Adam J. Szubin is the Acting Under Secretary for Terrorism and Financial Intelligence at the United States Department of the Treasury. He leads the policy, enforcement, regulatory, and intelligence functions of the Treasury Department aimed at identifying and disrupting the lines of financial support to international terrorist organizations and other actors posing a threat to U.S. national security. He served as the Director of Treasury’s Office of Foreign Assets Control (OFAC) from 2006-2015 and earlier as the Senior Advisor to the Under Secretary for Terrorism and Financial Intelligence.
CTC: What capabilities does the Office of Terrorism and Financial Intelligence (TFI) bring to bear on countering terrorism finances?
Szubin: We were built to combat terror financing, and we bring quite a lot to that effort. We provide everything from expert financial intelligence and analysis, to some of the more structural steps that are helping our partners around the world harden their financial systems against terror finance. And that can be quite beyond banks; it can affect money exchangers, trading houses, front companies, and charities. It includes certainly our targeted sanctions and enforcement efforts to name, expose, and disrupt the activities of individual companies, front companies, real companies, individuals who are financing terrorism, who are the donors, the fundraisers, the middlemen, the facilitators, the attorneys, and/or the accountants employed by terror groups. A big part of our activity is sharing information and intelligence with other governments to assist them in cracking down on foreign-based individuals. We’re bringing all of that to bear on ISIL as a threat.
CTC: How are you evolving as an organization to meet that new threat?
Szubin: We are growing our organization while understanding that we’ll never be able to handle every piece of intelligence that comes in and every threat. There’s always a lot of triage. We’ve had to evolve in our thinking because the model that ISIL is using as a financial model is different from other terrorist organizations. I don’t know that I’d use the word unique because we’ve confronted other terror groups who hold territory before—think of al-Shabaab, think of the FARC, at times think of Hamas. But none of them have done so on the scale of ISIL, and none of them pose the same active threat. And so that has forced us to adapt our thinking both in terms of intelligence gathering and in terms of our operational work to adjust to this model.
CTC: How is the United States and its coalition partners targeting the finances of the Islamic State?
Szubin: In terms of the campaign on the financial side, we tend to group it into two major baskets—the first being targeting their revenue stream, their sources of income, and the second being targeting their ability to harness and use that money. The first has been largely, though not entirely, a military effort.
ISIL is overwhelmingly financed internally, mainly from sales of oil and gas, and taxation/extortion. Those types of internal revenue streams are, of course, very difficult to target in the same way you could with, for example, foreign donations or Islamic charities that are being corrupted by a terror group like al-Qa`ida. It’s far harder to target those revenue streams using treasury regulatory and enforcement tools. And as a result, the military efforts of the coalition have been having the greatest impact by far. And that includes targeting oil and gas fields, the infrastructure both upstream and downstream, all the way down to tanker trucks. Looking at the other vulnerabilities in their financial infrastructure, the military has had some real successes in the tens of millions of dollars, if not considerably higher, by blowing up cash storehouses. And then you combine that with the targeted efforts against ISIL leadership, and across the board, that has a great impact on ISIL’s ability to generate money.
On top of that you have ISIL’s ability to then spend its money, and this is the point that I think is not well understood. People picture ISIL as entirely self-reliant, and certainly they’re well-stocked with small arms, but there are plenty of items (satellite phones, weaponry, replacement parts for their oil and gas sector) that they need to obtain from the outside. And to do that they need to be able to take money they’re generating in cash within Iraq and Syria and get it into the formal financial system. And that’s where I think Treasury’s tools can be pretty effective.
CTC: How are you working to shut the Islamic State off from the international financial system?
