MUSLIM BANKING AND FINANCE
29 Arrested in Connection to Syrian Terrorist
Financing Scheme in France
29 Sep 2020
(AFP) — French police on Tuesday arrested 29 people in a sting operation
targeting a network of terror financing for jihadists in Syria, prosecutors
said.
The network, active since 2019, mostly operated via the purchase of
crypto-currency coupons whose references were given to jihadist contacts in
Syria and then credited to bitcoin accounts, the anti-terror prosecutors’
office said in a statement.
This marks a departure from previous methods to transfer funds
identified by France’s anti-terror financing and money laundering services,
which mostly involved cash mandates, it said.
“Constant surveillance of these networks prompted terrorist organisations to seek more opacity by using
crypto-currencies such as bitcoin,” the statement said.
Two French jihadists, identified as Mesut S and Walid F, both 25, are
believed to be the architects of the network, working from northeastern Syria,
the prosecutors said.
They are suspected members of the Hayat Tahrir Al-Sham organisation, an Al-Qaeda affiliate.
They were both sentenced to 10 years in prison in absentia in 2016, and
are the target of an international arrest warrant.
Their accomplices were caught after purchasing coupons worth 10 to 150
euros ($12 to $176) each on many occasions over recent months in several
locations in France.
The coupons are available at licenced tobacco
outlets known as Tabacs — of which there are about
24,000 in France — that also offer various small payments services, such as
cashcard top-ups and money coupons, without requiring proof of identity.
Hezbollah
operatives seen behind spike in drug trafficking, analysts say
August 4, 2020
at 4:00 a.m. PDT
The Washington
Post
At first glance,
the shipping trailers that arrived at the Italian port of Salerno appeared to
contain only paper, rolled up on giant industrial spools as tall as a man. But
when an investigator sliced into one of the rolls with an electric saw, he
unleashed an avalanche of little beige pills.
Police found more caches inside
other paper rolls, and by the time the search ended on July 1, customs agents
had recovered 84 million tablets of the amphetamine Captagon.
It was a record haul, worth an estimated $1.1 billion, and even more
jarring was the suspect initially named by police as the likely source: the
Islamic State.
Yet, within
days, suspicions began to shift toward different Middle Eastern groups.
Intelligence officials concluded that the drugs did originate in Syria, but in
factories located in areas controlled by President Bashar al-Assad’s
government. The amphetamines departed Syria from Latakia, a coastal city with
dedicated Iranian port facilities, and a known hub for smuggling operations by
Tehran’s ally, Hezbollah.
Italian police
learned of the shipment because they happened to be monitoring the
communications of a local crime family that was supposed to pick up the drugs,
the authorities in Italy said.
Whether
Hezbollah was directly involved in the Italian shipment is not yet known, but
investigators say the episode fits a pattern of recent drug cases in the Middle
East and Europe linked to the powerful Lebanese militia. Facing extreme
financial pressures because of U.S. sanctions, the coronavirus pandemic
and Lebanon’s economic collapse, Hezbollah appears to be growing increasingly
reliant on criminal enterprises, including drug smuggling, to finance its
operations, U.S. and Middle Eastern analysts said.
Law
enforcement officials have linked Hezbollah to a string of major drug seizures,
in locations ranging from the empty desert along the Syria-Jordan border to
urban centers in Saudi Arabia and the United Arab Emirates, to central and
southern Europe. Many of the cases involve counterfeit Captagon,
a synthetic drug that Hezbollah operatives began manufacturing more than a
decade ago and has gained prominence as a moneymaker as the group’s military
and financial commitments have expanded, intelligence analysts say.
“They have
stepped up the whole business with Captagon. There is
no doubt about that,” said a Middle Eastern intelligence official who closely
tracks Hezbollah’s illicit enterprises. The analyst, like several other
officials interviewed, requested anonymity to discuss sensitive intelligence
assessments. “The thing is to find any way to bring money into the
organization,” the official said, “and Captagon is
additional income.”
In addition to
last month’s historic Captagon seizure on Italy’s
western coast, customs officials in several other U.S.-allied countries have
confiscated multi-ton shipments of Captagon in the
past year, with Hezbollah operatives identified among the suspects. In
February, police in Dubai found more than five tons of Captagon
tablets in hidden compartments inside reels of industrial cable. Lesser
quantities of the amphetamine, along with other illicit drugs, have been seized
in Saudi Arabia, Egypt, Greece and Jordan.
In June, a
report by the European law enforcement agency Europol warned that Hezbollah
operatives were believed to be “trafficking diamonds and drugs” and laundering
the proceeds, using European countries as a base.
The most
recent drug cases suggest a collaboration among a diverse array of actors,
including Syrian business executives with ties to the Assad government as well
as organized crime families, U.S. and Middle Eastern officials said.
Coordinating the logistics — and sharing the profits — are operatives from
Hezbollah, with support from Iran’s Islamic Revolutionary Guard Corps, the
officials said. Both Shiite groups have shown a growing willingness to work
with partners normally regarded as enemies, including even criminal affiliates
of Sunni extremist groups such as the Islamic State.
“When it comes
to making money, they [Hezbollah] don’t care about sectarian differences or
religious differences,” John Fernandez, head of the U.S. Drug Enforcement
Administration’s Counter-Narcoterrorism Operations Center, said in a recent
briefing on Hezbollah at the Washington Institute for Near East Policy. “We’ve
seen them working with Sunni criminals, Christian criminals — and even with
Jewish crime syndicates.”
A club drug in
the gulf states
Hezbollah’s forays
into the illicit drug trade date back to at least the 1990s, a few years after
a loose collection of armed Lebanese Shiite factions first coalesced under the
“Party of God” banner to fight Israel. Some of the groups had historical ties
to the illegal drug trade in Lebanon’s Bekaa Valley,
and the money earned from drugs became an early, and significant, contributor
to the group’s income, current and former U.S. law enforcement officials say.
Some Hezbollah
operatives eventually cultivated relationships with Latin American drug
cartels, which became partners in elaborate networks for contraband smuggling
and money-laundering schemes. Ultimately, Hezbollah’s leaders were compelled to
make peace with an activity that most faithful Muslims view as immoral, said
Matthew Levitt, a former FBI counterterrorism official and author of
a 2013 history of Hezbollah’s external operations and financial networks.
“It usually
started with logistics, but over time, people became more involved with money
laundering and then with the narcotics themselves,” Levitt said. “That’s how
Hezbollah stumbled into this.”
Hezbollah
officially denies any involvement with illicit drugs, and some U.S. and
European intelligence officials believe the militia is mainly a passive
beneficiary of a drug trade conducted by Lebanese operatives only loosely
affiliated with the group. But FBI records show that, as early as the
mid-1990s, Hezbollah’s top spiritual advisers were quietly condoning drug
dealing, telling members that narcotics trafficking was “morally acceptable if
the drugs are sold to Western infidels as part of a war against the enemies of
Islam,” according to a declassified 1994 report.
An interactive database unveiled
by Levitt on Monday includes hundreds of government documents and court records
linking Hezbollah operatives to drug smuggling, money laundering and other
criminal enterprises in dozens of countries around the world, while also
charting terrorist attacks financed by such illicit proceeds. Some of the
activity clearly is “bottom-up” — initiated by low-ranking individuals seeking
personal gain — but all of it is “very much encouraged by people at the top,”
Levitt said.
“At the end of
the day, it is a distinction without a difference,” he said, “because Hezbollah
is knowingly and wittingly accepting tens of millions of dollars from the
proceeds” of the illicit drug trade.
Among the
varieties of drugs associated with Hezbollah, Captagon
is a relative newcomer, one that is linked to a previous episode of maximum
stress for the group.
After
Hezbollah suffered heavy losses in its 2006 war with Israel, Iran supplied its
militant allies with pharmaceutical equipment needed to manufacture counterfeit
Captagon, current and former U.S. officials say. The
resulting product was a knockoff version of a stimulant that was once used
legally to treat depression and other psychological disorders.
The drug, also
known by its generic name fenethylline, was sold under the brand name Captagon until the early 1980s, when most countries banned
it as being highly addictive. But in Lebanon’s Bekaa
Valley, Hezbollah-linked factories were soon producing the counterfeit version
of the drug by the ton. Then, with the start of Syria’s civil
war, some manufacturing facilities moved to Syria, where they could operate
without threat of interference from Lebanese or international law enforcement
agencies. The new factories are located in government-controlled coastal
provinces where Hezbollah maintains a heavy presence, U.S. and Middle Eastern
intelligence officials said.
