Iraq News
Economy

Barring ISIL from the global financial system

By Waleed Abu al-Khair in Cairo

The 'Islamic State of Iraq and the Levant' has been smuggling oil and grain using trucks like these ones, seen outside the Syrian city of al-Raqa. [Photo courtesy of Mohammed al-Abdullah]

The 'Islamic State of Iraq and the Levant' has been smuggling oil and grain using trucks like these ones, seen outside the Syrian city of al-Raqa. [Photo courtesy of Mohammed al-Abdullah]

The best way to block the "Islamic State of Iraq and the Levant" (ISIL) from the global financial system is to eliminate its funding sources, prevent its smuggling activities and freeze the financial assets of its elements, experts said.

This issue is a concern because prevailing conditions give ISIL the opportunity to exploit the financial system, said banking expert Mahmoud Seif, who lectures at Egypt's Zagazig University faculty of economics.

"Penetration of the global financial system, despite the complexities that govern its transactions, might be achievable in times of war and security tensions, provided there are areas that are not under the authority of any state and are not monitored by the international community, but are rather controlled by a group or a gang that conducts commercial and financial transfers and transactions," he told Diyaruna.

"This scenario matches the reality on the ground in a number of Iraqi and Syrian areas, where commercial transactions are being conducted by ISIL involving the sale of oil, grain and stolen antiquities" as well as other illegal activities, he said.

Funds generated by commercial transactions like these, although illegal, ultimately reach global markets through black market traders, and become part of the global financial system, he said.

It is possible that ISIL also could penetrate the global financial market through bank transactions in areas under its control, Seif said.

This has happened before in Iraq, he said, but "urgent financial measures were taken", which chiefly included locking these banks out of the banking system.

Locking ISIL out of the system

"There are numerous ways and means to combat ISIL’s attempt to penetrate the global financial system," Ain Shams University economics professor Shaher Abdullah told Diyaruna.

International organisations and a host of countries have been implementing measures to stem this penetration, he said, noting that any intervention must include legal cover, as it involves tracking and monitoring the movement of funds and the bank deposits of suspect individuals around the world.

Numerous resolutions to facilitate these measures have been issued by the UN, the EU and G20 nations, as well as other countries, Abdullah said.

The inter-governmental Financial Action Task Force (FATF) also has been conducting important work to dry up ISIL financing sources, he said, by communicating and co-ordinating with countries around the world.

Decisions made by the finance ministers of UN Security Council member states have been critical in drying up sources of terrorism funding and freezing the assets of individuals or companies involved in terrorism financing or money laundering for the benefit of terrorist groups, he added.

On a smaller scale, dozens of countries have implemented strict measures to stop financial transfers related to terrorism financing, he said.

"In Europe, for example, work is under way to restrict the use of prepaid ATM cards in an earnest attempt to combat terrorism financing and money laundering," he said.

Military action is essential

"Any talk of preventing ISIL from gaining access to global financial markets or the global financial system must be accompanied with action to stop the group’s financing," said Sami Gheit, a researcher with Al-Sharq Centre for Regional and Strategic Studies.

These actions must target illegal activities carried out in ISIL's areas of influence, particularly in Iraq and Syria, he told Diyaruna.

This type of prevention activity is almost entirely linked to the ongoing military operations, he explained, and includes air strikes against oil smuggling convoys, installations and refineries in addition to ground operations targeting the group.

These operations, led by groups battling ISIL such as the Syrian Democratic Forces (SDF), seek to cut off the group's access to borders that connect Syria to neighbouring countries in order to besiege the group militarily and financially.

"Stopping the smuggling and transport of goods, fighters and funds across the border would cripple the group’s military and financial capabilities, and thus preempt any attempt to inject money into the global markets generated from illegal activities, including the sale of oil and stolen antiquities," he said.

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