Islamic State in Afghanistan has become the strongest branch of the militant group outside of Iraq and Syria, according to U.S. officials, posing a persistent threat despite a U.S.-led offensive and the killing in October of leader Abu Bakr al-Baghdadi.

The branch has received a stream of funding from Islamic State in Iraq and Syria, a sign of the group’s importance to its leadership. The group, known as ISIS-Khorasan and infamous for its violent attacks on civilians, has as many as 2,000 fighters and seeks to target the West,…

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