Tag Archives: Shariah Compliant Finance

Obama, zakat and Islamic charities

For instance, in the United States, rules on charitable giving have made it harder for Muslims to fulfill their religious obligation. That is why I am committed to working with American Muslims to ensure that they can fulfill zakat. –President Obama in Cairo

We’re still shaking our heads in disgust over Obama’s pledge to ease the scrutiny on zakat payments to Islamic charities in the speech he delivered in Cairo. For readers who don’t know, zakat is one of the fiver pillars of Islam and it is a required tithing from all faithful Muslims who are able to donate. Charities are declared zakat-eligible by Shariah scholars, many of whom, by the way, are flat-out jihadists.

And there’s the problem. zakat payments have very often gone to charities that support terrorist organizations. Very often.

Though we’re not absolutely certain what the exact motivation for this move by Obama is, we have a few ideas:

1. The most likely reason for this announcement and pending change in policy is that the Sauds complained loud and long. You see, even though many pointed out that the Bush family had too many close ties to these monsters, on Bush’s watch the Justice department did actually manage to finger two of Saudi Arabia’s largest charities for sending money to terrorist groups. One of these was the Union of Good, operated out of Saudi Arabia by none other than Sheikh Qaradawi, who is of course banned from entering the US and the UK due to his longstanding, close ties to terrorist organizations. This is the same character who referred to Shariah-Compliant Finance as "Jihad with money" in a 2006 interview with the BBC…(at least the guy was honest we suppose.).

The Union of Good is sort of like an Islamic United Way, an umbrella group for-count ‘em-53 charities. In fact, when you add up all these Union of Good charities with other charities identified as terrorist entities, by our most recent count, you come up with 80 Islamic charities tied to terrorism.

In other words, these aren’t isolated incidents or cases of mistaken identity or simple errors.

The Sauds have been caught red-handed and they don’t like losing face. So, they have taken advantage of Obama’s shameless obsequiousness and pressured him into easing up on them.

No doubt, that pressure was accompanied by the usual meaningless assurances not to support "terrorism," without, of course, actually defining what "terrorism" means.

2. It is also possible that Obama and his handlers don’t actually realize what zakat really is and how it works and they are just responding to requests from Muslim Brotherhood organizations in the US, such as CAIR and ISNA, which are getting pinched by the scrutiny of Islamic charities. (Ironically, Obama wants to take away the charitable deductions for Americans who give the most, but given the zakat requirements set out to faithful Muslims in Shariah, that scheme won’t have as great of an impact on Islamic charities as it does on other charities. Hmmm…)

3. The third possibility is that Obama and his handlers know what zakat is and still want to go ahead with reducing scrutiny of the Islamic charities. This possibility, of course, is not mutually exclusive of number 1 above.  It is a little hard to believe that anyone could be completely ignorant of zakat and the role Islamic charities play in funding terrorism in making such an announcement in such an important policy speech. Heck, just two weeks ago, The Wall Street Journal published an article about how the Taliban continue to receive financial support from Muslims around the world through Islamic charities!

We won’t speculate about Obama’s motivation here, but relying on assurances from "the Muslim world" not to support terrorism is bad policy because Shariah mandates that Muslims donate zakat to charities and it also mandates that a portion of those zakat donations go to Jihad.

Under Shariah law there are several approved destinations for zakat.

The most authoritative source for such information is a book which is available on Amazon called The Reliance of the Traveler, A Classic Manual of Islamic Sacred Law. That book has a section devoted to the rules of zakat, including "The Eight Categories of Recipients." On page 272, section h8.17, one category is labeled:

THOSE FIGHTING FOR ALLAH

The seventh category is those fighting for Allah, meaning people engaged in Islamic military operations for whom no salary has been allotted in the army roster (O: but who are volunteers for jihad without remuneration). They are given enough to suffice them for the operation, even if affluent; of weapons, mounts, clothing, and expenses (O: for the duration of the journey, round trip, and the time they spend there, even if prolonged. Though nothing has been mentioned here of the expense involved in supporting such people’s families during this period, it seems clear that they should also be given it).

This passage, from this widely-used Shariah text seems to have been written expressly about zakat payments to charities which have funded Al Qaeda, HAMAS, Hezbollah and the Taliban. Note from the passage that such payments are meant specifically for irregular forces who are not part of any army roster, which describes terrorist/guerilla/insurgent groups exactly. Note that they are meant for "Islamic" military operations and not secular groups (i.e. HAMAS and not the Popular Front for the Liberation of Palestine-General Command). Note that such payments are made even if the recipient is affluent…like Osama Bin Laden. And, finally, the families of fighters are to be taken care of, such as payments by Saddam Hussein and Saudi princes to families of Islamikaze bombers in Gaza and the West Bank.

All too often, the destinations of zakat payments are to Jihadists, simply because Shariah mandates it.  

That is the reason the federal law enforcement and intelligence authorities in the US have scrutinized Islamic charities to such a degree. And it is irresponsible of the Obama administration to intervene. This is in fact how our enemies are being funded.

 

Originally posted at ShariaFinanceWatch.

Shariah-Compliant Finance: Benign or belligerent?

As Shariah-compliant finance continues apace, professionals and policy specialists continue to ignore a fundamental danger: the lack of disclosure of all the material facts relevant to a post-9/11 investor. This presentation is intended as an in-depth analysis of this critical failure in the current regulatory framework.

The Law Offices of David Yerushalmi, P.C., has prepared this online presentation to assist legal professionals, policy specialists, SEC regulators, Treasury officials, and investors to understand that the Black Box of Shariah compliant finance (SCF) presents a real and present danger not just to our Western financial institutions built on disclosure and transparency, but to our very system of governance and our way of life.

This presentation is entitled Shariah-compliant Finance: Benign? or Belligerent? It is timely and important for two reasons: first, the interest and investment in Shariah-compliant finance in the West continues to grow, and second, the fragile state of our financial system of late is due to the catastrophic impact of toxic financial products designed as highly sophisticated black box solutions to undisclosed market risk.

The same black box phenomenon now permeates Shariah-compliant finance. Unfortunately, heretofore, none of the professional literature has examined the risks and problems associated with Shariah-compliant finance in any analytical or critical fashion. Instead, it appears more akin to a cheerleader chorus line singing the praises of this year’s new and improved profit center, much as we heard about sub-prime mortgage securitizations and credit default swaps in their heyday. This presentation is an effort to pry open this new and emerging Black Box.

This presentation is 60 minutes in length and has been organized to be accompanied by source materials available as downloadable PDF files linked below.

First, for lawyers and other professionals interested in an in-depth legal analysis of the risks and legal exposure financial institutions confront when they offer Shariah-compliant finance products, you can download a law review article authored by Mr. Yerushalmi entitled, “Shariah’s ‘Black Box’: Civil Liability and Criminal Exposure Surrounding Shariah-Compliant Finance, published in the Utah Law Review, Vol 2008, No. 3.

