UK authorities and Gulf banks join forces to cut off sources of Islamic State funding

Published in Gulf States News, 30 July 2015 Gulf banks are taking part in discussions with British counter-terrorism police, in the latest sign of international co-operation to clamp down on funding for Islamic State and other radical groups.

Banks in several of the Gulf ’s main financial centres – including Dubai, Kuwait and Qatar – have been developing working relationships with the UK authorities, who, given London’s prominence as an international financial centre, have potentially valuable experience in tackling funding flows going to Islamic State (IS) and other radical groups involved in fighting in Syria and Iraq. It is not yet clear how deep this co-operation runs. One person involved in the process described the relationship as “a work in progress”.

Co-operation could form a useful part of efforts to track and disrupt the flow of finance to Syria. Differences persist over the extent that funds from the Gulf region have gone to IS and conflict zones, especially compared to the situation before and following the 9/11 attacks. One industry executive said that banks had not seen a significant volume of suspicious transactions, leading to speculation that more informal routes are being used to funnel money from the region into Syria.

“We don’t see the flows of money that we might expect from Saudi Arabia or Qatar to Syria in terms of the amount of fighters they have over there,” the executive told GSN. “I’m not surprised. There is the opportunity to use alternative payment systems.”

It is widely believed that systems such as the hawala network, which have long been used to circumvent financial sanctions on Iran and circulated funds around Al-Qaeda and other networks, are also being used by supporters of IS. These are essentially grey market currency exchanges, allowing people to send money across borders while bypassing the formal banking network; as such, they are extremely difficult to track.Efforts to clamp down on IS financing have been given renewed impetus by recent attacks on tourists in Tunisia and suicide bombings of Shia mosques in Kuwait and Saudi Arabia have heightened such fears.

The London-based International Centre for the Study of Radicalisation and Political Violence (ICSR) estimated early this year that several thousand fighters had gone from the Gulf to fight with Sunni militant organisations in Syria and Iraq. The largest number come from Saudi Arabia, which has provided up to 2,500 fighters. The other Gulf states have far fewer citizens involved. Kuwait has an estimated 70 fighters, while Qatar and the UAE both have only 15 and Bahrain just 12. Some 110 are thought to have gone from Yemen.

While funding and fighters continue to flow into the conflict zone, some observers believe IS is financially self-sufficient at present. It has been able to earn revenues from sources such as oil sales, the sale of ancient artefacts, taxing the local population and looting banks. “Islamic State is one of the best-funded terrorist organisations of all time,” the industry executive said.

However, others say the group is not financially secure. “Their main source of finance, as they built up for their expansion campaign, was the Iraqi state, which was a relatively rich state and they managed to tap into that and act as a very effective parasite on that wealth,” said David Butter, an associate fellow at London think tank Chatham House. The oil trade has been disrupted by coalition bombing of refineries and a halving of the oil price over the past year, while it has become harder to impose taxes when fewer people are being paid salaries by the central authorities in Damascus and Baghdad.

As a result, sourcing foreign finance could become more important as the conflict with IS evolves. That is likely to encourage the authorities in London and the Gulf to push for even more co-operation between banks.