You name it, we've got it: Exploring the finances of the ISIS, Hamas, and Hezbollah terrorist empires
One method of laundering this money is by buying luxury items: expensive cars, watches, and artworks, which are then shipped from Europe to Lebanon or Africa and sold for cash. The annual amount of money laundered by Hezbollah through Europe is estimated at 25 million euros. In 2016, the group bought Rolex and Patek Philippe watches worth approximately 14 million euros from a single store in Germany. Some watches were sent by boat to Lebanon, while others were transported by couriers through Beirut airport, assisted by customs and security personnel. In Lebanon, the watches were resold, and the proceeds funded new cocaine shipments from Colombia.
Hezbollah's annual drug trade revenue is estimated at $300 million, though the actual amount of its overall illicit income is several times higher.
Western sanctions and the vagaries of the oil market are reducing Tehran's capacity to finance its terrorist proxies, potentially spurring Hezbollah's imperative to secure its own sources of funding. The organization leverages its primary asset: an informal network of influential families dispersed globally and deeply entrenched in the economic and criminal landscapes across the globe, particularly in Latin America.
Economic strategies are in a constant state of evolution. Just a few years ago, ISIS amassed substantial revenues from selling oil extracted from territories under its control. According to energy analysts in the UAE, in 2014, ISIS was raking in up to $3 million per day from oil extraction. However, by late 2015, frequent airstrikes on oil facilities began to impact its operations, reducing daily revenues to just $700 thousand by March 2016. After its territorial losses in Syria and Iraq, oil ceased to be a significant revenue stream for the terrorist group.
The organizational structure of ISIS has undergone significant transformations. Once concentrated in Syria and Iraq, the group has fragmented into multiple independent entities spreading out worldwide. Each entity adopts its own earning strategies, ranging from traditional methods such as extortion, kidnappings, robberies, and drug trafficking, to location-specific ventures.
Recognizing the importance of scalability and diversification, ISIS's central leadership began treating its branches as if they were startups, providing them with seed capital and guidance while expecting dividends once financial independence was achieved.
One of ISIS's offshoots, “Wilayat Khorasan,” which claimed responsibility for the Crocus City Hall attack that killed 145 concertgoers outside Moscow this past March, received an initial $100 million from the central office in its inaugural year. Furthermore, the ISIS faction in Somalia regularly channels tens of thousands of dollars back to the Middle East via cryptocurrency each month. “Wilayat Khorasan” diverted ISIS's focus away from oil, prioritizing the seizure of areas rich in talc and chromite mines. By mid-2016, it assumed direct control over mining operations, departing from the previous taxation model employed by the Taliban.
Cracking down on crypto exchanges
To effectively stem the flow of funds, global collaboration between governments and the private sector is imperative. However, such an approach presents challenges in corrupt nations, where regulators themselves may benefit from laundering terrorist funds. Despite existing prohibitions and sanctions, loopholes persist, granting terrorists access to financial and arms markets. In response, the United Nations, alongside blockchain analytics experts from the private sector, is developing technologies to aid authorities in identifying and halting cryptocurrency transactions associated with terrorism. Contrary to popular belief, cryptocurrency transactions are not anonymous — every transaction is logged on the blockchain, enabling traceability of funds down to the last cent in any wallet. Establishing ownership of these wallets is paramount, underscoring the need for increased regulation of private cryptocurrency firms.
Recent efforts have yielded notable successes in confiscating terrorist-linked cryptocurrency. For instance, Israel announced the seizure of over $17 million in cryptocurrency tied to Hezbollah and the Iranian Quds Force. Additionally, Tether, a cryptocurrency firm, reported blocking nearly one million dollars kept in terrorist-associated wallets. While these amounts pale in comparison to the terrorist groups’ overall earnings, governments are at least gradually enhancing their capacity to monitor transactions within the crypto market.