Second, we have linked to a PDF file of a monograph sponsored by the McCormick Foundation and the Center for Security Policy which delves into these matters in more detail as well.

Third, there are three separate handouts also linked as PDF files to which this presentation refers at specific points.

Finally, the presentation includes audio with a valuable narrative to explain the material presented both online and in the attached PDF files. This narrative has been transcribed and is also available for download as a PDF file.

This presentation is currently being prepared for Continuing Legal Education credits. If you are interested in an in-person presentation, conference or seminar, please contact Mr. Yerushalmi’s staff at www.davidyerushalmilaw.com.

 

Experts Comment on the Presentation

Frank J. Gaffney, Jr., former Assistant Secretary of Defense for International Security Policy in the Reagan administration, and president of the Center for Security Policy, a leading national security think tank in Washington, D.C., writes:

David Yerushalmi brings to his every assignment an extraordinarily in-depth command of the subject matter, a passion for its illumination and an articulateness that enables even knowledgeable audiences to learn new insights and attain an enhanced mastery of the topic.  These qualities are on marvelous display in his new CLE course on Shariah-Compliant Finance.

Stephen C. Coughlin, an attorney, holds the rank of Major in the United States Army (res.), and was formerly assigned to USCENTCOM, with a military intelligence specialty. Maj. Coughlin also served in a strategic communications role in CENTCOM-Doha. His U.S. assignments have included attachment to the Pentagon’s National Military Joint Intelligence Center, the National Security Council’s Interagency Perception Management Threat Panel, and culminating in his assignment to the intelligence staff of the Joint Chiefs of Staff. He comments:

Mr. Yerushalmi’s analysis of Shari’a compliant finance (SCF) so clearly demonstrates its nexus to both Islamic law and hostile jihadi entities as to raise the question whether promotion or analysis of SCF without reference to this information constitutes malpractice. Simply a must for any person looking to enter the black box world of SCF.

Andrew C. McCarthy, a former senior U.S. Attorney for the Southern District of New York, was the lead trial attorney in the successful prosecution of the “Blind Sheikh” in the first terror attack on the World Trade Center in 1993, he also contributed to the prosecutions of Islamic terrorists who bombed the U.S. embassies in Kenya and Tanzania. He currently is a senior fellow at the Foundation for the Defense of Democracies and contributes to many prestigious publications on the intersection between law and the global jihad threat. He remarks:

David Yerushalmi is one of this country’s hidden treasures.  One of our most insightful and intellectually engaged critics of Islamic jurisprudence, he has become a singular authority on the burgeoning—and portentous—field of shariah compliant finance.  The CLE course he has designed on the subject will not only enrich students but fill in a critical deficit in our thinking about American national security … and the Trojan horses that threaten it.

Robert Spencer, director of Jihad Watch and author of the “New York Times Best Sellers” The Politically Incorrect Guide to Islam (and the Crusades) and The Truth About Muhammad, notes:

An extraordinarily illuminating and much-needed explanation of just what is wrong with Shariah-compliant finance, showing why financial institutions in the U.S. and elsewhere in the West are working against their own best interests when they institute Shariah-compliant programs. This should be required viewing on Wall Street.

 

 

Linked presentation materials

 

Instructions

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Shariah-Compliant Hotels (with zakat payments to Islamic charities and EEOC violations)

The hospitality industry has generally been haram under Shariah-Compliant Finance, but that is changing. Now we’re seeing a movement to expand Shariah-Compliant hotels into the West.

A close examination of the mechanisms and practices surrounding Shariah-Compliant hotels illustrates just exactly why the the barbaric Shariah code is almost completely incompatible with Western values and laws. In fact that entire system of Shariah-Compliant hotels is a microcosm of this problem, as illustrated by this organizational chart which maps out how one goes about making a hotel Shariah-Compliant:

 

(Click image to enlarge.)

 

The first thing that stands out about the organizational chart is that it reveals the similarities between Shariah-Compliance and the Jim Crow laws of the American south in the first 60 years or so of the 20th century and the South African apartheid regime as well.

No accommodations whatsoever are made for non-Muslims in this organizational chart. These hotels are designed for Muslims and Muslims only. If a non-Muslim wants to stay in a Shariah-Compliant hotel, that’s fine, but he or she will have to observe the Shariah rules and abide by them during their stay.

The organizational chart is divided into three sections:

  1. Operations
  2. Design & Interiors
  3. Financial

Hotel operations start, of course, with a complete prohibition of alcohol. This in and of itself is not terribly unusual. There are, after all, entire counties in parts of America which are still “dry.” But Shariah-Compliance also dictates that food be “halal,” or in compliance with Shariah. Non-Muslims in the hotels have no recourse or alternative. They must abide by Shariah if they want to stay in the hotel.

Still, dietary restrictions are not that unusual or unique to Islam. Catholics don’t eat meat on Fridays during Lent and Kosher Jewish diets have been accepted in America for a long time. Still, as a Catholic, if I go to lunch on a Friday during Lent with a buddy who is Southern Baptist, I don’t insist that he not order a roast beef po-boy. And, as far as I know,  hotels owned by Catholics don’t completely delete meat from the menu at such times. (Maybe I am wrong about this; I invite your reply if I am.)

Continuing along the organizational chart, we come to the requirement that states “Majority of staff of Muslim faith.”

This obviously is discriminatory and illustrates the built-in bigotry native to Shariah. There is just no way that this provision could ever pass EEOC (Equal Employment Opportunity Commission) regulations in the United States–unless of course an appeasing, sympathetic presidential administration chose to look the other way, which is not impossible. 

This raises some serious questions about Shariah-Compliance for other business enterprises. If Shariah-Compliant hotels require that a majority of the staff be Muslim, are there similar requirements for other businesses to be Shariah-Compliant? Just because we have not run across this requirement before does not mean that it does not exist, even “below radar.” The promoters of Shariah aren’t stupid. They could certainly require such a policy in the US without stating it specifically, so as to avoid scrutiny. After all, didn’t Mohammed say that war is dissimulation? 

We already know that there is a great lack of transparency and disclosure inherent in Shariah-Compliant Finance. It would not be surprising at all if discriminatory practices were shrouded inside Shariah-Compliance.

One thing seems certain. Given the track record of Jihadi Shariah scholars like Sheikh Yusuf al-Qaradawi and Mufti Mohammed Taqi Usmani, it is highly unlikely that Shariah scholars will waive the requirement for majority Muslim staffs just because there are man-made laws which prohibit employment discrimination based upon religion…

Analyzing the organizational chart further, we come to the requirement that the hotel staff for floors for single female guests be female and the staff for floors with single male guests be male. I am not an attorney, but that sure quacks like an employment discrimination duck. After all, if our courts insist that female reporters be allowed inside locker rooms after NFL football games, I don’t see how the Shariah-Compliant policy is going to hold up!

