It’s been reported several times that the Islamic State is taking part in Iraq’s dollar exchanges to earn hard currency. At the end of 2014 the U.S. Federal Reserve and Treasury Department warned the Central Bank of Iraq (CBI) that IS was buying up dollars at its auctions. The U.S. even stopped delivering dollars to Iraq in the summer of 2015 to push the Bank towards reform. In response the CBI issued new rules, fined banks, and banned 142 money exchanges from the auctions. Iraq has weak enforcement however, so the Bank’s actions have not stopped IS from being able to buy dollars.
In March 2016 David Butter of Chatham House testified to the British parliament on IS’s continued role in the Central Bank’s exchanges He said IS was taking dinars from Mosul, sending them to Jordanian banks, then to Ramadi, and onto Baghdad using money transfers. They then used the dinars to buy U.S. dollars from the Central Bank and sell them for a profit, which was then sent back to IS areas. Butter claimed that IS was making $20-$25 million a month from the dollar auctions. Ramadi has been retaken by the government, but IS probably has other routes to Baghdad that it can use. What Butter pointed out was that the group was still making lots of money off of the Central Bank. It has not proven able to stop IS because the ruling parties, Iran, Syria, and organized crime rings are all making money off of the dollar auctions as well. The Bank would have to crackdown on upon all of those to get to IS. The CBI is unwilling to do so, because it can’t stand up to such powerful actors. That means IS will continue to have this source of funding as other means such as its oil industry began to dry up in the face of international bombing.
Ellyatt, Holly, “ISIS ‘making millions’ by gaming forex markets,” CNBC, 3/3/16