But Abu Shawkat runs the hawala equivalent of a mom-and-pop store: One of the giants of the industry, which analysts believe owns a network of money-services businesses and has moved millions of dollars a week, is the Islamic State.
Even as U.S.-backed forces wrest back the Islamic State’s last strip of territory in Syria, the United States and its allies are nowhere close to bringing down the terrorist organization’s economic empire. The group remains a financial powerhouse: It still has access to hundreds of millions of dollars, according to experts’ estimates, and can rely on a battle-tested playbook to keep money flowing into its coffers. That continued wealth has real risks, threatening to help it retain the allegiance of a committed core of loyalists and wreak havoc through terrorist attacks for years to come.
The Islamic State’s financial strength offers a window into the broader challenge facing the United States and other governments. In its effort to squeeze the group financially, Washington has been forced to rely on a fundamentally different strategy than it employed in its military campaign: The main weapons at its disposal are not air strikes and artillery barrages, but subtler tools, such as sanctioning Islamic State–linked businesses, denying them access to the international financial system, and quietly cooperating with governments across the globe. Successes will be less visible, the campaign against the group will likely take years, and there is no guarantee of victory.
The end of the Islamic State’s days of holding and governing territory represents a double-edged sword for officials looking to starve it of resources. On the one hand, its dramatic losses have made it far more difficult for the group to rely on two major sources of revenue: the exploitation of oil fields in Iraq and Syria, and the taxation of citizens living under its rule. These methods played a key role in allowing the Islamic State to raise roughly $1 million a day, a senior Iraqi security official, who declined to be identified discussing intelligence issues, told me, transforming the group into the world’s richest terrorist organization.
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On the other hand, the Islamic State’s loss of territory has freed it from the costs associated with trying to build its self-declared “caliphate,” allowing it to focus exclusively on terrorist activity. A U.S. Treasury Department official, who spoke on the condition of anonymity, said that the group is operating increasingly like its insurgent predecessor, al-Qaeda in Iraq, and no longer requires the same resources it did when it governed territory. Oil still brings in revenue too: While the Islamic State no longer controls individual fields, the Treasury official added that a key source of the group’s income is the extortion of oil-supply lines across the region.