“The
production in Syria started when Hezbollah entered the war” in 2012, said the
Middle Eastern official who tracks Hezbollah’s illicit enterprises. Now, the
official said, “everyone is getting a commission, from the distributors to the
high-level army officials who look the other way.”
The income is
partially offsetting huge financial losses incurred by an organization that
traditionally relied on Iranian subsidies and a mixture of legitimate and
illicit business to finance its operations in Lebanon and beyond. Hezbollah’s
coffers have been drained by years of open-ended military campaigns in Syria
and Yemen, and the group took a massive hit this year when Tehran announced
sharp cuts in financial support for its militant ally.
The crisis has
prompted both Hezbollah and Iran to seek revenue through any available means:
from drugs and other contraband to currency speculation and bribery schemes,
said a second Middle Eastern intelligence official who also closely follows
Hezbollah’s illicit operations. “Shiite criminals — known collaborators with
Hezbollah — are being told, ‘If you are able, make money,’ ”
the official said.
The extent of
Hezbollah’s control over the Syrian Captagon
factories is not publicly known. Up to now, the facilities have been “run under
the protection of Hezbollah, or run by affiliates with Hezbollah turning a
blind eye and getting a share of the profits,” a senior U.S. law enforcement
official said.
The drug is
little known in the United States, but the smugglers have found an eager market
closer to home. Captagon users say the drug makes
them feel euphoric and energetic, and the stimulant has become enormously
popular within the club cultures of several Middle Eastern countries,
particularly in the Persian Gulf states. In addition, Islamic State commanders
notoriously used Captagon as a morale booster for
fighters heading into battle, thus bolstering its reputation as the “jihadi
drug.”
But more
recently, trafficking in Captagon appears to be
strictly about generating profits, officials say. While Islamic State fighters
sometimes sold the drug for cash during the waning days of the group’s
self-proclaimed caliphate, the making and marketing of Captagon
is a costly and sophisticated enterprise that requires dedicated factories as
well as extensive networks for moving the drug across international borders.
All the
required ingredients currently exist in northwestern Syria, along with paper manufacturers
who make giant paper rolls of the type used to hide the tons of Captagon discovered at Salerno, said Armand Chouet, a Paris-based imagery analyst and author of a report that analyzed
the movement of the drugs from Syria to Italy’s west coast.
“This was a
very large transportation and logistical operation,” Chouet
said. Noting that the port of departure is heavily controlled by Iranian,
Hezbollah, Russian and Syrian interests, Chouet
added: “No one can play such a game in Syria without high-level approval.”
Police arrest
three of Abu Hamza's sons in London after they 'carried out £1million in fraud
with help from a corrupt banking insider'
Yasser, 29,
was arrested at the West London home where he lives with his mother
Najat Mustafa
is Hamza’s second wife and mother of seven of his eight children
His second
eldest son with Mustafa, Uthman Mustafa Kamel, 31, arrested nearby
Their eldest
son, Tito Ibn Sheikh, age 33, was also arrested in North West London
By MILLY VINCENT FOR MAILONLINE
PUBLISHED: 03:27
EST, 28 December 2019
Three of radical
preacher Abu Hamza's sons have been arrested and released on bail for allegedly
carrying out a £1million fraud with the help of a corrupt banking insider.
The trio were
arrested for 'fraud and money laundering offences' and are said to have used
stolen details to get loans, cars and access dormant
funds.
One son,
Yasser, 29, was arrested at his mother's West London home, while
another son Uthman Mustafa Kamel, 31, was arrested nearby.
Yasser
and Uthman's mother Najat Mustafa is the second wife of Hamza and has
seven of his eight children with the radical preacher.
The couple's eldest
son, Tito Ibn Sheikh, 33, formerly named Hamza Mustafa Kamel, was
arrested in North West London, as reported by The Sun.
A source told
the newspaper that a suspected bank worker is believed to have provided
'invaluable assistance' in the alleged fraud.
Another three individuals
were also arrested over the suspected stolen bank account details, believed to
be a husband and wife and another man.
They have all
been released on bail as inquiries continue.
Metropolitan
Police told The Sun :
'Six people arrested for fraud and money laundering offences have been released
on bail.'
Abu Hamza, 60,
the former imam of the Finsbury Park mosque whose
radical views brought him to the attention of the authorities was found guilty
of terror offences in both the UK and US.
He is serving
a life sentence at a high-security prison in the US after being expelled
from Britain six years ago after a long legal battle.
Abu Hamza -
The Egyptian engineer who became a preacher of hate on London's streets.
Abu Hamza al-Masri was born in Alexandria, Egypt in 1958 as Mustafa
Kamel Mustafa, the son of a naval officer and a primary school headmistress.
After
initially studying civil engineering he entered the UK in 1979 on a student
visa.
He was granted
UK citizenship when he met and married his first wife, a British Muslim
convert, in 1980. Hamza has previously said she was the one who got him
interested in Islam and he converted after taking time off from his job as a
nightclub bouncer in London's Soho.
As he found
his new religion and his job incompatible, he instead resumed his civil
engineering studies at Brunel University and Brighton Polytechnic, gaining a
degree.
He met and
married his second wife in 1984 in a Muslim ceremony in London and had a
further seven childen.
Heavily
influenced by the Iranian revolution, he took an interest in Islam and
politics, in particularly the occupation of Afghanistan by the Soviet Union.
After meeting
the founder of Afghan Mujahideen in 1987, he moved to Egypt and then to
Afghanistan, and it was in the following years that he lost his hands and one
eye.
Over the
years, Hamza has given several different reasons for the loss of his hands and
eye. These include a road project in Pakistan, an explosion during a de-mining
project in Jalalabad, Afghanistan, fighting the jihad as a Pakistani
Mujahideen, and working with Pakistani military in Lahore when an explosives
experiment went wrong.
After spending
time in Afghanistan and Bosnia in the early 90s, he returned to Britain and
adopted a new name - Sheikh Abu Hamza al-Masri.
It was in London
that Hamza began his rise to public notoriety as the Finsbury
Park mosque imam, where he arrived in 1997.
One year
later, in 1998, he helped organise hostage-taking of
16 mostly British tourists in Yemen. Three Britons and an Australian killed in
rescue mission.
In 2000, he
set up a terrorist training camp in Bly, Oregon, sending volunteers and money
to Afghanistan to support al Qaeda and the Taliban.
He firmly
placed himself on the national radar in 2001 after speaking out in support of
Osama bin Laden following the September 11 attacks.
His
inflammatory speeches led to the Charity Commission suspending him from his
position at Finsbury Park Mosque the following year.
In 2003, legal
moves begin to get Hamza deported to Yemen, a move which he appealed.
In 2004 Hamza
was arrested on a US extradition warrant over charges of conspiring to take
hostages in Yemen, funding terrorism, and organising
a terrorist training camp in Oregon. Charged with 15 offences under the
Terrorism Act, temporarily staying US extradition.
In 2006, Hamza
was jailed for seven years at the Old Bailey after being found guilty of 11 of
15 charges, but the courts still battle to have him extradited.
He was finally
extradited in October 2012, and appeared in a US court, indicted under the name
Mustafa Kamel Mustafa, where he pleaded not guilty to terrorism charges.
In May 2014,
Hamza was convicted of all 11 charges on terrorism offences at Manhattan's
Federal Court.
In January
2015 he was sentenced to life imprisonment without any possibility of parole.
Since October
2015 he has been locked up at 'Supermax' correctional facility ADX Florence,
Colorado.
Gangsters with
links to the 7/7 London bombings stole £8 billion from British taxpayers in
20-year fraud before funnelling cash to Pakistan to
support Osama Bin Laden
•
Gangsters stole billions via VAT fraud, benefit fraud, credit card and mortgage
fraud over 20 years including £8bn directly from UK taxpayers, files show
• They channelled £80 million to Al
Qaeda terror operations and Osama Bin Laden
• HMRC were tracking associates of
7/7 bomber two years before deadly strike
• Court orders prevent reporting of names and details because
prosecutors claim ringleaders' trials could be jeopardised
- but they fled to Middle East years ago
• Gang was so hard to infiltrate, investigators tied a camera
to a dog to get photos
• Criminals 'infiltrated government agencies and the Post
Office' to create fake IDs
By JOEL ADAMS
FOR MAILONLINE
PUBLISHED:
07:17 EDT, 31 March 2019
A network of
fraudsters stole billions of pounds from taxpayers in a 20-year crime spree on
an industrial scale, funneling tens of millions to terrorists including Osama
Bin Laden, according to police and intelligence files.