Then we come to the requirement for a “Conservative television service.” I have a hunch they aren’t talking about Fox News. All the same, it certainly does not appear to be anything in violation of any laws or afoul of Western customs.

The TV requirement is followed by the requirement for prayer mats and Korans in each room. Nothing wrong here I suppose. After all, most hotels I stay in these days have both a Bible and a Book of Mormon in the drawer between the beds. But I do wonder how Shariah-Compliance treats non-Muslims in this case. During Muslim prayer time, what are non-Muslims allowed to do? And what if a non-Muslim wants to bring a Bible into the hotel? How is that viewed? What would the reaction be if a Catholic at the hotel makes a sign of the Cross when he or she sits down to eat?

Next we move to the Design & Interiors requirements for Shariah-Compliance.

It all starts with gender apartheid. Of the 7 requirements for Shariah-Compliance relative to Design & Interiors, three are devoted to keeping the sexes separated. These are not merely benign requirements. Like the “separate but equal” policies of Dixie in 20th century America, there is in fact nothing equal about “separate but equal.” The fact is, under Shariah, women are second-class citizens in every way, shape or form. Islamist women may deny it, but it’s the truth, and those who promote Shariah in the West want to see that it stays that way. And non-Muslim women who have the misfortune of finding themselves in such a hotel will soon find that they too are required to obey Shariah.

The remaining items in the Design & Interior sections illustrate the all-encompassing nature of Shariah, with which most in the West, and the USA in particular are not familiar. There must be arrows in the rooms pointing out the direction to Mecca for prayer time. Beds and toilets must not face Mecca. These may seem rather odd to Americans, but these requirements are pretty pedestrian in places like Saudi Arabia.

But the final two clearly demonstrate the all-controlling nature of Shariah: no entertainment venues are permitted at all (Or as Dean Wormser of Animal House said: “No more fun of any kind!”) and art should not depict the human form. This last requirement is especially oppressive because if art that depicts the human form is not allowed to be displayed according to Shariah, then there is simply no reason for it to be created. The Mona Lisa would be completely unwelcome in the lobby of a Shariah-Compliant Motel 6.

Last, but certainly not least, there is the Finance aspect of a Shariah-Compliant hotel. The hotel must be financed through Shariah-Compliant financing mechanisms. 

All of this creates a self-licking ice cream cone. The promoters of Shariah want it to encompass all aspects of life, so each aspect must feed off of the other. If you want to run a Shariah-Compliant hotel, you can do everything right, but if the hotel’s checking account earns interest, you’re out, so you must bank at a Shariah-Compliant bank. (Oh, and if you want paintings on the wall, it’s best to buy them from an artist who is Shariah-observant so you won’t have to guess on that one either…)

At the end, we get to the really sinister aspect of the whole Shariah-Finance movement: “The hotel should follow the zakat principles.” This is euphemistically defined as “giving back to the community.”

Giving back to the community? Guess what? “Giving back to the community” means supporting Jihad. In fact, no fewer than 4 accepted uses of zakat can be interpreted as supporting Jihad. Almost exclusively, zakat payments go to Islamic charities selected by Shariah scholars, like Mufti Taqi Usmani and Sheikh Yusuf al-Qaradawi. In fact, Qaradawi himself heads up a kind of Islamic “United Way” based in Saudi Arabia called the Union of Good. The Union of Good is an umbrella group of 53 charities and it has been designated a terrorist entity by the US government and the British as well. In addition to the 53 charities of the Union of Good, there are an additional 27 Islamic charities which have been tied to terrorist organizations as well.

The fact is, the zakat system funds Jihad as the rule rather than the exception and there is almost no sentiment in the Muslim world to stop, or even curtail, the practice of zakat going to charities that support groups like Al Qaeda, HAMAS and Al Qaeda. The very last requirement of a Shariah-Compliant hotel is that it fund Jihadist terrorism– which is reason enough in itself to stop it.

 

Originally published at Shariah Finance Watch

Shariah-Compliant Finance as a ‘safe haven’?

Promoters of Shariah-Compliant Finance routinely violate the trust of investors when they proclaim that investing according to shariah principles has provided a safe haven from the recent and current financial crisis.

Could any other sector get away with such lies?

The lies emanate from the entire range of shariah practitioners, from individual investors themselves all the way up to sheikhs, muftis, mullahs and heads of state. The entire World Islamic Economic Forum held in Jakarta, Indonesia in March would have made Goebbels blush. 

If you tell a lie long enough and loud enough, it will become the truth, no matter how big the lie. Not surprisingly, Osama Bin Laden’s TV network of choice, Al Jazeera, is in on the scheme:

 

 

A few comments on the Al Jazeera report: First of all, if sticking to “Islamic” standards is really the answer to heading off financial crisis, why have so many Shariah-Compliant banks and financial institutions been clobbered in the current economic and financial crisis?

Second–and this is very important–note that one of the bankers being interviewed in the Al Jazeera video encourages people to disregard the reference to “Islamic” and just think of it as “ethical.” This is a common theme among practitioners of Shariah-Compliant Finance. I attended the Harvard Law School seminar on Shariah-Compliant Finance back in April of 2008 and the possibility of removing all references to “Islam” and “Shariah” was openly discussed at the forum as a means of attracting non-Muslim customers.

In other words, they want to conceal the truth from investors in order to dupe them into investing in something they might not otherwise touch with a ten-foot pole. In some places, this is referred to as fraud.

Then there is the whole issue of “ethical” investing and I will once again point out that, if the world’s largest Shariah-Compliant Bank, Bank Melli, can be under US, EU and Australian sanctions for its activity in funding and facilitating the financing of terrorism and Iran’s weapons programs, what measure of “ethics” are these people using???

Finally, the Al Jazeera video claims that “Islamic finance” has been around since the 7th century. HOGWASH. Complete and utter HOGWASH.

Shariah has been around since the 7th century to be sure, with very little modification, especially in places like Saudi Arabia, Sudan, Iran, the Swat Valley and a few other hellholes, but “Islamic finance” or “Islamic economics” was a decidedly 20th century man-made creation.

The concept of a separate Islamic financial/economic system was first conceived by Maulana Abul Ala Mawdudi. Mawdudi spent his whole life trying to turn Pakistan into an Islamic republic ruled under shariah and he was horrified over the encroachment of Western values and culture into the Islamic world, so he called for a separate and distinct economic and financial system for Muslims to insulate them from the influences of Western wealth.

