The militant group ISIS has managed to fund a full-scale offensive using a financial system that's very similar to the Mafia's. For more on the means the group uses to finance its operations, Robert Siegel speaks with Juan Zarate, a senior adviser at the Center for Strategic and International Studies.
ROBERT SIEGEL, HOST: If ISIS does control that Iraqi oil refinery, it would fit a pattern. ISIS appears to be as well-endowed economically as any such group can be endowed by conquest, by plunder and by voluntary contributions. How do they make their money? Joining us to talk about ISIS's finance is Juan Zarate. He is the former assistant secretary of the Treasury for Terrorist Financing and Financial Crimes. And he's now at the Center for Strategic and International Studies. Good to see you again.</s>JUAN ZARATE: Robert, good see you.</s>ROBERT SIEGEL, HOST: How well-funded is ISIS?</s>JUAN ZARATE: Incredibly well-funded. This is a group that has been gaining momentum and now with the plundering of Mosul banks and control of oil sector resources - they have now added to their stockpile of cash.</s>ROBERT SIEGEL, HOST: Let's start with oil. Syria is not one of the major oil exporters of the world, but it does have oilfields. And I gather that ISIS has taken control of some of them, and it's in the oil business.</s>JUAN ZARATE: It is. What it has done is in the territory that ISIS controls, it has become a part of that oil economy, in some ways, looking like warlords taking advantage of that business helping not only to sell gas but to refine the oil. They've developed mobile refineries to do this. They escort the shipments to border posts. They work with Turkish brokers, and they even have accommodations with the Assad regime to move the oil into sectors that are controlled by the Syrian government. And so they've learned to profit from controlling the oil sector.</s>ROBERT SIEGEL, HOST: Then there is ISIS money that's obtained by means that have been described as mafia tactics. What does that typically refer to?</s>JUAN ZARATE: Well, for some time ISIS, which is the successor group to al-Qaida in Iraq, has learned to take advantage of the environment they control. And that has imparted local taxes or extortion of business folks, individuals, organizations that have to either operate in the zones that they control or pass through them or do business in them.</s>ROBERT SIEGEL, HOST: In Mosul, they took over a bank and stole nearly half a billion dollars that was there.</s>JUAN ZARATE: And that number may be slightly exaggerated.</s>ROBERT SIEGEL, HOST: OK.</s>JUAN ZARATE: But still.</s>ROBERT SIEGEL, HOST: They have a $100 million.</s>JUAN ZARATE: Exactly.</s>ROBERT SIEGEL, HOST: Did they put it in 1,000 suitcases? Do they bank somewhere? Do they use banks in other countries? Where does that money go?</s>JUAN ZARATE: Well, they have many needs for the cash. They obviously have to pay their fighters. They pay them relatively well compared to other fighters. They have to pay for allegiance and co-optation with tribal leaders and perhaps even government operatives. They pay for weaponry. They pay for food, and so a lot of that happens in cash and barter arrangements. They also have brokers, and they also have the ability to place that money in banks and largely that then flows the trade that they have with, for example, Turkish companies.</s>ROBERT SIEGEL, HOST: Well, before they controlled cities or oil wells or banks, they had contributions from people. Typically from where? From Saudi Arabia?</s>JUAN ZARATE: Well, Saudi Arabia was an area of focus, especially before 9/11 and immediately afterwards. Where you've seen the area focus shift has been to countries like Kuwait and Qatar, which the U.S. Treasury Department has called out specifically as the epicenters of funding to the Syrian opposition and in particular to al-Qaida-related groups and to a certain extent, with good reason, from their perspective. They want to see the fall of Assad. They also want to see the end of suffering in the Syrian conflict.</s>ROBERT SIEGEL, HOST: Juan Zarate, thank you very much for talking with us. Juan Zarate used to be in charge of tracking terrorist funding for the Treasury. He's also the author of "Treasury's War: The Unleashing Of A New Era Of Financial Warfare."