The Islamic State has emerged as the largest and perhaps wealthiest terrorist group in the World. Nicholas Ryder identifies the funding streams that IS has exploited.

In evidence put before the US House Committee on Financial Services, it was suggested that Islamic State’s daily income could be around $1–3m, with estimates of its total assets varying between $1.3bn and $2tn. Notwithstanding the huge variance in these estimates – an unavoidable outcome of the difficulties of assessing illicit financing – the Islamic State is the world’s best-funded terrorist group.

How was Islamic State able to access and control such vast sums of capital and income? The answer is that it is able to manipulate and abuse an unprecedented array of funding opportunities.

The control of oil reserves

One of Islamic State’s most distinctive and innovative financing streams involves selling oil they have captured and produced. Utilising pre-existing smuggling routes to Turkey, Jordan, and Iran, IS has used the same methods that were used by Saddam Hussein during the 1990s when international sanctions prevented the sale of Iraqi oil.

The international community has threatened to impose sanctions on countries that purchase oil from IS. However, the effectiveness of this approach is questionable, as if IS can freely smuggle oil into neighbouring countries and sell the oil at below-market prices, who will the sanctions be imposed on and how will they have their desired impact? The ineffectiveness of sanctions has resulted in nation-states abandoning this approach in favour of targeted missile strikes on IS’s oil infrastructure.

Kidnapping for ransom

Kidnapping for ransom has become a major source of income for the Islamic State. It is believed that IS has amassed between $35m and $45m in ransom fees in 2014, earning as much as $10m per month from ransom payments from foreign states and insurance companies. While these payments violate criminal law in the US, countries that have paid ransoms include Germany, France, Italy, and Spain.

UN Security Council Resolution 2133 states that ransom payments to terrorists are counterproductive. The impact of this resolution on IS’s ability to profit from kidnappings for ransom will be negligible, not least because some countries are permitted to make ransom payments under domestic legislation.

Foreign and private financial benefactors

The Islamic State also receives financing from foreign investors, private benefactors, and non-profit organisations – following a similar funding strategy to al Qaeda. The US Department of Treasury believes that IS has collected up to $40m from private donors in Saudi Arabia, Qatar, and Kuwait although private funding is thought to be diminishing.


Almost a third of Iraq’s archaeological sites are in Islamic State territory and the sale of artefacts has become one of their largest funding streams: approximately $100m per year. In February 2015, the United Nations Security Council passed a resolution prohibiting the trade of artefacts illegally removed from Syria and Iraq, although it is too early to tell the effect this has had on IS finances.

Other funding streams

There are many other funding streams exploited by the Islamic State. For example, taxation raises approximately $360m per year. In addition, the US Department of Treasury thinks that IS has gained a significant amount of revenue from criminal activities including robbery and extortion. One of these, a one-off but significant boon for IS, was the theft of an estimated $425m from Mosul’s Central Bank, while material support provided by foreign terrorist fighters has been a regular – if far less substantial – source.

Lessons learnt

The unprecedented scale of Islamic State’s finances has been underscored by the development of its own currency: an unparalleled development in the financing of terrorism. The Islamic State is an extremely well-funded terrorist group that while reminiscent of al Qaeda in its pomp, belittles their achievements and those of other terrorist groups.

Assessing the wealth of publicly traded companies is extremely difficult – as evidenced in recent financial crises – and so it is no surprise that evaluating the wealth of illicit organisations relies at best on educated guesswork. However, if the most accepted estimates are accurate, and IS earns approximately $1m per day, then from a financial perspective it has the financial capability to operate for many years.

This financial resilience has come about because IS’s financial infrastructure is significantly more advanced than any other known terrorist organisation and the existing counter-terrorist financing measures – the ‘Financial War on Terrorism’ – is not fit for purpose when it comes to IS. Not only do all financial institutions need to redouble their efforts to avoid being conduits for IS funding, the regulatory regimes that oversee them also need to be better monitored to ensure the consistency and efficiency of their counter-terrorism measures. Local action is also necessary, such as closing the oil smuggling routes.

Even with more consistent implementation of counter-terrorism financing measures the fact remains that Islamic State’s funding model has proved to be extremely flexible and adaptable, and so it is only when the territorial reach of Islamic State is defeated that we are likely to see their funding streams significantly reduced.