In other words, Islamic finance was a political invention right from the start, but that start was in the 1940s, not in the 7th century. Furthermore, there is a lot more to know about the father of Shariah-Compliant Finance. Check out this quote from Mawdudi and decide for yourself if you’re comfortable with the tables turning and the Jihadis exporting their ill-conceived economic/financial system over to us:

In the jihad in the way of Allah, active combat is not always the role on the battlefield, nor can everyone fight in the front line. Just for one single battle preparations have often to be made for decades on end and the plans deeply laid, and while only some thousands fight in the front line there are behind them millions engaged in various tasks which, though small themselves, contribute directly to the supreme effort.” Mawdudi further states, “A time will come when Communism will fear for its survival in Moscow, Capitalistic democracy will tremble for its safety in Washington and New York.” “The objective of Islamic Jihad is to put an end to the dominance of the un-Islamic systems of government and replace them with Islamic rule, Islam intends to bring about this revolution not in one country or in a few countries but in the entire world.

Perhaps when Al Jazeera referred to the 7th century, they were referring only to the prohibition of interest. The problem with that is, that isn’t true either. There was a great deal of controversy in the Islamic world on this issue as recently as the 1980s, with some prominent Islamic scholars claiming that there was in fact no complete prohibition of interest, only a prohibition of usury, or excessive, unfair interest.

It’s all a straw man argument anyway, because these so-called “interest-free” loans that Islamic banks are hawking are nothing more than convoluted constructs designed to replicate prevailing interest rates anyway. Heck, folks who take out “Islamic mortgages” have no problem taking the interest deduction off of their income taxes…

To summarize the video, it is simply a propaganda piece designed to do “missionary work,” which is the purpose of Islamic banking and the true mission of Al Jazeera in the first place.

But we must still address the idea that Shariah-Compliant Finance has offered a safe haven.

Here’s a typical example of misleading reporting from the financial press, which has clearly been lubricated into becoming cheerleaders for Shariah-Compliant Finance. It comes to us from the Financial Times.

Note that the whole FT article headline is dedicated to “Islamic” investors and how they are weathering the downturn. Why is FT singling out Islam? The article points out that the Islamic indexes were down sharply in the 4th quarter of 2008 and then down again in the 1st quarter of 2009.

Why was Islamic finance singled out for mythical positive performance in view of this passage from the article:

According to S&P, over the quarter, 15 markets posted positive returns, including Norway with 6.9 per cent, Brazil with 18.6 per cent, Russia with 9.2 per cent and Taiwan with 13.2 per cent.

It seems to me that the big story here is the fact that Brazil’s stock market is going gangbusters! And I have a feeling that Brazil’s excellent performance wasn’t due to adherence to Shariah…

It gets worse:

Here is a prime example. Here we have an article which perpetuates the myth that shariah-compliance provides a safe haven and then loudly proclaims that the current crisis is just the opportunity to spread shariah-compliance to new markets. That is their agenda and they will bend and break the rules to do so.

Now back to a healthy dose of reality. Are all these shariah-compliant financial institutions and products really performing as these press reports claim?

No.

Take the Iman Fund, one of the largest and most publicized shariah-compliant mutual funds in the United States. Since its inception in 2000, its average annual return is -7.00%, as of 31 March 2009. As a comparison, the S&P 500 Index benchmark, a non-shariah compliant index of shares, is down 4.93% on an annualized basis over the same time period.

In other words, the Iman Fund has underperformed the market for nearly 9 years. Adherence to shariah principles hasn’t helped a bit.

We get a similar picture when we analyze the Iman Fund’s performance over a one-year period.

For a one-year period ending on 31 March 2009, the Iman Fund has turned in a loss. It is down -39.35%. Compare that to the S&P 500, which is down -38.09% for the same period.

Again, adherence to shariah has not helped performance at all.

Each day, one can go to the internet and find examples of shariah-compliant financial institutions which are struggling in the current economic crisis:

Like Qatar Islamic Insurance Company, which posted a net loss of 56% in the recent quarter and saw its investment portfolio’s profits drop 67% as well.

Then there is Bahrain Islamic Bank, which recently saw its quarterly profit drop 40% year over year. This comes after a 9.78 million Bahraini Dinar loss in the 4th quarter.

The idea that shariah-compliance provides a safe haven is a myth and the fact that the industry keeps making that claim in the face of reality is simply more proof that they cannot be trusted.

 

Originally posted at Shariah Finance Watch blog.

Shariah bankers: West ready for ‘faith-based alternative’

Backers of Shariah-compliant finance see an opportunity for expansion amid the global economic downturn, and some Western banks are welcoming this growing source of new business.

"Islamic bankers should do some missionary work in the Western world to promote the concept of Shariah banking, for which many in the West are more than ready now," Indonesian President Susilo Bambang Yudhoyono said at the World Islamic Economic Forum last month in Jakarta.

Such statements have given rise to fears that Shariah finance is a stalking horse for hidden political or religious aims. Shariah finance is an extension of Islamic law, pushing a faith-based alternative to Western banking.

Key Islamists who advise Shariah financial houses have called for full Shariah law to be adopted in Western countries and, in some cases, have made statements supporting terrorist groups.

Shariah finance means institutions and norms that fit with Islamic law. Fully compliant Islamic financial institutions are prohibited from interest payments and require transactions to be backed by tangible assets.

Speculation and hedge funds are off limits — ditto for anything connected to porn, gambling, alcohol or pork. Shariah finance targets Muslims who want to avoid what are deemed "un-Islamic" Western banks or financial practices, and appeals to clients’ faith as well as their bottom line.

The practice has its detractors.

"A shift from present global economic practices [in which many Muslims participate] to Shariah-based practice" would mean "an unacceptable intrusion into Western culture," said Stephen Schwartz, executive director of the Center for Islamic Pluralism.

Mr. Schwartz said the sector is arguably un-Islamic by contradicting the traditional Islamic teaching that "Muslims living in non-Muslim societies must accept the laws and customs of the countries to which they immigrate."

Depending on the measurements used, the Shariah finance sector manages assets of $700 billion to $800 billion, according to the Islamic Financial Services Board, an industry body. Standard and Poor’s estimates that the sector could reach $4 trillion before long.

Shariah banks make up a small fraction of the global banking sector, and they may have suffered less than Western counterparts by being sheltered from the subprime crisis.

However, as Duncan McKenzie, director of economics at International Financial Services London (IFSL), told The Washington Times: "Islamic finance is one model but is by no means a panacea. The Islamic finance industry faces a number of challenges, including the need to standardize interpretation of Shariah law, harmonize tax and regulation of the industry, and develop the skills base."

Christopher Holton, vice president of the Center for Security Policy and director of its Shariah Risk Due Diligence Project, told The Times: "It is a myth that Islamic finance has provided a hedge against crisis. The FTSE Islamic Index has fallen 41 percent, and the all-world index 44 percent, similar losses over the past six months."

Shariah finance remains dominated by banking, but the sector is diversifying. A growing proportion — up to 20 percent according to some estimates — is taken up by sukuk, which is a Shariah-compliant bond issuance. Malaysia is a dominant base for this particular service. Bonds can play a key role in helping countries deal with the global economic crisis, but the global sukuk market has fallen for two years in a row, in step with the global downturn.