Szubin: There’s work we’re doing, both on our own, but also alongside a long list of allies primarily coordinated through something called the Counter ISIL Finance Group, or the CIFG, where Italy, Saudi Arabia, and the United States are the three co-chairs, and there are close to 40 countries participating. We’re using CIFG, as well as our existing multilateral and bilateral relationships, to share targeted intelligence on exchange houses and money changers and to increase our ability to apprehend ISIL cash couriers when they’re crossing borders. We’re doing a lot of work with the regional states to share intelligence and best practices. Our actions targeting exchange houses is an example of this. In conjunction with Iraqi authorities we’ve been identifying Iraqi exchange houses in ISIL-held territory or working with ISIL, in an effort to close them out of cash auctions in Iraq. We’ve been then taking that same list to the Jordanians, Lebanese, and Turks and ensuring that they’re closed out of the financial systems there.
CTC: How helpful was the adoption of U.N. Resolution 2253?[a]
Szubin: It was very symbolically important to demonstrate the international resolve with respect to ISIL, that it’s a group that’s being treated on par with al-Qa`ida under a global mandatory financial asset ban. The whole U.N.-al-Qa`ida-Taliban apparatus, in terms of countries needing to report to the U.N. what they’re doing to implement it, has proven to be a powerful framework. To bring that to bear against ISIL is a powerful thing in my view. I’d also point you to the importance of a Security Council meeting that my boss, Secretary [Jacob] Lew, chaired in December. It was the first of its kind to feature finance ministers from the 15 Security Council members sitting around the table instead of ambassadors or foreign ministers. There was not any daylight as you went around the room; the entire world is united in this. So while there are a lot of challenges when you’re talking about the counter-ISIL financing campaign, one of our huge advantages is the international consensus.
CTC: While measuring progress can never be an exact science, do you have metrics and benchmarks on Islamic State revenue streams and the degradation of their finances?
Szubin: You’re asking a question that I find myself asking very often. Obviously, it’s key in this effort to know how well we’re doing and what’s making a difference and what isn’t. It’s proven to be a pretty hard intelligence question to be able to measure ISIL’s overall accounting. Of course, they go to great lengths to keep that hidden. And when we get a snapshot, it’s either from something like the Abu Sayyaf raid[b] where you’re all of the sudden privy to a tremendous amount of information, but it’s a snapshot in time. Or it’s a more impressionistic data point about what’s happening in Mosul or Raqqa. I can share with you a number of those data points that we find valuable, but I will admit they are not nearly as quantitative as we would like. And they don’t present us with the ability to compare how they are doing year on year.
Overall, ISIL is significantly constrained in terms of its funding. A reflection of that is the famous memo that surfaced with respect to the fighters getting a 50-percent pay cut in their salaries in Raqqa.[c] The text, as I recall, stated that all ISIL employees and fighters will be receiving a 50-percent pay cut. There will be no exemptions. They went out of their way to emphasize that point, which I think cries out for some reading between the lines. I have no doubt that ISIL continues to pay its chemical engineers and the people who are advanced on the weapons side, people who are helping it on the gas refinery side, the same salaries they used to pay them. The 50-percent pay cut is probably for the foreign fighters or those who are in the second or third ring, and it’s a pretty significant pay cut.
It’s also, I believe, a vulnerability for the organization because they have been able to attract unprecedented numbers of foreign fighters to come join their cause based on two things. One was battlefield success and this narrative that they were moving towards establishing a caliphate. They no longer have that. The last six months have been nothing but loss of territory followed by loss of territory. And secondly, they were paying better than the going rate, more, for example, than a civil servant could be expected to receive in a place like Iraq and more than other militia groups were paying. So a 50-percent pay cut is jeopardizing that second attraction.
Obviously, there will continue to be sort of true-blue ISIL adherents, but that represents, in my understanding, a small fraction of the people we’re talking about as fighters for the ISIL cause.
In addition to the memo, we received information earlier this year indicating that ISIL stopped paying death benefits to families of ISIL personnel. That’s a core benefit that a group like ISIL needs to promise to the families of those going on suicide or likely suicide missions in order to maintain their operational tempo.
