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Extorting ransoms has become a cash cow for ISIS

The city of Raqqa, Syria, is where ISIS is believed to be holding around 12 foreign hostages
ISIS and their business of extortion 02:31

The disclosure that ISIS terrorists had demanded more than a $100 million in ransom for journalist James Foley shocked many in America, but extortion and ransom has become a growth industry.

On Turkey's border with Syria you can see towns controlled by ISIS, an acronym for the extremist group known as the Islamic State of Iraq and Syria.

ISIS militants have built up a lucrative trade in negotiating steep ransoms for hostages. CBS News

Just 50 miles away is the Syrian city of Raqqa, the capital of what ISIS calls its own Islamic state, where it's believed to be holding around 12 foreign hostages.

Negotiating their release is a lucrative trade for the militants.

Will President Obama expand U.S. fight against ISIS? 01:17

It's thought the French and Spanish governments paid several million dollars for the freedom of six European journalists earlier this year - though they officially denied it.

In contrast, American journalist Foley was brutally executed after ISIS demanded $132 million for his release.

The U.S. government says it won't pay ransom money to terrorists. It instead made a failed attempt to rescue Foley earlier this summer.

Gary Noesner, the FBI's former chief hostage negotiator, told CBS News that European governments may be encouraging ISIS with large cash payments.

"They're getting money for their despicable, terrible acts and the conclusion is going to be, 'Let's kidnap more people and get more money,'" he said.

U.S. refocuses on homeland threat posed by ISIS 02:30

Foley's friends and family were attempting to raise $5 million as a counter offer for his release. But if they had handed over the money, they would have been breaking a U.S. law that prohibits the material support of terrorists.

Noesner believes the U.S. position is too inflexible.

"It's not a one-size-fits-all. And saying we won't negotiate does little to help resolve the situation, and it does even less to prevent Americans or others from being grabbed," he said.

Noesner said prisoner swaps or payments in humanitarian aid - rather than in cash or weapons - can sometimes be effective.

But he also said that ISIS appears to be barbaric and not always rational, which may make any negotiation extremely difficult.

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