Despite the varying prohibitions, some Shariah banks find creative ways to make the equivalent of market interest rates by other means, such as by pegging debtor repayment rates to his or her future profits, or when a bank offers a "hibah," or gift to those who open an account — in essence a way of attracting new customers in lieu of interest accruals on savings.

Shariah finance likely will grow in coming years, with Saudi Arabia and the United Arab Emirates being followed by Indonesia, Turkey, Singapore and some Western countries as viable locations for expansion.

The IFSL recently published a detailed report on the sector highlighting how "the U.K. is getting ahead of the game, in Europe at least, in facilitating this sector" — as noted by Emile Abu-Shakra, media relations manager at British bank Lloyds TSB.

Lloyds stole a march on the competition by greasing the wheels for Shariah-compliant bank-to-bank transactions, and now Britain has a bigger Shariah finance sector than Egypt or Pakistan.

In total, 22 financial institutions offer Shariah-compliant services in Britain, compared with nine in the United States. However the American financial sector is eager to source and provide new products — among them Shariah finance.

American International Group Inc.’s December pledge to bring Islamic home insurance to the United States was met with a written rebuke by Rep. Sue Myrick, North Carolina Republican, and Rep. Frank R. Wolf, Virginia Republican, who warned that opaque charitable transfers made by Shariah finance advisers could end up funding terrorists.

Mr. Holton said some Islamic financial institutions have been implicated directly in bankrolling terrorists. "From 1988 to 2001, when it was designated a terrorist entity by the United States and the United Nations, Bank al Taqwa [registered in the Bahamas] transferred tens of millions of dollars to Hamas, al Qaeda, the Taliban, and others," he said.

An elite cadre of scholars dominates the advisory boards of Shariah institutions, and these same thinkers are often called by Western institutions who want to develop Shariah-compliant products. However some, such as Sheik Yusuf al-Qaradawi, are banned from entry into Britain and the United States for making statements supporting Islamist terrorism, while another, Mufti Taqi Usmani, who has advised the Wall Street Islamic index, has promoted extension of full Shariah law into Western countries.

Most troubling, perhaps, is the appearance of Bank Melli of Iran at the top of a listing of the world’s top 500 Islamic financial institutions, published by the Banker in November 2008 and reproduced in the IFSC report. Bank Melli is under U.S. and EU sanctions for facilitating Tehran’s support of Hamas and Hezbollah and funding Iran’s uranium enrichment program. In total, Iran has six of the 10 biggest Shariah-compliant institutions and double the Shariah assets of any other country.

 

Originally published in The Washington Times

 

Baloney from the Bee

All too frequently, an article will appear in the news media extolling the virtues of “Islamic” finance as a way to protect wealth from the ravages of the current financial crisis. When we first came across a recent article in the Sacramento Bee, we figured that we had another case of this and were prepared to make a rather pedestrian posting about how Shariah-Compliant Finance has not in fact been the safe haven that some of its promoters maintain. 

But as we dug deeper into the article, the more we realized that it contained clues to a much larger puzzle.

That’s largely because of the complete lack of curiosity on the part of the reporters and editors at the Bee. This is unfortunately rather typical. So many of the articles on “Islamic” finance amount to fluff pieces which seem like nothing but regurgitations of marketing brochures and public relations press releases.

What makes the situation regarding this particular article so aggravating is the fact that just drilling down slightly raises all sorts of questions, yet the Bee didn’t bother.

The article starts off by assuming that Shariah-Compliant Finance has provided some sort of “shield” against the economic downturn. There is just a world of information out there to refute that, as we have documented on SFW:

• Qatar has had to bail out its banking system, which is almost entirely Shariah-Compliant.

• The UAE and Iran have both had to float conventional bonds to raise money.

• Stock markets throughout the Islamic world–Qatar, UAE, Saudi Arabia, Egypt to name a few–were all down sharply in February.

• Issues of “sukuk,” or Islamic bonds, were down 37% in Q1 2009 as compared to Q1 2008.

The Bee article mentions that Shariah-Compliant Finance prohibits investments in companies in the “weapons” business. This is a stark example of a lack of curiosity on the part of the journalists. That prohibition does not apply to companies that contribute to the “defense of Islam,” as I myself heard at the Harvard Law School celebration of “Islamic finance” in April of 2008. Need an example?

How about Bank Melli of Iran, which we have written about extensively on SFW. Bank Melli is the world’s largest Shariah-Compliant Financial institution. Bank Melli has also been sanctioned by the US, the EU and Australia for its finance operations in support of Iran’s ballistic missile program and support of terrorism.

This information is not hard to find. You actually have to try not to check out some of the claims associated with Shariah-Compliant Finance.

One of the Muslims interviewed in the article explains that his investments in the Shariah-Compliant Amana mutual funds have performed much better than non-Shariah-compliant investments.

The Amana funds have indeed performed extremely well, but not due to their adherence to Shariah. They are down 23% and 29% respectively over the past year

The Dow Jones Islamic Index is down over 33% for the year, as compared to 36% for the Dow Jones Industrial Average; not a lot of difference.

But it is notable that the Shariah-Compliant Iman Fund is down over 40% over the past year, thus it has fared worse than the S&P 500 and the Dow-Jones Industrial Average.

Again, Shariah-Compliant Finance has provided NO safe haven from the financial crisis.

But the story of the Amana Mutual Funds only begins with their performance. There is MUCH more to be curious about when it comes to these funds.

First of all, the Amana Mutual Funds web site has an extensive section on zakah, which is usually referred to as zakat. Zakat is a form of tithing in Islam in which pious Muslims are required to donate a portion of their wealth to the needy, most often these days through Islamic charities.

Here at SFW, we have documented the activities of the dozens of Islamic charities that have been discovered to fund terrorist organizations. No fewer than 27 Islamic charities have been designated as terrorist entities by the US Treasury Department, including the three largest Muslim charities in the US.

Zakat is one of the most opaque aspects of Shariah-Compliant Finance and it is rarely mentioned by Shariah-Compliant financial institutions, even though it is a requirement for Shariah Compliance.

The Amana Funds explain zakat in detail, without actually disclosing anything specific about where the money actually goes or who makes the decisions: http://www.amanafunds.com/zakah_1.html

This is where things start to get disturbing. On the page in which Amana instructs investors as to how much money to devote to zakat, they quote none other than Sheikh Yusuf al-Qaradawi.

To fully explain why this attribution is so troubling, we will repeat our background on Qaradawi here:

There is so much more to know about Sheikh Qaradawi. First of all, he is banned from entering the US and the UK for his ties to terrorist organizations. In 2001, Sheikh Qaradawi was the chairman of the Shariah Advisory Board of Bank al-Taqwa, which was shut down by the United Nations and the US Treasury Department for funneling large amounts of money to several Jihadist terrorist organizations, including Ayman al-Zawahiri’s Egyptian forerunner of Al Qaeda. Much of the money came through a Shariah-Compliant real estate firm in New Jersey and the money was funneled to the terrorist groups as zakat payments to charities.