Another data point is we’ve seen them significantly increase taxation rates and increase the categories of activity they’re now taxing. While they had once held off from taxing the poorest civilians on humanitarian grounds, they are now taxing across the board. Where the rates might have once been three or five percent, we see those doubling, and we see them going after everything from income to remittances to picking up pension payments. Every aspect of life is being taxed, including real estate. What happens alongside that is increasing disaffection, increasing frustration, and all of the tensions that come with that for a group that’s trying to hold territory, sell itself as a quasi-governing authority, while fighting a multi-front war.
Adam Szubin (U.S. Department of the Treasury)
CTC: And there has also been evidence the Islamic State is increasingly using fines for various offenses as punishments.
Szubin: Yes. And while ISIL can call it a fine, these fines, taxes, and extortions all feel the same to the person who’s giving the money who really can’t afford it.
CTC: We’re not at the stage yet where this is a group on the brink of financial collapse, correct?
Szubin: I wouldn’t describe it that way, but I do think they’re feeling financial strain across the board. If you look at a number of the military fronts, they’re feeling strain there. I think they’re feeling it in terms of the public narrative. And they’re feeling strain in terms of the internal support by Sunni populations who have soured even further on ISIL. They are back on their heels, but we need to keep at it and even intensify our work.
CTC: We’ve seen dollar estimates from some intelligence groups in the private sector on the decline in the Islamic State’s monthly revenue streams.[d] Does the U.S. government try to quantify things in similar ways? Or is it impossible given the fragmentary intelligence picture to reliably provide such precise metrics?
Szubin: We have insights on certain things like how many oil wells we’ve taken out and we have estimates of what proportion of the production those oil wells accounted for, but this is not a static picture. Of course, ISIL is then turning to other oil wells. They’ve proven very adaptive. So it has proven very difficult to quantify, let’s say, monthly figures. There are estimates by outside groups on revenue streams, but I don’t have the confidence to be able to cite any of those for you.
CTC: Juan Zarate, the former U.S. deputy national security advisor for combating terrorism and a CTC senior fellow, told CTC Sentinel in April that one limitation on the coalition’s ability to target the Islamic State’s finances is that the group has created “economic defensive shields” in occupying urban areas and knows the coalition is “not going to bomb all the banks in Mosul or starve the economy of millions of people.” How have humanitarian concerns factored into coalition efforts to go after Islamic State financing?
Szubin: Humanitarian imperatives cut both ways. The military is grappling with this daily in a very nuanced way in terms of strikes. That includes strikes against financial targets. You saw with the strikes on tanker trucks. The military didn’t just blow them up. Our assessment was that the drivers of the oil tanker trucks were just ordinary Syrian civilians and not ISIL fighters. So those would have been civilian casualties. The coalition instead airdropped pamphlets by the queue of the tanker trucks saying, “We’re going to blow these up in about 15 minutes.” People scattered, they blew them all up, and there were zero civilian casualties. And that’s an example of great sensitivity to humanitarian concerns without sacrificing the efficacy of the strike. But that gets into the kinetic side. Where you’re talking more strictly about financial, regulatory, and sanctions measures, I think we just have to go all out. We want to put the greatest dent possible in their revenue stream. The more financial pressure we can exert, the sooner we can liberate the civilian population areas from ISIL.
CTC: To what degree is intelligence improving on the Islamic State’s finances? To what degree have U.S. Special Forces raids on Islamic State operatives, for example the raid on the compound of the Islamic State operative Abu Sayyaf, and the recovery of data such as recently in Manbij, Syria,[e] contributed toward our understanding of Islamic State financial networks?
Szubin: We have some of the best and brightest minds on this, and collection, including the additional capture of information that you’re referring to, is being exploited really thoroughly. This is not a typical counterterrorism target where we’re operating in the territory in which the group is operating. This is a group that is controlling territory where it’s extremely hard for us to operate. They’re largely cash-based within that territory, and so we don’t have the normal financial transaction information that could yield data. I don’t want to pretend it’s not a difficult intelligence target, but I do feel like we’re learning more and more as we go.
CTC: What information that you have collected stands out as particularly important?
