Keeping Clean: How Islamic Banks Fight Money Laundering? Essay

1595 Words Oct 18th, 2011 7 Pages
Keeping Clean: How Islamic Banks Fight Money Laundering?

By: Hany Abou-El-Fotouh

Money laundering is not a new trend. It is a process that takes illegal or “dirty” money generated from illegal activities and puts it through a cycle of transactions, so that it comes out at the end as apparently legal or clean money. The process is driven by criminal activities and conceals the true source, ownership, or use of funds.

No one can deny that money launderers may use Islamic banks as a place to clean their dirty money through the use of various financial instruments. In fact it is important to ensure that Islamic banks are well protected from being unwittingly used by money launderers. Additionally, the public at large should continue
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personal donations and profits from businesses and charitable organizations, as well as from criminal sources. Terrorists use same money laundering techniques to evade authorities' attention and protect the identity of their sponsors and the ultimate beneficiaries of the funds. They use conventional and Islamic banks, informal value-transfer systems, Hawala and physical transportation of cash, gold and other valuables through smuggling routes.

Money Laundering from Islamic Perspective

Islam forbids involvement in economic activities which are not in line with the teaching of Islam such as money laundering activities. Allah says in al-Quran surah al-Baqarah verse 188: “And do not eat up your property among yourselves unjustly and do not use it as bribe for the judges, with intent that you may eat up wrongfully and knowingly (even) a little of other people’s property. The word unjustly here means property acquired through unlawful ways such as deceiving, stealing, smuggling, etc. Money laundering involves proceeds of unlawful activities and Islam does not allow any property derived from such sources.

Islamic banks are required to combat money laundering and terrorist financing by laws and regulations and the ruling of Islam. Therefore, Islam obliges Muslims to do good things and forbids criminal activities. This duty rests with individuals and corporate entities as Allah says in al-Quran surah al-Imran verse 104:- Let there arise from you a group of people

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