Earlier this year, the US Treasury Department designated the Union of Good, an umbrella group of 57 charities run out of Saudi Arabia, as a terrorist entity. Qaradawi runs the Union of Good.

Qaradawi has written extensively in support of “martyrdom” operations (suicide bombings) against Israelis and Americans. And here are Sheikh Qaradawi’s views on women’s rights:

Beating is not suitable for every wife; it is suitable for certain wives and for other wives it is not. There is a woman who cannot agree to being beaten, and sees this as humiliation, while some women enjoy the beating and for them, only beating to cause them sorrow is suitable…

In the financial realm, back in October 2008, Qaradawi called for Islamic finance to replace capitalism. In 2006, he told the BBC that he liked to refer to Shariah-Compliant Finance as “jihad with money,” because “allah teaches us to fight our enemies” with weapons and our money.

The mention of Qaradawi on the Amana Funds web site certainly got our attention and it is too bad that the Bee reporters didn’t bother to look into zakat or even Google “Qaradawi.”

Our next step was to look into who Amana’s Shariah advisors are. It turns out that Amana does not disclose anyone by name, but identifies the Fiqh Council of North America as their adviser on Shariah.

The Fiqh Council of North America has a troubling background. It is an outgrowth of the Muslim Students Association, a Muslim Brotherhood front group funded out of Saudi Arabia. It is an affiliate of ISNA, the Islamic Society of North America. ISNA was founded in part by Sami al-Arian, who is now in jail for ties to terror funding. The president of the Fiqh Council of North America, Taha Jaber Al-Alawani, was named an unindicted co-conspirator in al-Arian’s prosecution.

 The Justice Department named ISNA an unindicted co-conspirator in the Holy Land Foundation terrorism financing trial in which America’s largest Muslim charity was shut down for funding terrorist organizations.

One of the original trustees of the Fiqh Council of North America was Abdurrahman Alamoudi, who is now serving a 23 year sentence on terrorism charges. Alamoudi had raised millions of dollars for Al Qaeda. 

The current chairman of the Fiqh Council of North America, Muzammil Siddiqui, was with the Muslim World League, an entity identified as having ties to Al Qaeda. On October 28, 2000 at a rally in Lafayette Park in Washington D.C., Siddiqui said, “America has to learn — if you remain on the side of injustice, the wrath of God will come!”

Another member of the Fiqh Council of North America, Jamal Badawi, issued a fatwa authorizing a husband to physically punish his wife: “There are cases, however, in which a wife persists in bad habits and showing contempt of her husband and disregard for her marital obligations. Instead of divorce, the husband may resort to another measure that may save the marriage, at least in some cases. Such a measure is more accurately described as a gentle tap on the body, but never on the face, making it more of a symbolic measure than a punitive one.”

The invaluable people at The Investigative Project have much more information on the Fiqh Council of North America:

http://www.investigativeproject.org/FCNA-CAIR.html

The next time you see a fluff piece on Shariah-Compliant Finance, you can be sure there is a lot more to the story than meets the eye.

Farewell to Britain

London: The British are understandably mystified.  Long accustomed to a "special relationship" with the United States, they are trying to figure out why the latter’s likeable new president would be going to such lengths to distance himself from the country that has for generations been America’s closest ally.

First, there was Barack Obama’s decision to return the Churchill bust that had graced the Oval Office since then-Prime Minister Tony Blair gave it to George W. Bush as a post-9/11 gesture of solidarity.  Then, there were the successive affronts during the visit by Blair’s successor, Gordon Brown, to Washington last week:  A seemingly thoughtless official gift (a set of DVDs of popular American films); a painfully chilly and brief press availability before the start of the two men’s private meeting; and no formal joint press conference of the kind Bush afforded Blair on all but one of numerous visits to Washington (the exception a hastily arranged trip right after the September 11 attacks).

The British press has offered several face-saving explanations for these serial rudenesses.  Perhaps Obama is "exhausted."  Alternatively, he is simply "focused elsewhere" in the midst of cratering capital markets, collapsing automakers and skyrocketing unemployment.

The real answer, however, was supplied by an unnamed State Department official whom London’s Sunday Telegraph reported on March 8th "reacted with fury" when asked by the paper why the Brown visit was so, er, "low-key."  According to the Telegraph: "The official dismissed any notion of the special relationship. ‘There’s nothing special about Britain. You’re just the same as the other 190 countries in the world. You shouldn’t expect special treatment.’"

Such a comment by a representative of the State Department – an institution that never saw a foreign government it wanted to offend – is a sign of how serious Team Obama is about "resetting" the U.S.-U.K. relationship.  Of course, as that term applies to friendly Britain, it means something very different than when used to describe the administration’s desire for improved ties with America’s enemies, actual or potential, like Russia, Iran and "Palestine."

(Consider, for example, Secretary of State Hillary Clinton’s tendering to her Russian counterpart a symbolic "Reset" button – one whose label, incredibly, used instead the Russians’ word for "overload." This unserious conduct in the face of the Kremlin’s increasing aggressiveness at America’s expense constituted the most appalling and degrading public spectacle by the top U.S. diplomat since her husband’s appointee, Madeleine Albright, danced with North Korean despot Kim Jong Il in 2000.)

Arguably, the need for a special relationship with Great Britain rooted in shared Western values and a mutual commitment to the common defense is as great today as at anytime since World War II.  Unfortunately, Gordon Brown’s government is conducting itself in ways that undermine those values and jeopardize the security of the Free World.  Particularly worrying are British concessions to the repressive and seditious theo-political-legal program authoritative Islam calls "Shariah":

  • Shariah-Compliant Finance (SCF):  Even though promoters of this industry, like "Shariah advisor" and al-Jazeera host Sheikh Yusuf al-Qaradawi, have described SCF as "financial jihad" and al Qaeda has publicly embraced its practice, Mr. Brown has declared he wants Britain to be the world capital of Shariah finance.
  • Shariah courts:  Brown’s government has begun institutionalizing the practice of separate legal systems for Muslims with the proliferation of "family law" courts where women can be treated, in accordance with Shariah, as second-class citizens – less-than-equal to male Muslims and entitled to a fraction of the property due the latter in the adjudication of divorce or testate matters. 
  • Terrorism charities:  The British government has refused to take punitive action against British-based Islamic "charities" that provide money to terrorist organizations.  The latest is Interpal, a Palestinian organization that even the BBC was able to figure out provides support to Hamas.
  • Engaging with terrorists: British civil servants are paying thousands of dollars to attend a conference next month on "Political Islam" at which Ibrahim Moussawi has been invited to speak.  Moussawi is a top propagandist for Hezbollah. The same Brown government that prevented Dutch parliamentarian Geert Wilders from presenting his film "Fitna" to the House of Lords on the grounds that he constituted too much of a threat to "community harmony" is evidently untroubled by having a flak for terrorists inciting in the U.K.