Szubin: One of the interesting things that I’ve seen coming out in the last six to nine months, especially since Operation Tidal Wave II[f] began to have more and more of an impact on the group’s revenues, is information about corruption—corruption investigations within ISIL. We’ve seen allegations to the tune of millions of dollars being embezzled by ISIL leaders as their resources have shrunk. That’s another indicator of success, in my mind. This information allows us to draw attention to the fact that a group peddling itself to foreign recruits as a pure expression of the Islamic caliphate is stooping to stealing from its own people. Even putting aside the murderous nature of the group and the fact that they’re corrupting the principles they claim to stand for, they’re lying to potential recruits on simple things such as quality of life, the salary they’ll be paid, or the benefits that will be provided to their families.
CTC: Why has it proven so hard for the coalition to go after criminal middlemen facilitating oil and other smuggling in and out of Islamic State territory?
Szubin: Smuggling networks have been key to their ability to get material in and out of their territory. If you’re talking about those who might be black-market oil profiteers or smugglers who are moving goods across the border into Jordan or Turkey, then you’re talking about smuggling routes that have existed for centuries, in many cases millennia. It is not a simple thing to simply crack down on that border. For the coalition, of course, these middlemen are civilians, and they are not going to be who the military is looking for in terms of striking against ISIL. This is more about a law enforcement and border patrol issue—and that is never an easy thing to do—but it’s especially hard in that part of the world. And although smuggling is a concern, it is important to note that the majority of oil produced in ISIL-held areas is consumed internally. In addition, ISIL sells some natural gas to the Assad regime in Syria.
CTC: The November Paris attacks, according to some initial estimates, cost as little as $10,000 to execute. To what degree does the Islamic State have the financial capacity to create the machinery to launch attacks of significantly greater scale and complexity?
Szubin: That’s a hard question to answer. Of course, the external plots that you’ve noted and CIA Director John Brennan recently noted[g] are comparatively inexpensive to finance if you’re just looking at the cost of the actual attack. What I think is often missed is there’s a far more expensive infrastructure and support network that typically exists behind that, especially if you’re talking about a more sophisticated attack where you have individuals in training camps who are obtaining fraudulent documents and paying bribes. That type of preparation can go on for years, if not longer, and it is not inexpensive to finance. But the actual day-of attack cost is low. It’s difficult, therefore, to dry up the financing to a point where the money isn’t there to sponsor it. What we do set as our goal is to weaken the group’s overall financing enough that we’re accelerating their demise as an organization or at least force their transformation into a far smaller, less effective, less dangerous group. That’s where I think the financial campaign has been making a difference and can deliver results.
CTC: Would you agree that so far the Islamic State has not put a large fraction of their financial resources into international attack planning?
Szubin: I think that’s fair to say. You’re pointing to something that has been discussed quite a bit in recent weeks, which is as ISIL is losing territory, does it transform to more of an al-Qa`ida core-style group where it is basically a senior leadership in hiding and it’s deploying cells for external attack and/or relying on ISIL-inspired actors, such as lone wolves, to carry out its attacks. There’s no doubt that that’s a far less expensive model than trying to govern population centers like Mosul, keeping the water and electricity on, paying salaries, and so on. So in that sense, sure, it is far less expensive, but it’s also I think a far less compelling narrative than the one ISIL was able to disseminate a year and a half ago when they were on the ascendancy. So I don’t see an ISIL in that form attracting anywhere near the level of support and foreign fighters that they have historically, and that will weaken them as a group.
CTC: Changing gears, what is the level of concern on the flow of funds from private donors in the Gulf to militant groups in Syria, including Jabhat al-Nusra and Ahrar al-Sham?
Szubin: That has been a focus for my office and for our colleagues across the U.S. government, and it is something that we devote quite a bit of time to—how to tighten the regime, the counter-financing of terrorism regime across the Gulf States with respect to some of these groups. And that affects wealthy donors and/or charities that are either being abused or are intentionally directing funds to some of these groups. Regardless, if we see funding that’s going to an al-Qa`ida affiliate or an al-Qa`ida-aligned group, that’s something that obviously we take very seriously.
