After two weeks of interrogation, Abu Hajjar cracked. The most trusted messenger in Isis looked to his Iraqi guards and gave them the name – Abdulrahman al-Bilawi, head of the Isis military council.
Then he offered a prophetic vision of nearing doom. Hajjar told his guards that the city they sat in then, Mosul, would “become an inferno this week."
"You don’t know what you’ve done," he said.
Hours later Iraqi security forces stormed the hideout of al-Bilawai, killing the Isis intelligence chief and in the process collecting one of the largest hauls of information on the group ever recovered. They took away 160 computer flash drives, each one filled with personnel lists of spies and foreign fighters, code-words and, perhaps most chillingly – the Isis accounts. It was a forensic picture of the group that, within two days, would become the world’s most infamous and feared.
With intelligence operatives from the US and Iraq still poring over the documents, Abu Hajjar’s prophecy was realised. Isis forces swept into Mosul, capturing Iraq’s second largest city, announcing itself emphatically to the world.
The ease with which Islamic State (IS - then Isis) moved into Mosul and other cities in the summer of 2014 stunned most observers. A terrorist organisation who moved as a major land army, with tactics more brutal than anything seen before, and one declaring its own state in the deserts of Iraq and Syria.
But it was the contents of the flash drives found in the Mosul hideout that perhaps best laid bare just how different IS was to anything that had come before – they were the richest terror group the world had ever seen, and were operating their affairs on a level never before encountered.
Image: Military hardware captured during a 100-day rapid advance across northern Iraq has given IS military power that groups like Al Qaeda could never have imagined
Evolution of Terror
The IS is a major step in the evolution of terrorism. Osama bin Laden could never have foreseen a time when a group, whose savagery had shocked even al Qaeda, would storm entire Iraqi cities in US-made tanks and armoured vehicles, run oil fields and control an area of territory larger than the UK.
Yet just years after bin Laden’s death, the landscape of religious war in the Middle East has been changed utterly by a group whose medieval savagery is matched by their meticulous, modern planning and organisation – and while it is the horrific acts of violence that make the headlines, it is the organisation, the wealth, and the planning that ensure the Islamic State will prove more difficult to stop that any of their predecessors. And they’ve built their war machine on a framework rooted in western capitalist planning.
IS is run with the structures of a multinational corporation, and maintained by an army of accountants and management personnel who produce reports documenting everything from the minutiae of daily life in the caliphate, to annual reports celebrating the murderous toll of their war.
“The group’s leaders portray themselves as akin to seventh”¯century warriors thundering forth on horseback to expand their religious empire by sword. But in many important ways they have much less in common with medieval warriors than they do with modern bureaucrats," Cam Simpson writes for Bloomberg.
“It may sound bizarre for a group calling itself a caliphate, but the foundation of its management model, as identified by experts, is more akin to that of General Motors than it is to a religious dynasty from the Dark Ages. After decades, we may have arrived at the ultimate professionalisation of terror.”
Discovered documents paint a picture of corporate terror
The documents haul in Mosul in June 2014 was just the most recent in a slow stream of discoveries that has helped piece together a forensic portrait of the inner machinations of the group.
In January 2007, a unit of U.S. Marines on routine patrol in a town called Tuzliyah al Gharbiyah, found nine documents from the group then known as Islamic State in Iraq (ISI) in a roadside ditch. These documents detailed financial records, payrolls, supply purchase records, administrative records and other organizational information on one cell in the Anbar province.
Read: How Al Qaeda in Iraq became Islamic State
Soon after, a raid on a house nearby uncovered a computer hard drive with 1,200 files of similar information, but this time on a provincial level. When paired with the documents found in the roadside ditch these files painted a detailed portrait of the bureaucracy that enabled the march of war.
When analysts in the US pored over the finds, they made a surprising discovery. They soon recognised the command structure of the group; it was one they had seen in analyses they had undertaken before. The terrorists were behaving like corporations.
The Rand report found that the ISI “had administrative emirs who represented and accounted for each sector’s administrative system," which included bureaucratic sections for: movement and maintenance, legal, military, security, medical, spoils, and media.
There was even a courier office for delivering mail.
The analysts found that these emirs – much like middle management – were part of an M-form management system, a system which allowed semi-autonomy of geographical sub-divisions rather than a centralized control structure. It was a business system pioneered at General Motors in the United States in the 1920s. The study found that ISI was set-up in a way not dissimilar to some of the world’s largest multinational corporations, whom the analysts had previously examined.
