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.


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 (, the Muslim Morningstar (, 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 "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


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.