CTC: How big are these financial flows?
Szubin: Again, it’s difficult to give precise estimates. We’re talking about significant amounts of money. The overall annual budget of some of these groups is in the tens of millions of dollars.
CTC: What has been the progress in going after the finances of the global al-Qa`ida network? What is the concern about money coming into al-Qa`ida-aligned groups in Syria from private donors in the Gulf, including via online crowdfunding? Will Jabhat al-Nusra’s announcement of decoupling from al-Qa`ida make it more difficult to stem funds being sent to them?
Szubin: We continue to aggressively go after al-Qa`ida core financing and that of al-Qa`ida’s external affiliates. With regard to the recent activity that we see with Nusra in purporting to distance itself from al-Qa`ida, we obviously believe that move to be transparently misleading. This purported split will not change our approach to combating the group’s financial and logistical support networks. While we recognize there is still more work to be done, we continue to make progress on combating al-Qa’ida’s and Nusra’s finances. In May, we sanctioned three al-Nusra Front financial facilitators: ‘Abdallah Hadi ‘Abd al-Rahman Fayhan Sharban al-Anizii, Abd al-Muhsin Zabin Mutib Naif al-Mutayri, and Mostafa Mahamed. In Yemen, al-Qa`ida in the Arabian Peninsula (AQAP) continues to exploit the unstable situation to gain funding for their organization. We continue to use targeted measures to disrupt the group’s revenue sources, and in May we sanctioned two AQAP financial facilitators: Nayif Salih Salim al-Qaysi and Ghalib Abdullah al-Zaidi.
[a] U.N. Security Council Resolution 2253, which was adopted in December 2015, extended the U.N. al-Qa`ida and Taliban sanctions regime to include the Islamic State.
[b] According to U.S. officials, the May 2015 raid in eastern Syria on the residence of Abu Sayyaf, described as the chief financial officer of the Islamic State, yielded significant information. See Eric Schmitt, “A Raid on ISIS Yields a Trove of Intelligence,” New York Times, June 8, 2015.
[c] A directive apparently issued by Wilayat Raqqa in November/December 2015 made the announcement: “So on account of the exceptional circumstances the Islamic State is facing, it has been decided to reduce the salaries that are paid to all mujahideen by half, and it is not allowed for anyone to be exempted from this decision, whatever his position.” See Aymenn al-Tamimi, “Archive of Islamic State Administrative Documents (cont.): Specimen 12Q” and al-Tamimi, “A Caliphate under Strain: The Documentary Evidence,” CTC Sentinel 9:4 (2016).
[d] For example, IHS reported that overall Islamic State monthly revenue had declined to $56m for March 2016 from around $80m in mid-2015. See “Islamic State Monthly Revenue Drops to $56 million, IHS Says,” IHS Press Release, April 18, 2016.
[e] According to U.S. officials, a significant amount of data has been recovered from the northern Syrian town of Manbij this summer. See Eric Schmitt, “U.S. Secures Vast New Trove of Intelligence on ISIS,” New York Times, July 27, 2016.
[f] Operation Tidal Wave II is the name of the coalition air campaign initiated in the fall of 2015 to strike Islamic State oil and gas sector, including infrastructure, refineries, transport, and collection points.
[g] CIA Director John Brennan testified in June that “unfortunately, despite all of our progress against ISIL on the battlefield and in the financial realm, our efforts have not reduced the group’s terrorism capability and global reach. The resources needed for terrorism are very modest, and the group would have to suffer even heavier losses on territory, manpower and money for its terrorist capacity to decline significantly.” Statement by Central Intelligence Agency Director John O. Brennan before the Senate Select Committee on Intelligence, June 16, 2016.
 “A View from the CT Foxhole: An Interview with the Honorable Juan Zarate, Former Deputy National Security Advisor for Combating Terrorism,” CTC Sentinel 9:4 (2016).
 Robert Windrem, “Terror on a Shoestring: Paris Attacks Likely Cost $10,000 or Less,” NBC News, November 18, 2015.