payments last year. We’ve seen a string of brutal executions of Western hostages by IS, so was it more interested in gaining attention and notoriety that in revenue they might bring?

CD: I think it’s both. It’s to get the money and it was, I think, one of the quickest ways they could get on social media and get media attention – it’s to systematically, every month or so, pick someone from the West for example and threaten to execute them if they don’t receive a certain amount of money. I think they’ve got huge publicity for that, which really helped their marketing campaign and helped put them on front page and so I think it was both – it was money and publicity.

SS:Loretta Napoleoni – you may know her, she’s also an expert in the field of terror financing – she told me how Iraq’s government is actually forced to do business with Islamic State, for instance buying wheat from IS to its prices under control. Are there other examples of government-terrorist deals you could cite?

CD: People say that the Syrian government, the Turkish government, they buy goods and services from ISIS all the time, electricity being one of them, oil, all sorts of agricultural products – and I have heard that myself that, yeah, they are able to sustain their economy in a large part because some governments buy from them.

SS:The digital age, right… It’s making it so much easier for terrorists to attract fighters and finance online, but shouldn’t it also be easier to trace them through the net as well? I mean, Twitter account is quite transparent… Why are we losing this war on digital terror?

CD: I think with respect to tracing, and it’s a really good question, when you open a Twitter account, you give an email address that you obviously will gave to go into and use it a number of times, so I think that’s one of the big issues as of why are we not tracing some of them through email accounts and through geolocation. You know, if they have a Gmail account - ask Google to trace that for us. These are things I think we need to be doing with Twitter accounts and I also think we need to be asking companies like Twitter, like Ask.fm, like all of the ones that allow social media, that has terrorist propaganda to be put on their websites, to be shut down, but I think we started to be concerned about terrorist financing in a digital aspect too late. So we have a lot to catch up on, but I don’t think it’s insurmountable, I just think that we realized how prevailing they were on social media way too late, and they had a head start.

SS:What exactly is a Twitter terrorist? Does it have to be someone on the ground fighting for Islamic State, or can it be a kid in his bedroom, somewhere in London, or Moscow or Toronto?

CD: Yeah, it is not someone on the ground at all. It tends to be a woman-based thing, who are sympathetic and not actually within the IS territory, but who is, for example, in London, who might be in Libya, who may be in India and so these are people… there was someone in the U.S., who was a Twitter terrorist – so these are people that are sympathetic and on their own initiative decide to propagate some terrorist materials on the Internet, 24/7. They are not difficult to find, but they are difficult to shut down because there are so many of them. There are so many Twitter supporters and as soon as Twitter shuts down one account, 10 more pop up, so it is difficult to keep track on them, but not insurmountable by any means.

SS:So what’s more important for these Twitter terrorists – fundraising or spreading the ideology?

CD: I think it’s spreading the terrorist propaganda, because by spreading terrorist propaganda it increases fundraising for ISIS. They don’t necessarily…. A lot of them don’t ask for money, although some of them do, but their objective is just to spread the word, be supportive, join the gang, as it were and by doing all of that they keep the message alive, they keep ISIS at the forefront of what they’re doing and that brings in revenue from all sorts of places for ISIS. So, they are not necessarily raising money, although they do do that for sure – there was this Canadian ISIS person who was rather notorious, who is on Tumblr all the time, asking for money. He’s not in Canada now, he went to join ISIS in Syria, but he uses his Tumblr, in English, to fundraise for ISIS – targeting Canadians.

SS:Now, just recently Alaa Esayed, a 22-year old young woman from London has been jailed for her radical tweets. Is that kind of punishment going to stop others?

CD: I don’t think so, I think it will result in them being more careful, rather than stopping it. I think what happens is that they get radicalized themselves, and if it’s a situation where they became radicalized and they can’t leave to go and join ISIS because their passports prevent it or they don’t want to come out and be sympathetic and actually depart – that I think this is a way for them to show sympathy, by tweeting and being terrorist on Twitter or terrorist on Ask.fm or whatever other social media they use, Facebook as well. This is way for them to offer support without necessarily having to offer support in a more violent way, or having to give up their home and go join ISIS. So, I don’t think her incarceration is going to stop it in any way. It’s not going to act as a deterrent because the problem is too huge, and I don’t see that happening. What I see as being more effective is shutting down Twitter accounts as they pop up.

SS:Europol is getting to work against online terrorists with a special police units set up to find ringleaders of IS social media campaign. Why is it taking so long for intelligence to take aim at the problem?

CD: Really good question, the whole world wants the answer. I don’t really know. I suspect that it’s because the Twitter terrorist is… I think it’s because policing agencies, intelligence agencies are not run by people on Twitter, they are not, in my opinion, socially-savvy. Having with some of them, they barely have Twitter accounts, they were not following on social media and I think it’s the wrong people… Terrorism now is a digital thing and it’s the wrong people in charge of intelligence agencies that are not savvy in social media. What needed to happen is they need to realize that there’s this whole terrorist aspect happening on social media and engage people that are savvy on social media to counter it, and I think that’s why it is taking so long – they realize the battlefield is on Twitter and the battlefield is not necessarily on the ground, and now they are responding. But, as I said before, we lost a lot of time, and it’s because we have people that are not social-media savvy running intelligence agencies, they don’t even have Twitter accounts.

SS:It was recently reported that Canada is seeing right now a spike in terror funding. Is this a trend we can see in other countries as well? Is it connected to Islamic State’s popularity?

CD: I think that all countries are seeing an increase in terrorist financing, and in Canada I don’t think this was a significant increase that we’ve seen, but sure, there are messages getting out, and unfortunately we’re not doing enough to shut them down physically and to take them off the Internet and shut down social media terrorist propaganda. Until we do that, we are going to see continuation of terrorist financing going to groups like ISIS – and others are cropping up in the same area to defeat ISIS, but with their own version of terrorism. So the problem is growing and is not lessening by any vivid imagination.

SS:Money sent by Gulf states to religious institutions in Western countries, like in your country, Canada, is expected to be promoting extremist ideology: does freedom of religion have to stop at some point?

CD: I don’t think that it’s freedom of religion, it’s just the fact that money going to fund terrorism is illegal, period, and if money is being used to radicalize people and then causes terrorist attacks, the rise of terrorism, then we are all in danger, and we all are in peril as a democracies. So, I think the issue has nothing to do with religious freedom or freedom of speech – as some people say, when they argue that Twitter accounts shouldn’t be shut down – it’s more that if we want a democracy to survive, we need to actually take aim at people that are threatening it, and shut down accounts that threaten democracy and threaten to topple governments and affect our way of life – because if at the end of the day we don’t have them forbidden, then they may prevail and… you know, what’s the point of having laws if we’re not going to enforce them and make sure that our way of life prevails; a life that is based on democracy and the rule of law. So, in my mind, the rule of law should prevail and that it does not allow for terrorist financing to come into terrible organizations.

SS:Christine, thank you so much for this interview. We were talking to Christine Duhaime - lawyer, expert on terror financing, Director of the Digital Finance Institute. Talking about the budget of the Islamic State and how much money it has and where it’s coming from; also about their cyber-terrorism strategies and how to counter them.