02:21 GMT04 December 2020
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    UK lawmakers have been told that funding for Daesh, also known as ISIL, has been cut back through international efforts to prevent the Islamic terrorist group making money out of oil and extortion, but has failed to prevent it making money out of foreign currency auctions.

    Interrogating UK lawmaker Tobias Ellwood MP, Under-Secretary of State at the Foreign and Commonwealth Office, lawmakers heard that Daesh has had a vast amount of its income stemmed through international action in the financial world.

    Daesh originally made millions by raiding banks and selling antiquities, as well as selling oil. But in recent months, concerted action — through the UN and other international financial institutions — the flows have been stopped.

    "Tackling Daesh's finances has been challenging, but as part of the global coalition, we have made important strides," Ellwood told lawmakers on the UK Foreign Affairs Sub-committee Wednesday.

    "In the early stages of the campaign [18 months ago] Daesh were able to make millions of dollars from looting cities, raiding banks and extorting a large population. We saw the prospect of Daesh making millions from kidnapping and ransom, smuggling and external funding.

    "But since then we have stopped Daesh's ability to expand. We have taken large portion of territory away from them and the UK has led the way in developing international best practice on kidnapping for ransom. The UK has sponsored [UN] Security Council resolutions — such as 2199 and 2253 — that have cut Daesh off from foreign funding sources and we have worked with partners to limit Daesh's ability to make money through smuggling," Ellwood said.

    Daesh for Cash

    However, the committee had earlier been told by David Butter, Associate Fellow at Chatham House, the London-based international policy institute that Daesh was still able to make over US$20 million-a-month out of foreign currency transactions using a system known as Hawala.

    Butter said: "That works through a very sophisticated system set up by a former Ba'ath party official who was killed in November-an intelligence agent-which is using funds which were previously coming into pensioner salaries in the Mosul area and other parts of Iraq and, in particular, the Iraqi dinar funds that were taken from the banks in Mosul.

    "They were siphoned out through Jordanian banks and back into Iraq through Ramadi into the Baghdad system. So when the Iraqi government does its regular foreign currency auctions, the ISIS money is inserted into that system and they can make a margin on the differences between the various exchange rates there and send it back into their areas through Hawala operatives," he told the committee of British lawmakers.

    Money is commonly moved this way in the Middle East. Butter said Hawala operations and not well-regulated banking transactions and are "perhaps" slightly more important to Daesh funding than oil, because international measures — including military airstrikes — have been effective in slowing revenues from oil sales.

    Example for the Hawala banking system: Person A wants to transfer money to person B, using the services of the hawaladars X and M. 1. A hands the money (red) to his hawaladar X and also tells him the code word (blue). 2a. Then, A tells B the code word. 2b. Independent of this, X tells the code word to M. 3a. B tells the code word to M... 3b. ...which shows to M that B is a legitimate receiver of the money, so he hands over the money to B. Legend: blue = shared code word is being told, red = money is handed over.
    © Photo : Wikipedia
    Example for the Hawala banking system: Person A wants to transfer money to person B, using the services of the "hawaladars" X and M. 1. A hands the money (red) to his hawaladar X and also tells him the code word (blue). 2a. Then, A tells B the code word. 2b. Independent of this, X tells the code word to M. 3a. B tells the code word to M... 3b. ...which shows to M that B is a legitimate receiver of the money, so he hands over the money to B. Legend: blue = shared code word is being told, red = money is handed over.

    Butter said: "To my thinking, the biggest source of funding for [Daesh] is what was accumulated prior to 2014-the war chest from Mosul and the operations in Iraq. Those funds were derived from a wealthy state system and were circulated through the Iraqi financial system-particularly through the Central Bank of Iraq's currency auctions.

    "There are financial transactions that have been investigated, but I don't think have been completely stopped, that relate to the war chest that was built up in Iraqi dinars and was then processed through into various dollar flows," he said.

    Related:

    How Daesh is Making Money Off the Oil Fields in Syria and Iraq
    On the Brink of Collapse: Is Daesh About to Breathe Its Last?
    Daesh Strapped for Cash Thanks to Russian Airstrikes, Expert Tells Sputnik
    Empty Coffers Force Daesh to Cut Fighters' Pay in Half
    ISIL Financed by 40 Countries, Including G20 Member States - Putin
    Tags:
    Middle East, Oil, anti-Daesh coalition, terrorist financing, oil production, Syrian conflict, terrorism, war, money, Daesh, Chatham House, Foreign and Commonwealth Office, House of Commons, Syria, Iraq, United Kingdom
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