US Taking Economic War to IS

US Taking Economic War to ISUS Taking Economic War to IS

Since last month, US warplanes have struck the so-called Islamic State’s oil infrastructure in Syria in a stepped-up campaign of economic warfare that the United States estimates has cut the group’s black-market earnings from oil by about a third.

In finding their targets, US military planners have relied in part on an unconventional source of intelligence: access to banking records that provide insight into which refineries and oil pumps are generating cash for the extremist group, current and former officials say.

The intent is to choke off the IS’s funding by tracking its remaining ties to the global financial system. By identifying money flowing to and from the group, US officials have been able to get a glimpse into how its black-market economy operates, people with knowledge of the effort have said.

That in turn has influenced decisions about targeting for airstrikes in an effort that began before IS’s Nov. 13 attacks on Paris and has intensified since, they said. While IS’s access to formal banking has been restricted, it retains some ties that US military and financial officials can use against it, the current and former officials said.

Reuters was unable to verify key aspects of the campaign, including when it started or exactly which facilities have been destroyed as a result. Two current officials, who confirmed the operations, declined to comment on their details.

It was unclear how US intelligence, Treasury and military officials working on what the government calls “counter threat finance” operations have used banking records to identify lucrative IS oil-related targets in Syria and whether that involved local banks.

A report this year by the intergovernmental Financial Action Task Force found there were more than 20 Syrian financial institutions with operations in IS territory. In Iraq, Treasury has worked with government officials to cut off bank branches in the group’s territory from the Iraqi and international financial systems.

Gerald Roberts, section chief of the FBI’s terrorist financing operations section, said that IS’s recruits from outside Syria often come with financial trails that officials tracking them can “exploit”.

“We are seeing them using traditional banking systems,” he said at a banking conference last week in Washington, adding that young, tech-savvy IS members are also familiar with virtual currencies such as Bitcoin.

IS, also known as ISIS or ISIL, is sometimes forced to use commercial banks because the amounts involved are too large to move using other means.

The US Treasury’s Financial Crimes Enforcement Network uses a set of “business rules” to screen the roughly 55,000 reports it receives daily from financial institutions for signs of activity involving IS, a spokesman said. He declined to describe the rules, but law enforcement sources say names, IP addresses, email addresses and phone numbers are among the data that intelligence authorities try to match.

The matches allow FinCEN “to connect the dots between seemingly unrelated individuals and entities,” the FinCEN spokesman said.  At present, FinCEN finds about 1,200 matches suggesting possible IS-linked financial activity each month, up from 800 in April, the spokesman said.

Bank of America, JP Morgan and Wells Fargo declined to comment on whether they provided financial reports to the US government. Such reports are supplied confidentially.

 ”Tidal Wave II”

US defense officials estimate that IS, 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.

The US military launched an intensified effort to go after oil infrastructure, dubbed “Tidal Wave II,” named after the bombing campaign targeting Romanian oilfields in World War Two.

The Pentagon estimates the strikes have reduced IS’s income from oil sales by about 30%, one US defense official with knowledge of the previously unreported estimate said. Reuters was unable to confirm this.

The use of financial records in helping to pick US targets was first disclosed last week at the banking conference in Washington.

At the conference, Kurt Gredzinski, the counter threat finance team chief at US Special Operations Command, cited the importance of information provided by banks in the war against IS.

“That to me is the first time in my recollection that we strategically targeted based on threat finance information,” he said at the conference. He declined to comment further on which strike he had been referring to.

  “Resilient Financial Portfolio”

US officials believe that diminished funding could gradually undermine IS’s grip on the area it controls in Iraq and Syria, because it needs revenue to pay salaries and keep public infrastructure operating, said two former officials with knowledge of the Obama administration’s thinking.

Experts caution that IS, which rules an area the size of Austria, has surprisingly deep pockets due to the various revenue streams it controls. It has built up what amounts to a “durable and resilient financial portfolio”, funded by oil sales, extortion and sales of antiquities, said Thomas Sanderson, an expert on terrorism at the Center for Strategic and International Studies.

Despite some initial success, cutting off its funding will require deeper cooperation from governments from Turkey to Russia, experts say. The group has shown the ability to bounce back from previous US strikes on its oil facilities.

Counter-terrorism experts say IS appears to have learned from US successes in cracking down on funding for Al-Qaeda, which relied heavily on support from wealthy donors in the Persian Gulf region.