An
investigation by The Sunday Times has revealed how a sprawling gang of British
Asians infiltrated government departments, associated with Abu Hamza and one of
the 7/7 bombers, bought Ferraris with personalised
plates and cosied up to politicians including Tony
Blair - all while keeping their operations so secretive investigators had to
resort to tying a camera to a dog to glean intelligence from inside one of
their factories.
The files show
four HMRC investigators pleaded with bosses to prosecute the crimelords but were rebuffed - and one claims he was
prevented from sharing HMRC data with MI5 because the Revenue wanted to
maintain the confidentiality of the terror suspects' tax records.
HMRC told MailOnline it 'can, has always, and does' pass information
on to intelligence agencies 'within minutes if necessary' and that
confidentiality 'doesn't come into it'.
An estimated
£8bn was stolen from the taxpayer through scams including benefit fraud and a
massive VAT swindle. The sum, equivalent to the GDP of Kyrgystan
or Kosovo, is three times as much as the Government spends on MI5, MI6 and GCHQ
each year.
The gang is
alleged to have sent one per cent of the money - £80 million - to al-Qaeda in
Pakistan and Afghanistan, where it was spent on madrasas and terrorist training
camps. MI5 sources say prior to his death in 2011 some of the money had reached
Osama Bin Laden's compound in Abbottabad, Pakistan.
The true scale
of the gang's profits, augmented by mortgage fraud, credit card fraud, and
investments of the stolen cash, is unknown.
Some members
of the syndicate have received and in some cases even
finished jail terms - of a combined 100 years for frauds worth £100m - since
the crimes first came to light in 1995, but the public has been prevented from
hearing about the case or the identities of the wrongdoers by court orders.
The Crown
Prosecution Service insists reporting might prejudice potential trials of the
gang's ringleaders - despite the fact the kingpins fled the country years ago
and are believed to be in hiding in the Middle East.
Last night Meg
Hillier, chairwoman of the public accounts committee, told the Sunday Times
said she would consider launching a parliamentary inquiry and would question
Sir Mark Sedwill, the cabinet secretary and national
security adviser to the prime minister, tomorrow.
Authorities first
became aware of the schemes in 1995 when an English rural force heard from an
extremely frightened' source that gang members were perpetrating mortgage fraud
with 'carrier bags full of cash' using false identities, with the help of
corrupt bankers.
A four-year
investigation by the Inland Revenue pooled intelligence from tax, customs,
police, immigration and trading standards and put suspects under surveillance.
It concluded
that the gang was using a network of factories and companies and exploiting their
workers for identity and benefit frauds, the sale of counterfeit goods, car
crash scams and mortgage and credit card frauds.
HMRC found the
gang used 'hijacked or altered national insurance numbers to create false
records' and exploited 'illegal immigrant labour'
before laundering the cash 'through bogus offshore companies'.
An undercover
HMRC officer reported that hook-handed cleric Abu Hamza recruited young Muslims
to work for the crime syndicate in the late 1990s, years before he became
infamous as an al-Qaeda recruiter.
A source said
the factories which employed those workers Hamza recruited had extra staff who
'were ghosts claiming benefits and having car crashes'.
The source
added: 'A factory of 180 workers only had 120 physical workers. The rest were
identity frauds with all proceeds going back to the owners of the companies.
This generated around £20,000 a week in benefit claims alone.'
But the gang
proved extremely difficult to penetrate, the report says. Undercover agents
eventually resorted to attaching a camera to a dog and encouraging it to run
around inside one of the network's factories just to find out how many people
actually worked there.
The gang's
biggest money-maker was so-called 'carousel fraud', a complex and
industrial-scale swindle in which four companies, two in the UK and two in the
EU, 'sell' goods to each other with some of the firms 'reclaiming' VAT from the
British government, while others never pay the VAT bill they rack up.
Investigators
concluded the gang had gained more than £1 billion from illegitimate VAT
rebates in a single postcode area.
A major break
in the case came in the months after 9/11 when, on abandoned laptops found by
the CIA in mountains on the Afghan/Pakistan border, intelligence officers
discovered al-Qaeda's money was coming in part from an accountant in an English
town.
He was a major
player in the network, which afforded its ringleaders UK properties and
supercars with personalised plates, all at the
taxpayer's expense.
For years HMRC
and other agencies did little to disrupt the network, taking almost no formal
enforcement action. The files show that at least four rank-and-file HMRC
intelligence officers implored their bosses to launch prosecutions. Their
requests were rejected 'due to their complicated nature and a lack of
resources'.
When the 9/11
attacks occurred in 2001, one official warned HMRC chiefs that he had 'basic
information' that would be of great interest to MI5.
Internal files
seen by The Sunday Times show the officer said he was 'ready to meet someone
from the intelligence services' with the 'mountains of information available to
us' that had 'taken on a whole new significance' after the attacks on New York
and the Pentagon.
'Officers and,
increasingly, their direct management have become frustrated at the lack of
action,' wrote the officer. His request was refused because HMRC was worried
about preserving the taxpayer confidentiality of the terror suspects.
An HMRC
spokesman told MailOnline today: 'HMRC can, has
always, and does pass information (within minutes if necessary) to other law
enforcement agencies and the intelligence services when dealing with serious
crime or terrorism – taxpayer confidentiality doesn't come into it.
'HMRC takes
its critical role in the fight against serious organised
crime and terrorism very seriously. We work side-by-side with the intelligence
services, law enforcement partners, and across Government, to break up criminal
gangs and disrupt terror funding.
'In 2017-18
alone, we collected and protected more than £3.3 billion through our work
fighting organised crime, and have brought more than
880 organised criminals to justice since 2010.'
The report
found widespread infiltration of government agencies, to obtain false
identities and 'sensitive information'. From one company investigators found
'20 potential internal fraud cases including [gang] members in government
agencies', one intelligence summary said. Another said two Post Office employees
seemed to be helping falsify documents, concluding: 'infiltration is
widespread'.
Thousands were
given by the gang to the then-ruling Labour Party. An
internal HMRC report said: 'There are numerous [gang] members involved in think
tanks and business forums which bring them into contact with senior British
politicians.
'I myself have
seen one member shoulder to shoulder with Tony Blair
on at least two occasions following the war in Iraq.'
The files also
show that the gang enjoyed links with a top politician in Pakistan. There is no
suggestion that Blair was aware of the alleged crimes.
HMRC
intelligence officers also identified the gang's links to Shehzad Tanweer, a terrorist involved in the 7/7 London bombings in
2005 which killed 52 people, at least two years before the attack.
Associates of Tanweer, who who detonated a bomb
while travelling eastbound on the Circle Line between Liverpool Street and Aldgate, killing himself and seven others., were suspected
of 'multi-identity fraud, phoenix trading, tax evasion, tax credit fraud and
money laundering', according to the files.
Many suspects
identified by the 1990s investigation were prosecuted, with second-tier members
of the gang charged with carousel fraud and money laundering.
In the course
of cross-checking HMRC files with secret MI5 intelligence, the CPS found the
'jaw-dropping' link, a source told the paper; that 'MI5 had information that
the ultimate destination for some of the money was Osama bin Laden's compound
in Abbottabad.'
However,
senior HMRC officials declined to use the intelligence to mount prosecutions
and take the gang out of operation until after the bombings.
Iran executes
'Sultan of Coins' amid currency crisis
14 November 2018
BBC
Iran has executed a currency trader known as the "Sultan of Coins"
for amassing some two tonnes of gold coins.
Vahid Mazloumin and another member of his currency
trading network received the death penalty for "spreading corruption on
earth".
According to the Iranian Students' News Agency, Mr Mazloumin and associates had hoarded the coins to
manipulate prices.
Rights group Amnesty International described the executions as
"horrific" and a violation of international law.
"Use of the death penalty is appalling under any circumstances,"
Amnesty said in a statement on Wednesday, adding that under international law
"the death penalty is absolutely forbidden for non-lethal crimes, such as
financial corruption".
Amnesty went on to say that the manner in which the trials were
"fast-tracked" displayed a "brazen disregard" for due
process.
How did these executions come about?
Mr Mazloumin was arrested
in July for operating as a speculator and accused of hoarding gold coins with
the aim of later manipulating prices on the local market.
