4The evolution of ISIL’s finances, and the UK’s response
The future evolution of ISIL’s finances
47.The assessment of the Government, as described in this report, is that ISIL’s two pre-eminent sources of revenue are currently derived from oil production, and taxation. But these sources are being intensively countered through the military means detailed in this report, and their viability for ISIL will ultimately be eroded as the group loses its territorial control. Mr Rarden assessed that:
Clearly, when they suffer territorial loss and move away from a pseudo-state, they will move to more traditional terrorist fundraising activities.96
Air Vice Marshal-Stringer told us that:
Our assessment has to be that, as you force people on to the back foot and make their operations simpler, to some extent they become more resilient97…we will see Daesh move ever more into the black economy and other ways of shifting cash around, and we have to be prepared for that.98
48.Growing involvement in the “black economy” would see ISIL profiting from criminal activities such as kidnap-for-ransom or involvement in various forms of smuggling. In the past, this has included the sale of Yazidi women to tribal leaders.99 Involvement in the black economy may be less lucrative, but there is a risk that they will also be more resilient and difficult to target militarily. As its oil and tax revenues are countered, ISIL is likely to evolve new sources of funding.
ISIL in Libya
49.The group’s operations in Libya may provide a case study of how ISIL can operate, even without access to oil revenues or tax resources. ISIL’s affiliate in Libya does not control large populations or economies (it currently occupies only one major settlement, Sirte) and it does not hold facilities that it can use to produce and sell oil on a large scale. Yet ISIL in Libya has still been able to operate. It has staged attacks against the country’s oil facilities as well as its capital Tripoli, and the group attempted to capture a border crossing with Tunisia in March 2016. Its occupation of Sirte has been associated with the same restrictions and atrocities as its control in areas of Iraq and Syria.
50.Air Vice-Marshal Stringer told us that “not a lot is known about ISIL or Daesh in Libya”,100 and the ISIL affiliate in Libya was not specifically mentioned in any of the written evidence from the UK Government (which focused instead on ISIL in Iraq and Syria). ISIL in Libya is able to function without the financial resources that the Government has identified as providing the majority of the funding to the group in Iraq and Syria. The Government should present an assessment of how ISIL in Libya funds itself, and whether financial links exist between the core ISIL groups in Iraq or Syria and their Libyan affiliate. A holistic understanding of ISIL is vital to the effective global defeat of the group.
Adaptation of the UK response
51.We note the role played by the UK in the military Coalition against ISIL, and this role should continue. But the primary focus of our inquiry has been on the non-military contributions of the UK to the international efforts to isolate ISIL financially. In this respect, Air Vice-Marshal Stringer told the inquiry that “the UK is an active member of the CIFG”,101 referring to the Counter-ISIL Finance Group, a collection of countries that Stringer described as “working to deny Daesh access to the international financial system”.102 But the UK is not a co-chair of the CIFG, which is chaired instead by the US, Italy, and Saudi Arabia. The UK should play a leading role in the CIFG, and be prepared to adapt its response to the evolving threat from ISIL’s finances.
Flexibility in the use of Government Department resources
52.Air Vice-Marshal Stringer described “the problem of paralysis by analysis: if you admire the problem for too long, the opposition has already seized the initiative”,103 and he told us that:
We need to refine and continue to adapt that target systems analysis. We must maintain our intellectual curiosity and our agility, because Daesh will adapt as we start to hurt it. We must keep ahead of it, and we must review the discarded. Just because they’re not making money out of something at the moment doesn’t mean they won’t revert to that in the future.104
53.Air Vice-Marshal Stringer told the inquiry that, under his leadership as Senior Responsible Officer for Counter ISIL Finance, the UK had established a framework for improving cooperation between different Government departments over this issue.105 He also told us that different intelligence sources were being combined, within the context of the international Coalition against ISIL:
We are pulling together previously very separate intelligence structures, some of which had become very compartmentalised because they are to do with national counter-terrorism in all the countries that are involved…We are now ensuring that we do not find intelligence through one channel, only to discard it because it is not useful for that one purpose.106
54.Air Vice-Marshal Stringer said that attitudes within Government departments were changing, and that this was serving to ease cooperation between them:
The next generation coming through may be less channelled down individual Departments, may be less schooled from an early age to be a mandarin of a certain kind, you will now find people from really interesting parts of intelligence agencies working, for example, at the Department for Transport and thoroughly enjoying it. That cross-fertilisation is changing attitudes.107
55.As the sources of ISIL’s finance evolve, so too must the UK’s response. Rapidity is imperative, and Air Vice-Marshal Stringer’s team should be supported in its efforts to quickly identify and target new funding streams for ISIL as soon as they emerge. Government departments must continue to work to ensure that the appropriate internal processes are in place to allow an agile UK policy, which is able to respond quickly to changes in ISIL’s fundraising.
The involvement of UK public and private sector expertise
56.Describing the UK’s contribution to the multilateral efforts to counter ISIL’s finances, Tom Keatinge told us that:
Given the significant experience that exists within (albeit rapidly diminishing due to retirement and ‘brain drain’ to the City) and outside HMG as it relates to terrorist financing and financial investigation, the UK’s position as a leading financial centre, and as a key source of FTFs [Foreign Terrorist Fighters], the UK should seek greater profile and leadership in the efforts to counter ISIL financing. Whilst the UK is a member of the Counter ISIL Finance Group along with as many as 30 other nations and four multilateral organisations that support the implementation of UN Security Council Resolutions 2178 and 2199, little demonstrable HMG leadership has been evident.108
57.In answer to a question about the staffing of his team, Air-Vice Marshal Stringer told the inquiry:
As SRO, I could say I have hundreds of people and I have no one, and probably Patrick [Rarden]—there is no staff under me as SRO…I do not have, if you like, an executive body. My aim is to go around the bits of government where I think things are not being done properly and say, “I think a little bit more investment is needed here”.109
He added that:
In some ways, investigative journalists, academics and others are sometimes better placed to explain how it [ISIL financing] really works than our structures110…We need to pull people in from outside and that we can’t expect people to work for free, and we can’t spend three months going through a complicated approvals process.111
58.When it comes to ensuring that ISIL cannot make or move money by accessing financial systems, the UK’s contribution to the Coalition appears underpowered compared to its potential. Expertise from the UK’s public and private sector should be effectively introduced into the international effort. It is unacceptable if external experts are expected to provide information on an unpaid basis.112 With the need for a rapid and flexible approach in mind, we urge the FCO to cater for accelerated vetting of the relevant experts, in coordination with other Government departments. The FCO should establish a budget for the payment of these external experts, and the procedures for paying them promptly.
96 Q196
97 Q158
98 Q172
99 Members of the parliament of the Kurdistan Region of Iraq told us in May 2016 that 934 Yazidi women had been rescued from ISIL but that 1,935 remained in captivity. Women had typically been sold for $100 to $200 each.
100 Q191
103 Q154
104 Q154
106 Q224
107 Q152
109 Q178
110 Q216
111 Q219
112 Q216
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7 July 2016