ISIL’s finances are big business

The group's balance sheet lists takings from kidnapping, smuggling and protection rackets

Islamic State group militants stand with a captured Iraqi Army Humvee at a checkpoint outside Beiji refinery. In all, ISIL is thought to control up to 11 oil refineries across Syria and Iraq (AP PhotoShow more

When ISIL swept into Iraq’s second city over the summer, it found a stash of money that immediately made it the world’s richest terrorist organisation. Smashing into Mosul’s central bank, ISIL militants made off with an estimated US$500 million in cash and gold bullion.

But this haul is only part of its wealth. As a new study conducted jointly by the BBC and King’s College London outlines, the terrorist group has become rich and entrenched itself in Syria and Iraq in significant part by copying the money sources of a state.

Terrorist groups usually resource themselves through a combination of donations, protection money and kidnapping. The latter is especially popular because the governments of rich countries are usually willing, somehow, to provide money in return for their citizens, even if they publicly deny it. Both Boko Haram in Nigeria and Al Qaeda in the Arabian Peninsula, in Yemen, have kidnapped for ransom.

But as the study shows, ISIL has taken this a step further by creating revenue streams that mirror those of actual states. It taxes businesses and people in the areas under its control. It both facilitates and profits from trade.

Most astonishingly, it also trades in oil. The group now has as many as 11 oilfields under its control, and by force and bribery has managed to transport that liquid gold through the Kurdish regions and into Turkey to sell. ISIL’s leaders are also canny businessmen – their oil is heavily discounted, making it easy for people to turn a blind eye to its provenance.

All of which makes it both harder – and easier – to cut off terrorist financing. Easier because the more ISIL mimics the structure of a state, the more vulnerable its infrastructure and logistical chain. Its trade will be affected by clamping down on convoys crossing borders and securing smuggling routes. But it is difficult too to cut off the money flow because ISIL has so many different streams of financing, it can turn to another if one looks like it’s running dry.