The irony of the evident distancing from Britain by the Obama administration is that Brown’s government is pursuing policies that Barack Obama seemingly espouses.  The U.S. taxpayer now owns most of AIG and Citigroup, two companies massively engaged in Shariah-compliant transactions, at odds with our constitutional separation of church and state.

In this and other ways, Mr. Obama is effectively acquiescing to Islamists’ demands to establish here as in the U.K. their own, "parallel" society observing Shariah rules, not the laws of the land. Among the concessions in the works appears to be bans on so-called "hate speech" that defames Islam, an idea implicit in the President’s injunction to use "respectful language" towards Muslims.

Last week, moreover, Hillary Clinton effectively promised a whopping $900 million charitable contribution from the U.S. taxpayer to Hamas – or at least a future Hamas-Fatah "unity" government.  This is a part of the President’s determination to reset Mideast diplomacy by forging what might be called "special relationships" not only with Syria and Iran but the major terrorist organizations they sponsor, Hamas and Hezbollah.

As the Free World increasingly engages in submission to Shariah, it appears the special U.S. tie to the U.K. that served to block the global ambitions of successive totalitarian ideologies will no longer operate. Under President Obama, the question increasingly is:  Will the U.S. perform that vital role alone, or succumb as Britain is doing to what Islam scholar Robert Spencer calls the "Stealth Jihad" now being mounted against every freedom-loving country? 

 

Frank J. Gaffney, Jr. is the President of the Center for Security Policy and a columnist for the Washington Times.

 

HSBCs Shariah Man

On February 27th, Financial Times Advisor featured an article about financial giant HSBC’s continued and growing embrace of Shariah-Compliant Finance.

According to the group, the new vehicles will aim to raise the profile of the sharia-compliant investment fund range in the UK significantly.

Andy Clark, managing director for UK and Mena wholesale at HSBC, said: "There is a general perception Islamic finance is only applicable to the Middle East. But demand is growing from the UK’s 1.3m Muslim population.

"For this reason, HSBC Global Asset Management plans to be at the forefront of offering to the UK market a comprehensive suite of investment products that meets sharia-compliant guidelines."

Today we would like to elaborate on HSBC’s connections in this area by focusing on the firm’s close ties to a creepy Mufti who has no business being associated with any respected Western financial institution.

HSBC's Mufti Muhammad Taqi Usmani, Shariah-promoting Jihadist

HSBC has one of the most extensive Shariah advisory boards in the entire financial services industry. But our focus today is on the name atop HSBC’s Global Shariah Advisory Board: Muhammad Taqi Usmani.

To be sure, Usmani is one of the most prolific Shariah scholars in the world of finance. He receives compensation from dozens of banks and investment firms, including Saudi American Bank, Citi Islamic Investment Bank, and Guidance Financial Group in the USA.

Before cashing in with the private sector, Usmani was a Shariah judge on the Supreme Court of Pakistan for 20 years.

Usmani is also a complete Jihadist.

In September 2001, Usmani was part of a small delegation of clerics known to be sympathetic to the Taliban in Afghanistan and travelled there to ostensibly convince Mullah Omar, the leader of the Taliban, to turn over Osama Bin Laden to the United States. Information leaked later by some of the clerics present at the meeting indicates that the delegation may have, in fact, tried to stiffen the Taliban’s will to resist.

Usmani is a prolific writer in Urdu, Arabic and English, having published dozens of books and countless articles.

Among his books available in English is a vitriolic attack on Christianity called "What is Christianity" and a broadside against the West and modernity called "Islam and Modernism."

Here is one particularly revealing quote from "Islam and Modernism:"

"Killing is to continue until the unbelievers pay jizyah (subjugation tax) after they are humbled or overpowered."

Usmani is well-known for his uncompromising views on the mandatory nature of conducting offensive jihad against non-Muslims "in order to establish the supremacy of Islam" worldwide. 

Usmani also complained bitterly at the lack of martyrs to combat American forces in Iraq: 

"No one is found having any desire of Shahadah (martyrdom). How many mothers are there who want to sacrifice their sons for the cause of Islam? How many sisters are there who want to say goodbye to their brothers departing to wage jihad against non-believers?"

Usmani referred to Americans in Iraq as "stinking atheists" and "the worst ever butchers and vultures of the world" who are "clawing off the flesh of bodies of innocent Iraqi Muslims."

According to what Usmani has said and written, aggressive jihad against unbelievers is an Islamic obligation and, as such, does not need any justification.

"For a non-Muslim state to have more pomp and glory than a Muslim state itself is an obstacle, therefore to shatter this grandeur is among the greater objectives of jihad."

For Taqi Usmani, offensive jihad can be postponed for a time only in cases when the Muslims in question are not strong enough to battle or otherwise challenge the infidels. And so, he advises the Muslims to live peacefully in countries like Britain, for instance, but only until they gain enough power to carry out jihad.

Under Pakistani dictator General Zia al-Haq (1977-1988), himself a zealous advocate of Shariah, Usmani played a key role in the introduction of the Shariah-based punishment code known as the Huddud Ordinance, as well as blasphemy laws and other Shariah injunctions, to the huge detriment of Pakistani justice and civil liberties.

HSBC’s bio for Usmani erroneously claims that he advises Dow Jones. Usmani did advise Dow Jones at for years but, when his beliefs and writings were brought to light, he abruptly disappeared from their Shariah Advisory Board, as explained by Paul Sperry.

Usmani’s Jihadist roots were too much for Dow Jones, but evidently not for HSBC.

HSBC describes itself as the "world’s local bank." Does your local bank employ any Jihadists?

 

Free Speech, Jihad and the Future of Western Civilization

On September 22, 2008, leading experts, writers and journalists gathered in London for a conference entitled, Free Speech, Jihad and the Future of Western Civilization. The conference– organized by the Center for Security Policy together with The New Criterion, the Hudson Institute, the Manhattan Institute’s City Journal, and the UK’s Centre for Social Cohesion– was to provide an anatomy of those efforts to suppress free speech, to examine the way such actions aid and abet the spread of radical Islam and further the aim of instituting Shariah law in the West, and to consider some possible responses, legal as well as journalistic, to the threats they pose. 

 

The Center for Security Policy has published a small book to commemorate the event, containing the following three transcripts of speeches delivered at the conference:

  • Roger Kimball: "The Soft Jihad on Free Speech"
  • Douglas Murray: "Great Britain and Cultural Jihad: It’s Not Over, Over Here"
  • Mark Steyn: "Shariah Appeasement and the End of the West"

 

Read Free Speech, Jihad and the Future of Western Civilization (PDF).

