Taxes and penalties issued by the Islamic State in the Middle East territories it controls show the group's finances are dwindling, analysis finds.

A report emailed from analysis group IHS finds revenue from taxes enforced by the Islamic State militant group are down 23 percent, forcing it to enact tighter policies and pursue steeper penalties of violations like possessing alcohol.

"In the past six months, the Islamic State has introduced a range of new taxes and fines as a means of generating additional revenue from the population to compensate for the loss of oil revenue and from its shrinking territory," Ludovico Carlino, a senior analyst with HIS, said in statement.

More than two years ago, David S. Cohen, undersecretary for terrorism and financial intelligence at the Department of the Treasury, said financial pressure could diminish the Islamic State's operational capacity in the region.

The terrorist group is said to generate anywhere between several hundred thousand dollars to as much as $2 billion in illicit oil trade. The Islamic State, known also as Daesh, ISIS or ISIL, which once controlled large parts of Iraq and Syria, generates revenue by selling oil on the black market at a deep discount.

IHS estimates the territory controlled by the group is down about 22 percent since March as regional and international efforts gain traction. The U.S. Defense Department is working on a strategy dubbed Operation Tidal Wave II, which has focused specifically on supply lines tied to the illicit movement of oil said to be financing regional terrorism operations.

In an April address at the CIA, President Barack Obama said strikes against Islamic State oil wells, refineries and supply lines were disrupting the group's ability to finance its move to gain influence over the region.

Last week, Iraqi and coalition forces started an offensive on the restive western city of Fallujah in order to recapture it from Islamic State control. Iraq called on international oil companies from BP to Exxon Mobil to cut their investment plans for the country in order to clear debt. This has a spillover effect, however, as it reduces oil-generated revenue in the Iraqi budget, which in turn starves the country of the funds needed to support military operations.