Young Europeans heading to Syria to join the self-declared Islamic State (also known as ISIS) proclaim that they are fighting for Islam against infidels of all kinds. But new investigations show that their financial dealings are less than halal. Earlier this year, Europol Director Rob Wainwright told a British Parliament committee that some 3,000 to 5,000 nationals from EU countries are in Iraq and Syria as so-called foreign fighters. According to estimates by the International Centre for the Study of Radicalisation at King’s College London, the top European country of origin, Belgium, saw 440 Belgian residents leave for Sunni militant organizations in Iraq and Syria in 2015, a figure equal to 40 foreign fighters per million residents. Fewer Swedes total have gone to the Middle East than Belgians, but in the past three years, the number has skyrocketed.

Säkerhetspolisen, Sweden’s counterintelligence and counterespionage agency, estimates that 250 to 300 Swedish residents traveled to Iraq and Syria for terrorism purposes last year, up from around ten residents three years earlier. As in other countries, some disaffected young men (and a few women) from immigrant backgrounds seem attracted to the prospect of violence. To deal with the problem, in its most recent budget presented in September, the Swedish government gave Säkerhetspolisen an additional 225 million krona ($27 million) to monitor foreign fighters. Earlier this year, the government also proposed a new law banning so-called terrorist trips.

According to Säkerhetspolisen, jihadists traveling to Syria and Iraq often take out SMS loans or engage in sales tax fraud to finance their trips. SMS loans are a fast-growing form of lending, similar to a payday loan, for which the borrower applies using his or her mobile phone account. The money comes with large fees and the debt generally has to be paid back within one to three months. Currently, the best 30-day loan for 10,000 krona ($1,196) comes with a de facto annual interest rate of 219 percent.

ISIS fighter holds a flag and a weapon on a street in the city of Mosul, June 23, 2014.
ISIS fighter holds a flag and a weapon on a street in the city of Mosul, June 23, 2014.
That makes such loans perfect for a person who is planning to leave the country for good. Magnus Ranstorp, a terrorism expert who teaches at the Swedish Defense University, has been studying terrorist financing for years and is currently investigating Swedish foreign fighters’ financial transactions on behalf of a Swedish government agency. “Would-be foreign fighters take out SMS loans because it’s so easy to get them,” he told me. “The lenders don’t look very closely at their borrowers.” Indeed, just as with payday loans, the amounts handed out are so small, and the fees they bring in so large, that there is little incentive to scrutinize borrowers. To date, according to Säkerhetspolisen, such fraudulent financial transactions amount to millions of Swedish krona.

Ranstorp’s investigations show that foreign fighters engage in more sophisticated fraud as well. “They launch companies—for example, mobile phone companies—ordering lots of stock that they sell, but they never pay the suppliers,” Ranstorp reported. “Often the orders are cosigned by another person, but if that person doesn’t have any assets, there’s not much the supplier can do.” There are enough cases to indicate that such fraud is systematic and planned on a number of fronts, Ranstorp told me.

Although law-abiding Muslims look askance at such practices, jihadists consider them a legitimate tool.
Another common trick is value-added tax (VAT) fraud. “Jihadists make significant money on VAT fraud,” explained Colin Clarke, a terrorism researcher at RAND and the author of the recent book Terrorism, Inc. VAT fraud involves importing common food items, including cheese and chicken, from Germany and selling the items with sales tax, as required by the government. But instead of forwarding the tax income to the tax authority, they keep it. Prospective foreign fighters “also commit credit card fraud, mortgage fraud, and welfare fraud, and sell counterfeit goods including cigarettes and designer products,” Clarke told me. “And they steal iPhones.”

Although law-abiding Muslims look askance at such practices, jihadists consider them a legitimate tool. “On the surface, the SMS loans violate the ban on riba [interest], and fraud is banned in Islam as well,” explained Jan Hjarpe, a professor emeritus of Islamic studies at Lund University, Sweden. “But if you want to, you can find a loophole. These young jihadists may view themselves as soldiers in a war and treat their financial fraud as war booty. Throughout history, neither Christianity nor Islam has treated war booty as theft.”

Where do the funds go? The journey to the Levant doesn’t require very much cash: a trip from northern Europe costs less than $500, although some fighters opt for the more expensive and complicated route through Greece so as not to be stopped at Istanbul Ataturk Airport, where surveillance is strict.

A destroyed building with a wall painted with the black flag commonly used ISIS, is seen in the town of al-Alam March 10, 2015.
A destroyed building with a wall painted with the black flag commonly used ISIS, is seen in the town of al-Alam March 10, 2015.
Thaier Al-Sudani / Reuters
And ISIS doesn’t need them to bring money: like other terrorist groups, including al Qaeda, it generates vast funds through extortion, kidnapping for ransom, smuggling, and trafficking. “Kidnapping hostages is an easy spoil,” Nasir al-Wuhayshi, the leader of al Qaeda in the Arabian Peninsula), boasted last year. ISIS also makes money through fraudulent businesses, front companies, and money laundering, and it possesses significant oil resources in its captured territory. Although those activities are far from pious, they have made the group the world’s wealthiest terrorist organization. Last year, for example, ISIS made $20 million on kidnappings, $100 million on oil, $500 million through theft from state-owned banks in Iraq, and $600 million through extortion and taxation in Iraq.

In other words, rookie fighters don’t really need to line their pockets before heading to Syria, yet bringing money can carry prestige. “The more money you bring, the higher status you get,” explained Ranstorp. His investigation shows that the jihadists usually bring some cash with them, handing it over to local leaders when they arrive in hopes of getting a better posting. Typically they also leave money with family and friends at home, who send it to the fighters in installments, often alternating the names of the recipients.

Although companies involved in the fighters’ financial fraud are aware of the problem, they face enormous hurdles trying to profile prospective customers. For example, the institutions can’t discriminate by asking about a borrower’s religious affiliation. And if a fraudster has left the country for a conflict zone, there’s little they can do to recover their losses. Indeed, the rebellious teenagers turned jihadists have discovered a weak spot in Western law enforcement: the fact that minor fraud is simply not a high priority. “It’s simply not possible to watch everyone,” noted Clarke. “And it’s very hard to pinpoint the moment when someone crosses over from being a thug to being a terrorist.” If Sweden—and the rest of Europe—wants to confront the problem, though, the capitals will have to try a little harder.

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