A document captured in 2007 shows the management structure of one ISI cell in Anbar Province. Under the sector emir there are emirs for medical, propaganda, sharia, administrative, security and military Image: Combating Terrorism Center/US Military Academy
And they have evolved since then: more captured documents in 2008 showed the ISI fighters had compiled lists of lessons learned from previous failures. They had critiqued the use of financial resources, highlighting the lack of regular funds flowing to individual cells and the lack of regular funding supplies.
Issues such as corruption and embezzlement were also highlighted and dealt with on a structural level. The US military Combating Terrorism Center (CTC) details how documents show one ISI manager offering a flow chart solution to the problem of disappearing funds.
"In a letter accompanying a report on financial activities, an ISI manager named As’ad recommended an individual for administrative duties and suggested that the financial organization be expanded in two steps," the CTC report says.
"His logic for the change is simple; he argues that the new structure '…makes the issue of monitoring the Treasury easier and makes the Administration of Finance distinct from the Taxation of Treasury [sic], and the
Administration of Taxation distinct from the Administration of Finance, and this issue is important to minimize the problem of embezzlement and fraud…'"
Image: An ISI manager's proposals to reorganise the group's systems to avoid corruption
At this time the group was making roughly $1m per month. In 2015 they produced a budget of $2bn.
In the group’s formative years, as it morphed from Al Qaeda in Iraq to ISIS, its leader since 2010, Abu Bakr al-Baghdadi, focused on building his management structures. He set about freeing former Iraqi military generals and some of the world’s most dangerous Islamic extremists from prisons around Iraq in his “Destroying the Walls” campaign. These freed prisoners formed the backbone of the beast Baghdadi was constructing. As the group grew they joined with and took over other radical factions - a campaign of “mergers and acquisitions,” military analyst Michael Knights told Bloomberg.
It is this level of planning – the businesslike approach to terror – that has sustained the group's rise and enabled it to become the world’s richest ever terrorist organisation, and also make it far harder to defeat, as it builds a war chest larger than any in terrorism history with much of its diverse income streams safely ensconced away from international detection and prosecution.
Image: Abu Bakr al-Baghdadi, self-proclaimed Caliph and leader of the Islamic State
Whereas Osama Bin Laden’s Al Qaeda made terrorism a franchise business spreading around the globe, IS has evolved it to an entirely more complex, and daunting, level.
The result of this is that, less than two years after its rapid advance across Iraq, the financial foundations of IS are now deeper and less vulnerable than those of any of its predecessors.
Controlling territory roughly the size of Britain, maintaining a level of social order to stave off uprisings in those areas, and simultaneously battling a number of enemies, costs huge sums of cash.
Expenditure covers tens of thousands of ‘employees’ – from fighters to engineers, accountants and fundraisers – and governs huge populations.
The war machine
There are varying estimates, but most put the monthly salary of a base level Islamic State fighter at $350 to $400. Foreign fighters will earn up to twice this much, with the amount increased depending on their number of children and wives, while mid-level field commanders can earn up to $2000 per month. These salaries are higher than those offered by both the Iraqi army and Syrian rebel forces.
To go with this is the cost of arms, ammunition etc – all substantial outlays.
Governing the caliphate
There is an entire ‘state’ to run – with religious schools, courts, a (form of) consumer protection agency, utilities services, and religious police forces to enforce their doctrine on conquered cities.
Each region of IS territory is governed by wallis (governors), with an “army of accountants” in each town to ensure oversight of public funds. There are also large salaries for engineers and other skilled workers in the group’s oil and gas fields. Christine Duhaime, a lawyer specializing in terror financing and money laundering, writes in the White Paper on Islamic State Funding, that oil workers are recruited often as the oil field is conquered – and assured of safety from other groups in exchange for working – but there are also reports of individuals with experience of the oil industry in the Gulf States being recruited and tempted with significant salaries.
A key to the future of the caliphate is a growing population, and the constant stream of propaganda aims to draw Muslims from across the globe to join the war. The group’s media arm is extensive, and the high production values of their output – from execution videos to the English language Dabiq magazine – suggest there are skilled, experienced operatives working behind the scenes. They’ve even had their own Twitter app.
Are the leaders privately wealthy?