In August, Iran's Supreme Leader Ayatollah Ali Khamenei approved a judicial
request to set up special courts to deal with those suspected of financial
crimes.
Since then, these courts have sentenced several people to death in trials often
broadcast live on state television.
The second man executed, who was also convicted of "spreading
corruption", was linked to Mr Mazloumin's network and was reportedly involved in the sale
of gold coins, according to Mizan, the official
website of Iran's judiciary.
Both men were executed by hanging.
Why are gold coins in high demand in Iran?
Demand for gold coins and US dollars in Iran has soared as the country's
currency has declined in value.
In the wake of the latest round of US sanctions on Iran ,
the rial has fallen about 70% against the US dollar, while gold coins have
grown more expensive.
As a result, a cost of living crisis has seen demonstrators take to the streets
against perceived corruption.
The tough US sanctions on Iran target the country's oil and finance sectors.
Iran is heavily dependent on its exports of oil, and the renewed sanctions, if
effective, would cause yet further damage to the economy.
Tehran has been battling instability in its financial markets since April, when
the government attempted to stabilise currency prices
by introducing a single official dollar exchange rate.
Brothers sentenced in $1.4M welfare-for-cash scheme at halal market
Bangor Daily News
June 18, 2018
By Judy
Harrison and Seth Koenig, BDN Staff
The former owner of a Portland halal market who, with his brother, traded $1.4
million in federal food benefits for cash was sentenced Monday afternoon in
U.S. District Court to three years in prison.
The federal prosecutor called the case “one of the largest, if not the largest,
fraud cases involving [Supplemental Nutrition Assistance Program] benefits in
[Maine].”
Ali Ratib Daham, 41, of Westbrook, who originally
owned Ahram Halal Market, 630 Forest Ave., pleaded
guilty in November to one count each of conspiracy to defraud the U.S.
government, money laundering and theft of government funds.
A halal market under different ownership still operates at that address.
Daham remains free on bail until July 18, when he must report to a prison
assigned by the U.S. Bureau of Prisons.
His brother, Abdulkareem Daham, 23, was sentenced
Monday morning to two years in prison. He was convicted after a three-day jury
trial in January of conspiracy to defraud the United States, according to court
documents.
The older brother was ordered to pay $1.4 million in restitution, while the
younger was ordered to pay up to $955,000, according to their attorneys. The
restitution order states that the men are equally responsible for payments but
the younger brother’s payments are capped.
Ali Daham already has paid $80,000 toward restitution, according to court
documents.
In addition to prison time, both men were sentenced to three years of
supervised release.
In sentencing the older brother, U.S. District Court D. Brock Hornby, who
himself is a naturalized citizen, said there were “no winners in a case like
this.”
“By sentencing two brothers, I realize I’m creating great pain for this
family,” he said. “I’m also creating great pain for the immigrant community, as
many members have told me he was a great helper to them. Sadly, he was a helper
to them by defrauding the government.”
Augusta attorney Walter McKee recommended the former store owner be sentenced
to six months in prison in his sentencing memorandum. He said that 72 letters
in support of his client had been submitted to the court.
Nearly 60 friends, family and supporters filled the Portland courtroom, several
of whom told Hornby that Daham is a kind family man who deserves lenience.
The Dahams are natives of Iraq. The family fled the
country in the mid-2000s. They arrived in Portland in 2009 and opened the
business two years later.
The elder brother said that he broke the law in an effort to help Portland’s
immigrant community.
“I came from a country experiencing different wars,” Ali Daham said through a
translator when it was his turn to address the court. “The human condition was
different. People had to help each other. … What I did [here] was in the spirit
of providing help for people in the community.”
But Assistant U.S. Attorney James Chapman argued that by running the
welfare-for-cash fraud, Daham harmed those immigrants in need by fueling
prejudice against his community and “providing ammunition to those who would
seek to restrict welfare benefits.”
The evidence presented at the younger Daham’s trial showed that between June
2011 through April 2016, the brothers gave cash to customers at the market in
exchange for benefits from the SNAP and the Special Supplemental Nutrition
Program for Women, Infants and Children plus a fee.
During that period, the market received more than $4 million in SNAP and WIC
receipts, at least $1.4 million of which were obtained illegally, according to
court documents.
In his sentencing memorandum, the younger man’s attorney, Peter Rodway of
Portland, argued that Abdulkareem Daham began working
at the store in 2011 when he was a 16-year-old high school student. In spite of
his conviction, he worked stocking shelves and did not begin working as a
cashier until July 2015, Rodway said.
The attorney also maintained that his client was only responsible for $226,000
in losses since he only worked as a cashier for 18 months. It was at the cash
register where the actual exchange of benefits for money took place, according
to court documents.
Rodway recommended his client be sentenced to five months or time served. Abdulkareem Daham’s bail was revoked about two weeks before
his trial for smoking marijuana. He is expected to be deported since unlike his
brother, who in 2013 became naturalized American citizen.
The maximum sentence for their crimes is five years in prison and fines of up
to $250,000.
Assyrian Group Sues Turkish-Kuwaiti Bank for Funding Terrorism
By Dikran Ego
Posted
2016-06-21
(AINA) --
Assyrians who fled the war in Syria filed a lawsuit against a bank which is
largely owned by Kuwait Finance House and the Turkish Authority for
Foundations, based in Turkey. The lawsuit accuses the bank, Kuveyt
Turk Katilim Bankasi A.S.
(KTKB), and its parent financial institutions of funding terrorism.
The lawsuit
was filed in a court in North Carolina, United States. The organization behind
the the lawsuit is called St. Francis Assisi and was
formed on June 6, 2016. The Christian organization is represented by Mogeeb Weiss in San Francisco but Tom Creal
seems to be the one behind the case.
A reporter for
the Turkish newspaper Hurriyet, Tolga
Tanis, interviewed Tom Creal and published a story in
Turkish. According to Tanis' article, titled Turkey and the Terrorist
Financing, Tom Creal formed a team of eight employees
that will prepare the lawsuit against KTKB, which is identified as the hub of
the financing of several terrorist groups in Syria. Among the terror
organizations mentioned being supported are the Islamic State (IS), Al-Nusra
Front and several other radical Islamic terror groups.
In the lawsuit
there is a plea for compensation of 75,000 dollars per person. Creal is a financial expert and worked in Afghanistan as a
reporter for the UN until 2009. After his mission in Afghanistan he left the
United Nations and formed the organization The Hunters Group, to work for
states and civil society organizations with the task to hunt black money.
According to Tolga Tanis, the evidence against KTKB is very strong. Via
social media, KTKB have asked people to donate money to several terrorist
groups in Syria through the Bank and its accounts. The fund-raising campaigns
are said to have been organized under the pretext of funding humanitarian aid.
The Turkish
connection is massive. The Vice Chairman of KTKB is Adnan Ertem,
who is also the head of the state authority Directorate General Of Foundations in Turkey. With regards to Turkey's role in
financing terrorism, Tolga Tanis cites the recently
released annual Country Report of the US State Department on terrorism from
2015 (p.159):
The nonprofit
sector is not audited on a regular basis for CFT vulnerabilities and does not
receive adequate anti-money laundering/combating the financing of terrorism
outreach or guidance from the Turkish government. The General Director of
Foundations issues licenses for charitable foundations and oversees them, but
there are a limited number of auditors to cover the more than 70,000
institutions.
Analysts
expect this case to grow and the connection between Turkey and the financing of
terrorist groups revealed (AINA 2016-06-16), in which case the Assyrians behind
the lawsuit against KTKB will find themselves standing against Turkey, which is
accused of financing terrorist groups.
Jihadists Target Banks for not being Shariah Compliant
Christopher Holton
July 18, 2011
Family Security Matters
Readers of SFW may notice that we have devoted several
posts in recent weeks to Nigeria. The chief of the central bank in Nigeria,
Mallam Sanusi, is an unapologetic financial jihadist and describes himself as a
“shariah scholar.” He has been pushing hard for Shariah banking and finance in
Nigeria, so hard in fact, that he has managed to figure out a way of easing
reserve requirements on “Islamic banks” through regulatory changes, without
going through the west African nation’s national assembly.
Why should we care about Nigeria?
First of all, Nigeria is NOT a Muslim majority country
and the fact that someone in a position of power would be exercising what
amounts to Islamic missionary work to force Shariah finance on the people of Nigeria
is worrisome on many levels, not the least of which is the fact that it could
serve as a model for other nations where the financial jihadists seek to use
Shariah compliant finance as a trojan horse to ease Shariah into a host
nation’s culture, society and legal system.
