Fighters from Islamic State in Iraq and the Levant (ISIL) hold their weapons as they stand on confiscated cigarettes before setting them on fire in the city of Raqqa, Iraq, April 2, 2014. Reuters/Stringer

BEIRUT — The Islamic State group has the dubious distinction of being the “world’s richest terrorist organization.” It’s a category that Guinness World Records has yet to employ, but the group better known as ISIS has grown wealthy on the proceeds of oil and gas revenues, combined with a system of strict taxation and extortion of local populations via the so-called caliphate it declared last year.

The international campaign against ISIS has focused on cutting off its finances through a series of targeted bombings on oil refineries that are under the militants’ control in Iraq and Syria. But newly revealed internal financial documents from within ISIS territories indicate that this policy alone will not be enough to slash the group’s profits. That's because it now makes most of its money through a joint system of taxation and extortion, confiscating valuables from anyone who resides or passes through ISIS-controlled territory.

Jonathan Schanzer, vice president of research at the Foundation for Defense of Democracies, told International Business Times that ISIS has a system “based on taxing [as well as] a range of other financial streams to remain solvent. Finances are closely tied to territory it controls.”

Gaining and maintaining territory is an essential part of ISIS’ strategy. Without the ability to plunder the resources and population in the territory it controls, there would be no ISIS.

An internal ISIS document titled "Principles in the Administration of the Islamic State," translated by Aymenn Jawad Al-Tamimi, a research fellow at the Middle East Forum, reveals “The state cannot remain without the existence of the land that allows for its continuation and expansion."

ISIS has divided its territory in Iraq and Syria into 19 wilayats, or provinces, each with its own military and administrative branch. Every province has a unit called Diwan al-Khidamat, or “service administration,” responsible for providing public services to civilians, and a financial ministry called Diwan Bayt al-Mal, responsible for budgets and collections.

Confiscation of Goods

In October, Al-Tamimi obtained one of the only ISIS budget documents that the West has access to. The document was issued by ISIS’ Diwan Bayt al-Mal in the Deir Ezzor province of Syria. It showed that roughly two-thirds of the province’s profits from December 2014 to January 2015 came from taxation and extortion. Confiscations of goods and territory accounted for 44 percent, or $3,774,000 of the total revenues for that period, with a total revenue of $8,438,000, according to the ISIS document.

Under the umbrella term “confiscations,” ISIS calculates all revenue that comes from seizing homes, property, land, livestock, forbidden items (such as cigarettes and alcohol), vehicles and cash. During this period in Deir Ezzor, ISIS seized 79 houses, 91 vehicles and more than $500,000 in banknotes.

Confiscations can happen for a number of arbitrary reasons decided by ISIS militants. The most common is “being caught in the [act of] apostasy,” according to the anti-ISIS activist group Raqqa Is Being Slaughtered Silently. For example, ISIS can seize the homes of residents accused of apostasy (abandonment of religion) or those who are deemed to be working against the terrorist organization.

In Mosul, the group’s de facto headquarters in Iraq, the Diwan al-Khadimat issued a decree forbidding the private ownership of livestock and warned that they would “confiscate them in the event of their presence,” in a document circulated online. A separate document from the same ISIS ministry claimed that any ISIS employee working in the service administration who fails to report to work would be “dismissed and his property/wealth confiscated.”

The border areas are a particularly rich source of cash for ISIS militants. During the documented period in Deir Ezzor, the group seized roughly $2,700,000 worth of goods through confiscations, which is “combined with transit fees for legitimate travel and transportation of goods,” Al-Tamimi wrote.

The Case for Ground Troops

This method of profit-making presents a significant challenge for the U.S.-led coalition against ISIS. A bombing campaign targeting ISIS’ leadership and oil refineries will not eradicate the group’s main source of revenue, which depends on local populations.

“The suggested siege-like strategy to trigger a collapse from within is impossible to realize in the current circumstances, as one cannot wholly isolate IS territory from interactions with the outside world, and so cash flows will continue,” Al-Tamimi wrote in his analysis of the Deir Ezzor documents.

The recent liberation of Mount Sinjar in Iraq is one of the only times the coalition has succeeded in removing ISIS from an area it has controlled. Victory was only possible with the help of Kurdish forces that fought militants from street to street, while receiving back-up from coalition airstrikes. Reclaiming territory through troops on the ground is the only way to starve ISIS of its main sources of revenue.

But an apocalyptic land war that would strip ISIS of its main artery of cash is just the kind of battle the militant group has long hoped for, presenting an inherent paradox for the anti-ISIS coalition. Last year, ISIS released its first documentary-style video, titled “Flames of War: Fighting Has Just Begun,” in which it warns of a “direct confrontation” with the West in ISIS-controlled territory. The group bases its ideology on prophetic texts that say Islam will only be victorious after an epic battle that will commence once Western armies come to the region.

Prophecies aside, a bigger issue for members of the anti-ISIS coalition is how to starve ISIS without starving the group's captive population. “The U.S. is doing its best, but the policy is not to cut off an entire population from the world,” Schanzer said. “There are millions of people who live in ISIS territory.”