The Islamic State (Isis) are attempting to sell the body of beheading victim James Foley for $1m (£638,000) to raise funds for their terrorist organisation, according to reports.

The group are said to be coming up with new ways to raise money following a series of failed hostage negotiations and are now hoping to sell the murdered journalist's body back to his family.

The group are willing to provide a DNA test to prove the body is Foley's before taking it across the border into Turkey once the ransom is paid, reported Buzzfeed News.

Foley was the first US citizen to be beheaded by IS on video, a move which was widely condemned as a "shocking and depraved" act. The 40-year-old journalist was taken hostage while reporting in Syria in November 2012.

Three middlemen with ties to IS – a former Syrian rebel fighter, a businessman, and an official for the Free Syrian Army (FSA) – said the group believe the act of handing over the body is a "humanity case" to help give the family closure.

The former rebel said: "They ask for $1m, and they will send DNA to Turkey, but they want the money first. They will not give the DNA without the money."

The other two sources are said to have backed up the $1m figure.

It was previously reported that IS demanded a $132m ransom for Foley while he was still alive, which the US government refused to pay as they were not willing to negotiate with the terrorist group.

The FSA official notes the issues raised if the US now purchase Foley's body after allegedly threatening his parents with prosecution if they paid the ransom themselves.

"It will be like a shame for the US government," the official said. "People will ask why you brought the body but you didn't bring him when he was alive."

Foley's family have not commented on the claims and the US State Department said they are "seeking more information".

According to the New York Times report by Rukmini Callimachi, hostage negotiations and ransom payments has earned al-Qaida and its affiliates more than $125m over a five-year period.

"Although every country in the world says they don't pay, the reality is that, in fact, it's really only the British government, the US government, the Canadians, and a few small European governments that don't pay," wrote Callimachi.