But there is another reason why we should be concerned
about Nigeria: Nigeria has been wracked in recent years by violence committed
by Jihadist terrorists determined to impose Shariah law in at least part of the
nation. Their brutality and barbarism has resulted in
massacres of non-Muslim villages and violence aimed at disrupting Nigeria’s
energy industry, which is its economic lifeline.
Here we have yet another example of the global Islamic
insurgency that the free world faces.
The latest development in the violence in Nigeria should
catch the attention of SFW readers: now the violent Jihadists are targeting
banks in Nigeria because they do not comply with Shariah law.
In other words, using violent methods, the jihadist
terrorists are working toward the same basic goals as the financial jihadists,
in this case the chief of the country’s central bank who, by hook or by crook,
is determined to see Shariah banking and finance gain a stronghold in Nigeria.
Maybe the fact that the terrorists are targeting banks
is just a coincidence, but we reckon that’s probably not the case. In our
estimation, at the very least, these attacks could have been inspired by
Sanusi’s campaign to force Shariah finance and banking on the people of
Nigeria.
Jama’atu Ahlis-Sunnah
Lidda’awati Wal Jihad, popularly known as Boko Haram
sect, yesterday claimed responsibility for attacking some banks in Borno, Bauchi and other places where they took away
unspecified amounts of money, stressing that the modus operandi of the banks
contravenes the Sharia legal system.
Spokesman of the group, Abu Zaid said: “Let me confirm
to you that our warriors had actually attacked three banks, namely Bank PHB,
First Bank of Nigeria and Unity Bank where they carted away huge sums of money.
“We took the measure because the mode of operations of
the banks was not based on Islamic tenets”, Abu Zaid declared.
“If the banks continued to operate contrary to Islamic
code, monies snatched from them remain legitimate. We are out to eliminate all
aspects of ills in socio-economic affairs of the people which go contrary to
the Sharia legal system,” he said.
Islamic
Banking
Washington
Times
By:
Dr. Rachel Ehrenfeld
Co-authored
by: Samuel A. Abady
December
15, 2008
If "cash is king," then Middle East coffers
are irresistibly enticing. During a recent tour of Saudi Arabia and the Gulf
states, Deputy Treasury Secretary Robert Kimmitt applauded the "growing
role" of Arab banks in the U.S. economy. Treasury is seeking buyers for
its newly acquired bailout assets because more than $1 trillion in cash is
urgently needed to rescue the largest U.S. banks.
However, cash from the Arabian Gulf comes with a vital
string attached: Islamic banking, erroneously viewed as an ancient practice. In
fact, Islamic banking is a newly invented institution: "Neither classical
nor medieval Islamic civilization featured banks in the modern sense, let alone
'Islamic' banks," notes Timur Kuran, professor
of economics and law at the University of Southern California. According to the
Dinar Standard, "assets managed by Islamic banks are in excess of $700
billion - predominantly concentrated in the Middle East."
Islamic banking took off in the 1970s, but was first
concocted by Muslim Brotherhood founder Hassan al-Banna
in the 1920s. The stated goal was to penetrate the Western finance system,
corrupting it from within in hopes of creating a parallel system to
re-establish a global Islamic empire governed by Islamic law (Shariah). Islamic
rules of commerce (fiqh al-muamalat)
forbid interest (riba) and investing in a prohibited
(hara'am) enterprise. They also mandate tithes on
wealth (zakat). However, the Koran fails to precisely define these concepts.
Imams and ayatollahs differ, for example, on whether riba
prohibits all interest or only usurious interest.
While the overhaul of American and Western banking
regulations is urgent, Islamic banking cannot be the answer because Muslim
clerics - not U.S. laws and regulators - make the rules. In 1969, the Saudis
created the Organization
of the Islamic Conference (OIC), which is now leading the charge for global
expansion of Islamic banking and has established new regulatory, accounting and
auditing organizations to govern such banks. Notably, the OIC's charter is to
"liberate Jerusalem and Al-Aqsa [mosque] from Zionist occupation."
Not surprisingly, zakat from Islamic banks often funds
terrorist groups like the Muslim Brotherhood's Hamas. That organization's
agenda was exposed during the Dallas trial of The Holy Land Foundation, a Hamas
front group and an American Muslim charity just convicted of terrorism crimes.
Evidence of the charity's true purpose included an 18-page "explanatory
memorandum" outlining its "strategic goal … that all their work in
America is a kind of grand Jihad (holy war) in eliminating and destroying the
Western civilization from within."
Sharia financing forbids loans to entities labeled hara'am, such as industries that use alcohol, and to all
Israeli businesses The Arab League Council established the boycott against Israel on December
2, 1945, (more than two years before creation of the Jewish state). The boycott
prohibits all Arab states, companies and individuals from any financial or
trade relations with Israel. Companies worldwide are blacklisted for doing
business with Israel, as are companies doing business with boycotted firms. The
OIC high commissioner for the boycott of Israel coordinates the efforts of its
57 member states from the Central Boycott Office in Damascus.
In response, the United States
made it illegal for individuals or companies to cooperate with the Arab
boycott. The law mandates reporting of boycott requests and imposes civil and
criminal penalties against boycott participants. Arab boycott requests have
risen sharply in tandem with the U.S. financial crisis and the rapid growth of
Islamic banking. The Commerce Department's Bureau of Industry and Security
reported a 20 percent increase in Arab boycott requests overall from 2005 to
2006, and the Congressional Research Service reported 24 boycott requests to
U.S. companies in fiscal 2007 from little Bahrain alone.
On April 5, 2006, Congress unanimously condemned Saudi
Arabia for its continued enforcement of the boycott - which violated
commitments the Saudis made to the World Trade Organization in 2005.
Nonetheless, last August Saudi Arabia and other Gulf states threatened to
boycott Nissan, which aired a commercial on Israeli television promoting a fuel-efficient
car, and demanded the Japanese carmaker's apology. Not a word from Washington.
Instead, the Treasury Department, hungry for
petrodollars, is holding seminars to promote Islamic banking and U.S. taxpayers
are footing the bill. This practice must stop. Islamic banking corrupts our
financial system, enables the illegal Arab economic boycott of Israel and
entangles government with Islam in violation of the First Amendment's
Establishment Clause.
Rachel Ehrenfeld is director of the American Center for
Democracy. Samuel A. Abady is a civil rights lawyer.
Muslim finance is the application of 7th century camel
caravan trade to the 21st century of global commerce.
MUSLIM FINANCE
Banking On Allah
Devout Muslims don't pay or receive interest. So how can
their financial system work?
By Jerry Useem
There's nothing in Osman Abdullah's bearing to suggest
an Islamic fundamentalist. He's a businessman, sober in dress and political
outlook. Ask him about America, and he'll talk fondly of his time at the
University of Wisconsin, where he earned his MBA. But when it comes to his
banking habits--and the Koran's ban on giving or receiving interest--Abdullah
turns deadly serious. "Allah gave us very clear instructions: Don't make
money on money," he says. The words from Chapter 2, Verse 278 of the Koran
are, in fact, quite specific: "O you who believe! Have fear of Allah and
give up what remains of what is due to you of usury.... If you do not, then
take notice of war from Allah and His Messenger." "If I break
that," says Abdullah, "I'm dead sure that I'm going to get very bad
results in the hereafter. I believe it as I believe in talking to you
now."
We are talking, just now, outside Shamil Bank in the tiny Persian Gulf state of
Bahrain. It's the bank where Abdullah keeps his money, and, except for the
tellers' untrimmed beards and the section for ladies' banking, it looks much
like any other: customers standing in line, an ATM machine, a hum of
efficiency.
But Shamil is not like any other bank. For starters, Abdullah's savings account
isn't really a savings account at all, but something called a mudarabah account: Instead of earning fixed interest, his
savings are invested directly in a range of ventures, such as construction
projects and real estate. "In Islam, money has to work," Abdullah
explains. "If it works, we have to share the profits. If it doesn't, you
don't owe me anything else." That means his nest egg could shrink if
enough of those ventures fail. But, he says, "I'm willing to take the
risks."
So, it turns out, are an increasing number of Muslims. At a time when the words
"Islam" and "finance" are more likely to conjure the
association "terrorist money laundering," the Muslim world has
quietly embarked on a very different sort of jihad: building a financial system
where interest--a phenomenon as old as money itself--does not exist.