In terms of personal wealth, there is little evidence to suggest the leaders are spending lavishly on luxury goods – and any such display would hardly sit well with the overarching message of the group. However there is suspicion that significant funds have been siphoned abroad.
“The group leaders likely have sent large amounts of funds overseas – as with most leaders who acquire power undemocratically – safe from the conflict area," Duhaime says.
"International banking rules are supposed to identify and stop these activities, but these rules have been notoriously lax in the past, most recently in Ukraine, where some $70bn was sent overseas.”
Despite the lack of obvious displays of personal wealth in Syria and Iraq, IS members in Turkey are known to have large houses and expensive armoured cars – the trappings of organized crime in any other guise.
So the questions is, where does the funding come from?
Historically, terrorist organisations have relied on a mixture of criminal proceeds and outside donations to fund their cause. One of the more commonly held perceptions about IS funding is that it is heavily subsidized by wealthy individuals in the Gulf states, without whose backing the group could not function – or at least not at its current level.
While that is true to an extent, the reality is in many respects far more troubling. There are Gulf donors sending the group funds, but the reality is – in the words of a US intelligence agent who spoke to The Guardian – “They don’t need them.”
Wheras Al Qaeda relied heavily on outside financiers to keep it going, IS has ensured it is not vulnerable, or unduly in debt to, external factors. Thomson Reuters’ analysis estimate that outside donors make up just 2% of the group’s total income – meaning they take in three times as much from wheat and barley (7% of their total income) as from wealthy donors.
However the connections between IS – and other radical Islamist groups - and the Gulf States remains strong, with IS sending fund-raising networks to the region to lobby for ‘charitable’ donations to the cause.
The Gulf States
When the Syrian war began the Sunni Gulf States were openly offering funding to factions battling the Shi’ite regime of Assad – which is backed by regional ally Iran. This meant money and weapons readily flowed to groups such as the Nusra Front and IS. At times individuals would simply travel to Turkey and hand over a bag with millions in cash inside.
However in 2013 international pressure increased, with Hillary Clinton leading the calls for the governments of Saudi Arabia and other Gulf states to stop the funding, with the result that the amount of money flowing to IS and other groups from Saudi Arabia has markedly dropped off in recent years.
While Saudi Arabia has largely complied with international requests to put in place protocols to stop the flow of funds to extremist groups, the major problems remains in other Gulf States - Kuwait and Qatar in particular, with some wealthy Saudi individuals now simply making their donations through the Kuwaiti banking system to avoid Saudi controls.
What payments do make it through are often laundered as humanitarian aid, with cash pickups arranged over Whataspp and Kik.
Interactive: Financial links between major Gulf nations and Islamic State
The problems posed by Qatar
Whereas Saudi Arabia is the home of the ideology that drives IS and groups like it – the radical and ultra-conservative Wahhabist Islam that forms the basis of radical Sunni ideology – in the current situation Qatar has provided significantly more headaches for Western powers than its neighbour.
Qatar and Kuwait have both said they will tighten controls on the transfer of funds to terrorist groups, but faith in their will to follow through on those promises remains thin on the ground.
Speaking to the US House Committee on Financial Services, Michael Levitt, an expert on Islamist terrorism, said that “unfortunately, Qatar has a history of introducing such laws with great fanfare but little or no follow-through or enforcement.”
Qatar has previously introduced legal measures to the same effect, including bringing in laws to criminalise the funding of terrorist groups in 2006. But when an IMF team visited two years later they found that the country had outlawed the practice “in a limited way.”
In 2013 Qatari banks filed just one suspicious activity report (SAR) under the country’s anti-money laundering laws. This was despite allegations at the time that some of the richest residents in the country paid both cash and wire transfer payments to IS, sometimes worth up to $2m.
In Qatar, foreign diplomats have reported seeing cars in affluent areas with IS logos on them, and Reuters has reported that the country is “a haven for anti-Western groups.”
Indeed, Western ex-pats can expect to browse the same shopping malls as exiled Taliban and Hamas fighters in downtown Doha – all while the Qatari ruling family spends lavishly on western weaponry and hosts the largest US military base in the Middle East.
Ultimately, foreign money makes little impact on IS's overall bank balance, as their own revenue generating activities - from crime to agriculture, and a massive oil business - have helped make them world's richest terrorist group.
In part two of this report we look at how Islamic State has built this vast revenue system, and why it will be so hard to dismantle.
