ONE OF my earliest lessons as a young financial journalist was to follow the money. The best way of understanding any scandal, financial, political or diplomatic, was to trace back the sources of funds often hidden in a maze of companies with nondescript headquarters ranging from Liechtenstein (the late Robert Maxwell’s favourite) to Bermuda, where Apple keeps its cash reserves.

Islamic State is best known to most as a brutalist terrorist regime that has brought havoc to Syria and northern Iraq, which engages in medieval beheadings and has spread the shadow of terror to North Africa. It’s now on Israel’s doorstep in Sinai, where it is engaged with Egyptian security forces.

There is one important point of difference with other terrorist organisations – the sophistication of the financial arrangements. ISIS has published annual reports each year since 2012. These outline the numerical and geographical spread of its operations in detail as if it were a multinational firm.

There are details of its finances as well as its accomplishments – numbers of bombings, assassinations, checkpoints, suicide missions, cities taken over and numbers of apostates to its cause.

On its ‘investments’ page, it highlights the numbers of automatic weapons, anti-aircraft guns and other military hardware it has acquired.

This granular and public approach to terror networks ought to make it an easier target for Western intelligence. In particular, it should make it simpler for the Western authorities, armed with money laundering and sanctions laws, to clamp down on its activities. If financial sanctions brought Iran to the table and have assisted in moderating some of the Ayatollahs’ policies, then the far smaller and less sophisticated ISIS should be much easier to tame.

Remarkably, however, ISIS has built a financial terror network that looks to exist outside of conventional banking. It is reckoned to be the richest terror group in the world, sitting on reserves of up to $700 million with a network of entities through which millions of dollars pass each week. At the core of this system are money exchange offices, which are generally beyond the reach of regulators.

Seasoned travellers tend to think of such places as an easy place to pick up local currencies with lower commissions and less paperwork than banks. But they can be much more than that. One such money exchange office run by Iraqi businessman Abu Omar, interviewed by the Wall Street Journal, reveals how his operation works: “I don’t ask questions,” Omar is quoted as saying. He moves money through a series of offices in Mosul, Sulimaniyah, Erbil and Hit and charges as much as 10 percent for its services. These money changers, part of an established Iraqi merchant class, move millions of dollars in and out of territory controlled by Islamic State, dodging the systems put in place by the West to starve terror states and groups of finance.

Global banks, such as HSBC and Standard Chartered, have hired compliance officers who sift through millions of accounts and close down those with potential Islamic connections. All that seems to do is create a parallel or shadow banking system that is harder for Western enforcement and intelligence agencies to track.

ISIS may appear to be governed by religion and politics but, when it comes to money, it is incredibly sophisticated. US authorities charged with countering terrorist finance reckon there are more than 1,600 money exchange operations moving finance around the region. They operate through correspondent offices in Amman, Jordan, Fallujah and Baghdad. US agencies are working with allies in the region to stem the flows of cash, but are finding it hugely difficult.

Its first move when taking over new territory is to loot the banks of cash. But it also earns income from the oil wells in the territory it controls. US airstrikes are aimed at economic targets, such as the oil wells, and the cash it keeps to pay its fighters and to tempt foreign fighters, many from Tunisia, to the region.

Iraq is working with the US in seeking to cut off the supply of dollars. The Central Bank of Iraq has named 142 currency exchange firms suspected of moving funds for ISIS and banned them from participating in fortnightly auctions in the hope of keeping dollars out of terrorist hands. It is an uphill fight and cutting of the sources of funds to a flexible and canny terror organisation like ISIS is much harder than outlawing a state with fixed territories.

Israel cannot look upon this with any equanimity. ISIS is seeking to build a bridgehead in Gaza bringing it into conflict with Hamas. Arguably the internal strife could distract Hamas from rocket attacks on Israel.

But the last thing Jerusalem needs is a malicious, well-funded new enemy on its borders.