Spread across the Middle East and beyond are more than 200 Islamic financial
institutions: banks, mutual funds, mortgage companies, insurance companies--in
short, an entire parallel economy in which Allah, not Alan Greenspan, has the
final say. Industry growth has averaged 10% to 15% a year. Sniffing
opportunity, conventional banks like Citibank and HSBC have opened Islamic
"windows" in the Gulf. And while the industry's market share is still
modest--about 10% in Bahrain--its very existence challenges the modern
assumption that global capitalism flattens all before it.
Which leaves just one question: How on earth can it work?
This spring, Shamil Bank helped Abdullah buy a car through a transaction known
as murabaha, which is more distinct from mudarabah in function than in spelling. In a deal you'll
never see from GMAC, Abdullah identified the Toyota Corolla he wanted, then
asked the bank to buy it from the dealer for roughly 3,600 dinar
(about $9,500). At the same time he agreed to buy the
car from Shamil for 4,000 dinar, to be paid in monthly installments over three
years. The two sales were executed almost simultaneously, but because Shamil
Bank took possession of the car for a brief period of time, everything was
kosher. Or rather, hilal.
The result looked a lot like interest, and some argue that murabaha
is simply a thinly veiled version of it; the markup Shamil charges is very
close to the prevailing interest rate. But bank officials argue that God is in
the details. For example, any late fees Shamil collects must be donated to
charity, and the bank cannot penalize a borrower who is genuinely broke.
Mortgages, meanwhile, are out of the question for Abdullah. That's why a house
he's building in his native Sudan sits unfinished near the Nile River. "I
started it four years ago," he says. "Sometimes I stop the
construction until I collect enough money."
Given the inconveniences, you might ask: What's the point? Can earning a little
interest really be such a big deal? Bahrain's most eminent Islamic scholar
provided some answers.
I found Shaykh Nizam Yaquby at the back of his
family's store in Bahrain's humming market--a diminutive, robed figure partly
obscured by the piles of papers and books on his desk. They include both the
hadiths, or sayings of the Prophet, and Inside Secrets to Venture Capital,
which more or less capture Yaquby's eclectic
background. He is trained in both economics (at McGill University in Canada)
and in Islamic sharia law (in Saudi Arabia, India, and Morocco). During its
heyday many centuries ago, sharia was the world's most vibrant body of
commercial law, its contracts recognized from the Arabian
peninsula to the Iberian peninsula. Then it fell into a long decline,
which Yaquby and other Islamic scholars are doing
their best to reverse.
As a member of Shamil Bank's five-member sharia board, Yaquby
issues fatwas, or opinions, on which transactions are Islamically acceptable
and which are forbidden. On the day of my visit he was dispensing advice to a
steady stream of callers. Was it sinful, a 15-year-old boy wanted to know, to
continue living in his father's house while his father was receiving interest?
"There is a hadith: 'The body that is nourished from nonpure sources is
bound to go to hellfire,' " Yaquby declared with
a somewhat incongruous grin. But his advice to the boy was milder. "My
answer to him was that he should advise his father politely and gently.
However, the boy was not committing any sin, because his father is responsible
in the sight of Allah."
Just how serious a sin is paying or receiving interest? Yaquby
noted that Christianity and Judaism got over their hangups
about it sometime during the Middle Ages. (The Old Testament offers several
stern warnings about interest.) But Islam never really budged. Back in the days
of Mohammed, the reasons for deploring interest were pretty self-evident.
Loan-sharking was rampant, and failure to repay a loan could mean slavery. By
outlawing interest, Islam advocated an economy based on risk-sharing, fair
dealing, and equity--in both the financial and social-justice senses of the word.
Islamic scholars believe this system is superior on several counts. It leads to
more prudent lending, they say, by encouraging financiers to invest directly in
an entrepreneur's ventures. ("A financial system without interest is more
interested," says Shaykh Yusuf DeLorenzo, a Virginia-based Islamic
scholar.) If adopted fully, say the scholars, interest-free finance would also
prevent future Enrons and Argentinas.
"One reason for prohibiting interest is to keep everybody spending
according to his limit," says Yaquby. "This
consumerism society was only created because of the banking system, because it
encourages 'buy today, pay tomorrow.' You also have poor economies in debt to
rich ones. This is because of borrowing and lending with interest. So this is creating big economic chaos in the world."
Fourteen centuries after these principles were laid down, their application can
be a tricky matter. Needless to say, ancient texts are mute on such matters as
derivatives and stock options, meaning scholars like Yaquby
must extrapolate. Currency hedging, for instance, is prohibited on the basis of
gharar, a principle that says you shouldn't profit
from another's uncertainty. Futures contracts? Not allowed, since Mohammed said
not to buy "fish in the sea" or dates that are still on the tree. Day
trading? Too much like gambling. Credit cards? Not cool, though debit cards
are.
Bonds? Well, that's where the disagreements start. Malaysian scholars have
approved the issuance of specially designed "Islamic bonds." But Middle
Eastern scholars, who take a harder line than their Far Eastern counterparts,
have roundly criticized them. "Playing semantics with God is very
dangerous," warns Yaquby. "Calling
fornication 'making love' doesn't make it any different."
Everybody can agree on one matter, though: It's okay to buy and sell stocks,
since stocks represent real assets. And now they can be traded safely using the
Dow Jones Islamic index.
Launched in 1999 with the help of Yaquby, the index
offers a prescreened universe of stocks for the devout stock picker. One screen
removes companies that make more than 5% of their revenues from sinful
businesses. That expels such notables as Vivendi (alcohol), Citigroup
(interest), Marriott (pork served in hotel restaurants), and FORTUNE's parent
company, AOL Time Warner (unwholesome music and entertainment). A second screen
eliminates companies with too much debt, the cutoff being a
debt-to-market-capitalization ratio of 33%. A third screen applies the same
standard to a company's cash and interest-bearing securities, while a fourth
makes sure that accounts receivable don't exceed 45%
of assets. "Islamic investing is low-debt, nonfinancial, social-ethical
investing," explains Rushdi Siddiqui, who
manages the index at Dow Jones.
Of the 5,200 stocks in the Dow Jones global index, 1,400 make the cut--yet even
those may not be entirely pure. If a company makes, say, 2% of its money from
selling pork rinds, an investor must give away 2% of his dividends to charity,
a process known as "portfolio purification." Then, too, he should
urge management to exit the pork-rind business.
So what does a typical Islamic portfolio look like?
Actually, a lot like the Nasdaq 100, since technology companies tend to carry
acceptable levels of debt. That made for a rough 2001, as favorites like
Microsoft and Intel sputtered. But demand for Islamic mutual funds is booming.
There are now more than 100 funds worldwide, including three based in the U.S.,
while a clutch of Internet companies position themselves as the Muslim E*Trade (iHilal.com), the Muslim Morningstar (Failaka.com),
and the Muslim Yahoo Finance (IslamiQ ). The latter offers members a feature called "Ask the
Scholars."
All of which raises another question: How high a price must investors pay for
following the rules? "Some people say you have to apply the COBM--the Cost
of Being Muslim," says Yaquby. But he and others
insist that no such tradeoff exists. Obey God's rules, in other words, and your
portfolio will prosper.
It is an argument that holds great appeal in the Arab world, where moral decay
is frequently blamed for the region's millennium-long material decline.
Nostalgia for the lost golden era of Muslim power has been a strong impetus for
Islamic banking. "The Islamic economy covered half the world," says
Jamil Jaroudi, Shamil Bank's head of investment
banking. "How do you think Islam reached Indonesia and Malaysia? It was
through traders, not jihad." Indeed, Mohammed himself was a trader who
early in his life led a caravan from Mecca to Syria.
The golden era gave way to a period of colonial domination in which
Western-style banking was imposed on much of the Islamic world--a source of
resentment to this day. (Individual Muslims handled this dilemma differently.
Some opened interest-bearing accounts under the principle of darura, or overriding necessity. Others opened accounts but
refused the interest. Still others opted for their mattresses.) It was mostly
that resentment that gave rise, in the 1940s, to the quasi-academic field known
as Islamic economics.
