Nearly two years after losing the last sliver of territory in eastern Syria, the Islamic State terror group seems to be generating substantial amounts of revenue that has been instrumental for funding its insurgency across Syria and Iraq.

The group's growing terror activity in both countries in recent months has occurred largely because it is still capable of generating cash from criminal networks, military officials and experts say.

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In a recent raid against Islamic State (IS) militants in the eastern Syrian province of Deir el-Zour, U.S.-backed Syrian Democratic Forces (SDF) discovered a hideout that contained large amounts of weapons, ammunition, and cash.

"Every time we carry out an operation against Daesh terrorists, we find a lot of weapons and money," said an SDF official, using an Arabic acronym for IS, which also goes by ISIS.

The official, who requested anonymity because he was not authorized to discuss the matter, also said "it is clear they possess a lot of money to finance their terrorism in the region."

Cash reserves

According to the U.S. Treasury Department, IS has an estimated $100 million available in cash reserves.

Experts believe a significant portion of that money could be from when IS ruled large swaths of territory in Iraq and Syria, particularly when the group introduced its own currency.

"During 2017 and 2018, as the caliphate was collapsing, they imposed their dinar and made residents deal with it," said Aymenn Jawad Al-Tamimi, a researcher at Swansea University in Britain.

Residents "weren't allowed to use other currencies," he told VOA. "What [IS militants] were trying to do by imposing [use of their own dinar] was to suck out as much foreign currency as they could from the populations that were living under them for financing their post-territorial control phase."

Tamimi also says the extent to which the Islamic State made prior preparations to financially stabilize its current insurgency phase has largely been overlooked.

With no territory to control, the Islamic State no longer has the administrative responsibilities that would require additional spending, say local military officials in Syria.

"Lack of direct control over the areas they once occupied has allowed them to decentralize their terror activity in Syria and Iraq," the SDF official said.

"Their sleeper cells in our areas focus on attacks in our areas," the official added. "Those in the [Syrian] regime areas focus on carrying out attacks there, and the same thing goes for Iraq, which means they could inflict a lot of damage with little money and resources."

Several Iraqi officials did not respond to VOA's requests for comment on this issue.

Financial 'logistical hubs' in Turkey

The U.S. Treasury recently said that IS supporters increasingly have been relying on cryptocurrencies to finance their operations.

In its quarterly report released this month, the U.S. Defense Department's Office of Inspector General said that "ISIS used money services, including alternate money transmittal services known as hawalas … to move funds in and out of Iraq and Syria, often relying on logistical hubs in Turkey and in other financial centers."

Turkey's foreign ministry did not respond to VOA's request to comment on those reports, but Turkish officials have detained IS supporters and disrupted their financial networks in the past.

The SDF official claimed that several IS militants captured in recent raids in eastern Syria have confessed to receiving donations from supporters in Europe through Turkey.

Smuggling networks

Since the collapse of its so-called caliphate, experts say, smuggling goods between Iraq and Syria has become the largest source of revenue for the Islamic State.

And with smuggling comes "using extortion to 'tax' some local communities in the disputed territories between the Kurdistan Region and Baghdad-administered areas of Iraq," said Nicholas Heras, a Middle East researcher at the Washington-based Institute for the Study of War.

In Syria, "ISIS is reportedly still involved in smuggling drugs into regime-held areas of Syria, which then get sent onward to Europe," he told VOA.

Heras added that "these activities are trickier for ISIS now than when it controlled a territorial caliphate, so the organization has to run itself more like a cartel network to make money off of these activities."

Kidnapping ransoms

IS militants have also resorted to taking hostages for ransom as another means to fund its insurgency.

Last week, Abbas Khidr Juma, a Kurdish car dealer from northeast Syria, was reportedly kidnapped and killed by suspected IS militants in the southern part of Hasakah province.

Immediately after his death, Abbas' family was contacted by the militants, asking for $100,000 in exchange for his body.

"They spoke to me on WhatsApp and said they are the Islamic State. I did not respond because I was scared, and I threw away the phone. They called me again and said, 'Answer the phone, we will tell you what has happened to Abbas.' I answered the phone and they said if I want Abbas' corpse, I must send them $100,000," Abbas' wife, Jiyan, told Kurdish news network Rudaw this week.

In November 2020, Dilan Mofaq Rashid, 23, a security guard in the province of Kirkuk, was guarding electricity pylons in the oil-rich province when IS militants raided his observation post at night to arrest him along with his 22-year-old colleague.

Though the two men were working for the government, IS's objective was not to kill them. It was to take them alive and release them after receiving tens of thousands of dollars in ransom from their families.

"They took us to a cave blindfolded and handcuffed. They would sometimes flog us. They would tell us it was not up to them whether we would get killed or released," Rashid told VOA in a recent interview after he was released in exchange for $40,000.

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To eradicate IS financial networks, experts suggest that the global coalition against IS and its local partners in Syria and Iraq should deal with the group as if it were more like a mafia organization.

"ISIS's reserves of cash are in hard currency and in goods that retain value, such as gold items, all of which are very difficult to interdict," analyst Heras said. "ISIS does not have assets in a bank account that could be frozen or a stock portfolio that could be seized." (VOA)