Print copies are available by contacting info@securefreedom.org

 

 

 

Forward by Frank Gaffney

This booklet captures the essence of an enormously informative conference convened in London in September 2008 by the U.S.-based Center for Security Policy, the Hudson Institute, the Manhattan Institute’s City Journal and the New Criterion Magazine and by the U.K.-based Centre for Social Cohesion. A distinguished roster of speakers illuminated the danger posed by the theocratic legal program authoritative Islam calls "Shariah" and the necessity for the Free World to prevent its further insinuation into Western societies.

Shariah obliges its adherents to work for the installation of a global theocracy. That end-state requires that all other governments-and most especially secular, democratic ones-be destroyed. Toward this end, the Shariah agenda requires the faithful to engage in jihad, using violence where possible and, where that would be impractical or counter-productive, employing stealthy techniques.

The immediate object of the latter is to establish "parallel societies" for Muslims whereby they would be governed, not by the laws and regulations of the Western nation in which they reside, but by Shariah. As with other forms of totalitarianism, the ultimate goal is to compel over time the non-Muslim population not simply to accommodate the Shariah agenda but to submit to it.

The London conference offered myriad examples of ways in which this stealth jihad is being advanced in Britain and the United States. These include operations mounted by the Wahhabis of Saudi Arabia and/or the Muslim Brotherhood via its various front and affiliated organizations aimed at: influencing the media, public opinion and campuses; penetration of government, corporations, prisons and military chaplain corps; the takeover and domination of mosques; the infiltration of Western capital markets through Shariah-Compliant Finance, affording unprecedented opportunities for freedom’s enemies to exercise non-transparent control over capital and credit flows; and the insinuation of Shariah legal codes and practices into Free World societies.  

Preeminent among the last of these examples is the effort to impose Shariah blasphemy, slander and libel laws in the West. According to Shariah, it is impermissible to engage in speech or writings that "defame" Islam or otherwise offend its followers. Mark Steyn, whose marvelous keynote address was one of the high points of the London conference and is reprinted in the pages that follow, has been a top target of this campaign led by the Organization of the Islamic Conference and now being enforced by the European Union and Human Rights Councils in Canada. Another victim, Rachel Ehrenfeld, was unable to attend the conference lest she be subjected to legal action in British courts pursuant to a Shariah-based "libel tourism" judgment against her. 

The insights contained in this brief compendium, like the conference from which they are drawn, are powerful warnings to complacent Western societies:  Shariah is a seditious ideology bent on the destruction of the freedoms, values and representative form of government we hold dear. If we wish not to submit to this brutally repressive program, we must awaken the public to the danger it represents, empower them to oppose its further assault-whether violent or stealthy-and engage them in doing so. The sponsors of the London conference hope that its proceedings and findings summarized herein will be a powerful catalyst to the taking of such steps.

The Mumbai terrorists, zakat and charities

Two of the chief concerns associated with Shariah-Compliant Finance are the obligatory tithing to “zakat” and obligatory donations of “tainted” revenue.

Shariah-Compliant Finance can entail contributions of up to 1/40 (2.5%) of assets per year in a charitable gift (known as zakat) that observant Muslims, Islamic organizations and businesses are obliged to make. Shariah advisors, men like Sheikh Yusef al-Qaradawi and Mufti Muhammed Taqi Usmani, are responsible for determining the recipients of such contributions.

Perhaps even more significant is a process known as “purification,” which is required of a Shariah-compliant investment or financial transaction that has been tainted with forbidden revenue, whether from interest, illicit speculation (such as trading in commodity futures) or a forbidden commercial enterprise (such as the pork industry). These “tainted” funds must be purified by donating the revenue to an acceptable charity, again typically selected by Shariah advisors. 

The recipients of zakat and purification payments are currently not disclosed and the process is non-transparent.  It should be noted that Shariah classifies Jihadi warriors in the defense of Islam and their families as an accepted category for such payments.

That makes the following story all the more disturbing…

No case reveals more about the role that Muslim charities have played in funding jihad than that of the organizations which carried out the Mumbai attacks.

Given that one of the tenets of Shariah-Compliant Finance is the system of zakat in which 2.5% of assets are donated to charities chosen by Shariah scholars, this story raises significant questions about the due diligence and disclosure practices of Shariah finance.

The Mumbai terror attacks were conducted by an Al Qaeda affiliate known as Lashkar –e-Taiba of Pakistan. This organization was outlawed by Pakistan in 2002 after pressure from the U.S. But Lashkar-e-Taiba continued to operate and merely formed a political/charitable arm known as Jamaat –ud-Dawa.

The Associated Press reported that U.S. government sources indicated that Lashkar-e-Taiba had operations in Chechnya, Bosnia and Southeast Asia and also sent operatives and funds to battle U.S. forces in Iraq. This same A.P. report said that Lashkar-e-Taiba received funding from organizations in Saudi Arabia and Kuwait.

Jamaat-ud-Dawa played a major role in the recovery efforts following the October 2005 earthquake in Pakistan and, according to British authorities, the organization siphoned off large sums of donations and put them to use in direct support of Jihadist terrorism.

In fact, the British discovered that Muslim Charity UK sent a great deal of money to banks in Mirpur, Pakistan in December 2005 as earthquake relief money. This money went into accounts in Saudi Pak Bank, Standard Chartered Bank and Habib Bank, Ltd. The money ended up being used to fund a bomb plot according to MI5 investigators.

British National Terrorist Financial Investigation Unit authorities found that a large portion of the money sent from Britain to charity was diverted for terrorism. Of $10 Million U.S. sent, less than half went to actual earthquake relief operations.

This is hardly surprising given that Jamaat-us-Dawa resembles other such Muslim organizations in that it is both a political organization and a militant group, like HAMAS and Hezbollah.

The level of involvement of Muslim charitable organizations in Jihad is reflected in the fact that the U.S. government has shut out no fewer than 27 Muslim charities for funding terrorism.

The Saudis themselves have explained that it is difficult to stop such funding because the money is run through charities at both ends of the pipeline: Zakat collected by Saudi charities and mosques are sent to charities in Pakistan, specifically to avoid “smoking gun” evidence of terrorism financing.

Obviously there are key questions which arise from these reports.

How safe is it to donate to Muslim charities? The largest Muslim charity in the U.S. was shut down for terrorism financing. What of other charities?

Who knows how zakat will be used? What steps have Shariah-Compliant Finance banks and investment firms taken to address these concerns? What level of due diligence and disclosure is there now for zakat and other payments by financial institutions to Muslim charities?

An Aid Gone Awry by Prateek Sharma: http://www.zeenews.com/Zee-Exclusive/2006-10-05/327343news.html

Man Arrested In Mumbai Probe is a Cop, Police Say by Manik Banerjee: http://m.freep.com/news.jsp?key=365156

Did the Saudis help fund the terror school behind Mumbai? By Gerald Posner: http://www.thedailybeast.com/blogs-and-stories/2008-12-08/did-the-saudis-help-fund-the-terror-school-behind-mumbai/