The State Department interpretation of 'al Sham' is Levant, hence the 'L'. Other agencies translate it as Syria because Levant doesn't incorporate the full area. But there's no one-to-one Western name for the region indicated by the Arabic word.

The whole Daesh meme is amusingly naive; it's like calling "NATO" as "OTAN" ( its French abbreviation ) and claiming that it annoys the British. Really, they have better things about which to concern themselves than the actually accurate abbreviation some distant foreigners have adopted for them.