As an attempt to build a "third way" independent of capitalism and
communism, Islamic economics was never long on scientific rigor; one
contemporary academic calls it "bad moral
philosophy with a little Keynes thrown in." But it produced a voluminous
critique of Western capitalism and its attendant evils, notably speculation,
consumerism, volatility, inequality, "unnecessary" products, large
corporations, and of course usury. Whereas conventional economics was built on
Adam Smith's notion of harnessing human nature ("Every man working for his
own selfish interest will be led by an invisible hand to promote the public
good"), Islamic economics proposed to reform human nature. "The
intended effect," the University of Southern California economist Timur Kuran has written, "is to transform selfish and
acquisitive Homo economicus into a paragon of virtue, Homo Islamicus."
For decades this vision remained just that--a vision. It was the oil boom of
the 1970s that turned it into a movement. In 1973, flush with petrodollars and
keen to reassert their Islamic identity, Muslim nations formed the Islamic
Development Bank, a sort of interest-free version of the World Bank. Two years
later the first Islamic retail bank began accepting deposits in Dubai.
Not everyone welcomed the phenomenon. While Malaysia promoted Islamic banks as
a constructive outlet for religious fervor, Saudi Arabia would not allow them,
lest they imply that the kingdom's existing banks were un-Islamic. (The Saudi
royal family, not incidentally, subsists largely on income from conventional
investments.) The government finally allowed one to open in 1987, though the
word "Islam" was nowhere in its name. At the radical end of the
spectrum, Iran, Pakistan, and Sudan officially Islamicized
their entire banking systems--in theory anyway. In practice, their
fundamentalist clerics had little interest in economics--the Ayatollah Khomeini
famously scoffed that the Islamic revolution was not about "the price of
watermelons"--and settled for changes that were mostly cosmetic.
Elsewhere, scandal threatened to capsize the whole enterprise. The 1989
collapse of several nominally Islamic investment houses in Egypt led to
disclosures about some very un-Islamic practices, such as fraud. And last
year's failure of a Turkish Islamic bank, Ihlas Finans, panicked depositors at Turkey's other Muslim banks.
But in banking centers like Kuwait, Dubai, and especially Bahrain, which is
known for its strict regulatory oversight, Islamic banking is serious business.
A respected group known by the acronym AAOIFI (Accounting and Auditing
Organization for Islamic Financial Institutions) has codified sharia rulings
into a set of industry standards. The early zealots have given way to more
pragmatic professionals. Even the sharia scholars--once recruited from the
local mosque and barely fluent in English, much less
financial statements--now come toting advanced degrees in economics. "In
the last five years," says Shamil Bank's Jaroudi,
"the industry has accomplished more than it did in its first 20."
Now it is making inroads in the U.S., home to seven million Muslim-Americans.
Here the most pressing issue is home ownership. Since buying a house usually
requires a mortgage, many Muslims end up renting their whole lives, thus missing
out on a crucial component of the American dream. Azmat Siddiqi was one of
them. A manager at Applied Materials who immigrated from Pakistan 22 years ago,
he hoped to circumvent the problem by making an all-cash purchase. After years
of saving, he, his wife, and their two daughters finally had enough for their
dream property: a $1.3 million plot of land facing the mountains in Saratoga,
Calif. But then Siddiqi's stock holdings plummeted, leaving him $275,000 short.
"I thought, 'By golly, should we let go of it?' " he says. "I
looked at the Koran for guidance."
He also looked on the Web, where he discovered a Pasadena-based company called Lariba, which offers a lease-to-own arrangement for Muslim
homebuyers. Lariba bought the property in partnership
with Siddiqi, who agreed to pay rent to Lariba while
buying out its $275,000 ownership share over ten years. Unlike interest, the
rental price could fluctuate as market conditions changed. "There was a
very high premium," says Siddiqi, 45. "But to me this was like a
godsend opportunity to achieve my real estate objective and not incur the
negatives of interest."
Lariba is still tiny in relative terms; it closes 15
to 30 mortgages a month. But it recently struck a deal with Freddie Mac that
could vastly increase its volume. "We are like ants among the
giants," says Lariba's founder, Dr. Yahia
Abdul-Rahman. "Insha'allah, we will catch
up." Meanwhile, HSBC has begun offering Islamic mortgages in the New York
City area.
Despite growing acceptance of Islamic banking, supporters concede that it has a
long way to go. The basic problem, they say, is that Homo Islamicus
keeps acting a lot like Homo economicus. Take the idea of profit-and-loss
sharing. For the concept to work, a bank must know how much profit, or loss, there
is to share. Yet in countries with widespread use of double bookkeeping--one
for the tax collector, one for the safe--business owners can easily understate
profits or overstate losses. "If someone is using [an Islamic bank], it
doesn't mean that he is guaranteed to be moral," says Saiful Azhar Rosly, an economics
professor at the International Islamic University in Malaysia. "Good
Muslims are still tempted by the devil."
Another problem is that profit-and-loss sharing tends to attract entrepreneurs
with dimmer prospects, who are looking to share losses in the event of failure.
Entrepreneurs with the best prospects are more likely to seek out
fixed-interest financing to maximize the returns on their presumed success. The
"adverse selection" problem saddles Islamic banks with bad risks.
Perhaps not surprisingly, then, profit-and-loss sharing deals constitute only
15% of Shamil Bank's transactions, while the murabaha
double-sale, considered the most gimmicky of
techniques, accounts for more than 30%. "We are very careful because
[profit-and-loss sharing deals] are very risky," acknowledges Shamil's
CEO, Dr. Said Al-Martan. "You have to be
involved in the company, which is not easy in this part of the world. It's much
easier to do leasing or murabaha."
Such admissions have left the industry open to charges that it has opted for
pragmatism over purity--something Islamic hard-liners have pounced on.
"And so the core Islamic concepts sit neutered,
no longer a different paradigm but instead just another member of the product
range," writes one firebrand on the Website islamic-finance.com.
"What a humiliation this is for a great body of law." Another writer
is even more strident: "The 'Islamic Bank' is a Trojan horse which has
been infiltrated into Dar al-Islam.... [It] is a totally crypto-usurious
institution and like all other usurious institutions must be rejected and
fought."
When I read some of these passages to Yaquby, he
smiled patiently. "These are very sincere people, but they are not
realistic people," he said. "Of course we
would like Islamic banking to have more activities with benefit to society, and
also to have more courage in sharing risk. But if you're saying that until we
reach this ideal state, we should do nothing, this is where we object. Because
until then, me and you have to do banking. We have to purchase our homes. We
have to invest our wealth."
These days, Islamic banking faces another challenge: the lingering suspicion
that it is connected to terrorism. So far, there is little evidence that its
activities are any more suspect than those of conventional Arab banks. (The
U.S. government's list of terrorist organizations includes one small Islamic
bank, Al-Aqsa Al-Islami in the West Bank.) Islamic
finance has always had more to do with conservative, devout Islam than radical,
political Islam. Nonetheless, Sept. 11 has put the industry on the defensive,
with some depositors withdrawing money for fear it would get caught in an
anti-terrorism dragnet. "A lot of investors were frightened, to be honest,"
says Atif Abdulmalik, CEO of First Islamic Investment
Bank in Bahrain." 'Collateral damage,' I call it."
Even if those fears prove unfounded, there's the question of how Islamic
finance fits into the broader issues raised by Sept. 11. Could it reduce the
Muslim world's isolation by serving as an intermediary between pure belief and
pure capitalism? Or will its litany of rules merely build the walls higher?
Should it be seen as an innovative force? Or a reactionary one?
Among the optimists is Frank Vogel, a Harvard Law School professor who helps
organize the university's annual conference on Islamic finance and has
co-written a book on the topic. "It's very much in our interest that it succeed," he told me, "yet I'm afraid that we're
going to be against it, that we're going to make all these snotty remarks. Time
is running out for healthy, happy experiments like this. The radicalization,
the desire to make yourself as ugly to the West as you can--that rage isn't
only at us, it's at the secular forces in their own societies. We need Islamicization, because they're not going to stop being
Muslims overnight."
Oddly, Vogel's co-author, Harvard Business School finance professor Samuel
Hayes III, gave me a different slant. In his view, literalist interpretations
of the Koran threaten to choke off Muslim participation in the global economy.
"Prophet Mohammed's teachings take very practical account of commerce in
the seventh century," says Hayes. "It's not up to me to say, but if he
were living today, I think he would find some accommodation. [Otherwise],
there's no way a business can operate competitively."
In the end, even Islamic scholars concede that Hayes might have a point.
"Once you face reality," Yaquby said
shortly before I left his store, "it's not possible to isolate yourself
from the whole economic system of the world."
