This article examines the multitude of legal issues – both criminal and civil – that Shariah-compliant finance (SCF) presents to U.S. financial institutions and their professional advisers. In short, SCF is the practice of investing in conformity with Islamic law (Shariah). Such investment appears at first glance innocuous. With only a modicum of probing, however, SCF turns out to be a black box, where the financial industry and their legal professionals have hidden a doctrine at war with the West and have ignored the dangers and risks posed by Shariah authorities who determine the rules and principles of this industry.
While SCF is marketed as primarily the avoidance of transactions involving interest and also includes a prohibition on investing in vice industries, this appearance ignores the reality of Shariah as determined by the contemporary and authoritative historical Shariah scholars. With a modicum of due diligence, one learns that the SCF black box fails to disclose the fact that leading Shariah authorities have issued authoritative Shariah legal rulings calling for violent Jihad against the non-Muslim world. As such, SCF presents U.S. investors and legal advisers with considerable risk under securities, anti-terrorism, antitrust, and racketeering laws.
To this point, the civil liability and criminal exposure surrounding SCF have been ignored by legal academia. Although some scholars have broached the topic of SCF, these scholars have merely trumpeted the practice’s virtues without questioning its legality. In an area that begs for vigorous analysis, only those with a vested interest in the success of SCF has been presented in the legal literature. This article, by identifying both professional responsibility and substantive legal issues inherent in SCF, seeks to fill in the current gap and instigate a much needed critical examination among practitioners, scholars, and policymakers.
This article is truly the first of its kind. Given academia’s failure to challenge Shariah – compliant finance or even engage in serious debate about its feasibility in the U.S. legal system, the article is certain to provoke strong responses from both proponents and detractors of the SCF industry.