Malaysia's Bank Islam vows probe as financial scandal
looms
October 28, 2005
KUALA LUMPUR -- Malaysia's
first-ever Islamic bank vowed on Friday to search out and prosecute those
responsible for $127 million in losses as the issue threatened to turn into a
major financial scandal.
Bank Islam's managing director Noorazman Aziz said
that it was working with the police, central bank and anti-corruption
authorities to get to the truth behind the massive net losses for the financial
year to June.
"Once investigations are completed, we will push for prosecution," he
said in a statement.
The bank, which was established in 1983, posted net profits of 85.74 million
ringgit ($22.7 million) last year but dived into the red in the latest balance
sheet that showed a 480.0 million ringgit net loss.
BIMB Holdings, which controls Bank Islam Malaysia, said that the loss was
mainly due to a provision of 774 million ringgit, mostly to cover
non-performing loans from its branch in Labuan, Malaysia's offshore financial
hub.
"Closer supervision and stricter accounting treatments revealed that
losses were much larger than what the head office in Kuala Lumpur had expected,"
the bank said.
"Loans were given out generously without sufficient understanding of the
risks involved, including country and project risks," it said.
Growing outrage over the losses led lawmakers this week to call for heads to
roll at Bank Islam, while Prime Minister Abdullah Ahmad Badawi said that the
bank had to find the culprits immediately.
"Bank Islam must act fast. If the negligence has elements of crime,
appropriate action must be taken without delay. We cannot forgive this
negligence," Abdullah was quoted saying in the New Straits Times Friday.
Malaysia's second finance minister, Nor Mohamad Yakcop,
has reportedly said that the loans were given to "non-relevant
parties" and that action would be taken against those responsible.
Noorazman declined to reveal details of the
investigation and said that poor administration was hampering the process.
"It is proving to be an arduous task for us because of poor bookkeeping
practices, which require us to actually painstakingly reconstruct the credit
files," he said.
"We also understand that some of the companies that took these loans are
no longer in existence," he added.
Malaysia, largely Muslim but with sizable Chinese and Indian minorities, is a
leader in Islamic banking after introducing the service in 1983 that provides
products and services that comply with Sharia or Muslim religious laws banning
the earning of interest.
How the West Came To Run
Islamic Banks (Muslim banks are owned by the west)
Giants like Citigroup dominate the sector, through
Islamic subsidiaries and hired Sharia scholars.
By Owen Matthews
Newsweek
Oct. 31, 2005 issue - You're a pious Muslim with a few million
in oil dollars to invest. So would the perfect Islamic bank for you be
Citigroup, perhaps? HSBC?
Actually, yes. Giant Western banks—or, rather, their
Islamic subsidiaries—are leading the market for financing that complies with
Qur'anic laws forbidding lending money for profit, or sponsoring un-Islamic
activities such as gambling or smoking. Citigroup's Bahrain-based Citi Islamic
subsidiary was first into the market in 1996, and now leads the pack with
deposits of more than $6 billion. Citi and at least 10 other Western majors
dwarf the biggest locally owned rival, Al Baraka of Bahrain, worth a little
more than half a billion.
Westerners are drawn in by oil money. The Middle East is
enjoying its fastest growth in a generation. According to Islamic Banking and
Finance magazine, there are $265 billion in deposits that comply with Sharia,
the law that governs the behavior of Muslims, finances included. That's up 17
percent in the past year, and by almost 10 times in the past decade, according
to the U.A.E.'s Sharjah Islamic Bank. Since 1996 Dow Jones has offered indexes
of stocks vetted by Sharia scholars. Now there are more than 40 Islamic
indexes, and last year Islamic stocks on average outperformed the market by 5
percent.
How did Western banks come to dominate a market
predicated on Islamic purity? A generation ago, an Islamic bank was just a
simple investment house that, instead of paying interest on deposits, created
dividends by buying and renting out property. "Islam forbids making money
on money," says Alun Williams, marketing director of the new Islamic Bank
of Britain. "But it does allow you to rent, and to trade." Now
Western banks are using that template to pioneer Islamic credit cards, Islamic
mortgages and Islamic bonds (known as sukuks) that during the past year have
financed everything from a $1 billion upgrade of Dubai airport to Pakistani
government debt. As growth picks up in the Middle East, more and more
Muslim-run corporations find they need sophisticated services, from bond issues
to derivatives, that so far only Western banks provide.
The Western banks gain Islamic credibility by hiring
top-drawer Sharia scholars to sit on their boards. "The caliber of your
scholars is the basis on which these [financial products] are marketed,"
says Majid Dawood, a London-based consultant on Sharia compliance. Because
there are just a handful of financially literate Islamic scholars in the
market, most sit on the boards of many institutions and can, says Dawood,
command salaries of as much as $88,500 per year per bank. Sheik Mohammed Taqi Usmani, a former Sharia
judge on the Supreme Court of Pakistan, sits on the board of Citi Islamic,
HSBC, Al Baraka and eight others, and is chairman of the Dow Jones Islamic
indexes' Sharia panel.
But the trend toward investing in Islamic funds really
took off after 9/11, when many Muslims began bringing their money home from
America. Since then, international banks like Societe
Generale, BNP Paribas, Deutsche Bank and Standard
Chartered have all entered the Islamic banking business. Accounting and
consulting firms like Ernst Young are now offering Islamic financial services.
The recently opened Islamic Bank of Britain, owned by leading Islamic banks and
other institutions from the Middle East, plans to create a retail-banking chain
for "average income" Muslim Britons, says Williams.
Customers in Muslim nations are driven to Western banks
in part by distrust of their own banks. Prominent failures, such as the 2001
collapse of Turkey's Ilhas Finance dented depositors'
faith. In Turkey, the Islamic world's largest economy, the fledgling
Islamic-banking sector is lobbying the state to guarantee deposits of up to
$36,000, which could in time make Turkey a major player. In Malaysia, where
more than 11 percent of deposits are now Sharia-compliant, local houses like
Bank Muamalat are working to gain on the
multinationals. "Local Islamic banks lack sophistication," says
Humayun Dar, an Islamic economist. "Customers are still more comfortable
with an international name." Even if the rules are strictly local.
Islamic banks lack regulatory norms: Expert
6/3/2006
The Peninsula
DOHA • A number of key issues related to
Islamic banking were discussed at a seminar here recently. Lack of adequate
regulatory norms for Islamic banks in Qatar and a near absence of facilities to
train personnel to man Shariah-compliant banks were some of the main topics
discussed in some detail.
One of the speakers, Dr Ali Al Saloos, who is a prominent Doha-based Muslim cleric known
for his deep understanding of Islamic economics, banking and finance, stunned
the audience by saying that some Islamic banks claim to be Shariah-compliant
while in practice they are not.
"They are cheating Allah and the
people," he said of such banks. According to Al Saloos,
most directors of Islamic banks do not know what Shariah-compliant banking is,
yet they remain on their boards. "Many of them have no idea about Islamic
banking," he said.
"I am afraid some of these Islamic banks
may start doing things that are actually forbidden by Shariah," said the
scholar. He, however, cautioned people not to generalise
based on what he said.
"I wish to clarify that my intention
here is not to create suspicion in the minds of people."
Al Saloos said
that despite the fact that Qatar has a vibrant Islamic banking industry, there
is hardly any focus on creating cadres who are qualified and trained to man
Islamic banks.
What is needed is a department where Shariah
and economics are taught together and this kind of inter-disciplinary teaching
facility can be set up at Qatar University itself, said the cleric.
Muajeb Turki Al Turki,
from the Qatar Central Bank (QCB), also addressed the symposium. He talked of
the advent and growth of the industry in the country since 1982 when the first
Islamic bank was established.
Al Turki said that the QCB had recently come
out with fresh directives that permit conventional banks to set up Islamic
banking windows as well as exclusive branches.
A speaker from the Qatar Islamic Bank (QIB),
Abdullah Mustafa Kamil, however, pointed out that regulations governing the
Islamic banks in Qatar were not adequate.
He lauded the role of Islamic banks in the
country in controlling inflation. According to Kamil, the Islamic banks needed
to put more effort in creating public awareness about the industry and the
services and products they offer.
Conclusion: Muslims must pay cash or use lease buy-back
schemes to conduct major purchases of goods and services. Thus
the standard of living of most Muslims is low unless you are a oil barren sheik who can purchase a German car made out
of fine silver.
