June 24: Perils of Shariah-Compliant Finance
Center for Security Policy Press Release
From a recent statement from the Center for Security Policy on Shariah Finance...
In recent letters to America's largest banks and hedge funds, Center for Security Policy President Frank Gaffney, Jr. has warned financial executives about the potential regulatory, legal and national security pitfalls of "Shariah-Compliant Finance" (SCF). These include civil and criminal exposure, as well as serious reputational risk for those engaged in SCF transactions.
The letter (an example of which is attached, as is the list of recipients) was prompted by the recent emergence in Western capital markets of Shariah-Compliant Finance (also marketed as "Islamic finance") and by a lawsuit now before the 2nd Circuit Court of Appeals in Philadelphia. The litigation was brought by a consortium of insurance firms, including Chubb, Ace and Allstate, and by the investment firm of Cantor Fitzgerald and accuses the Kingdom of Saudi Arabia, Dubai Islamic Bank and others of funding terrorism in the name of Shariah and jihad (holy war).
The Center for Security Policy's warning was made even more timely and urgent by the revelation on June 16 that a senior Mideast executive at U.S. investment bank J.P. Morgan Chase & Co. is being detained in Dubai as part of a widening fraud investigation of the Dubai Islamic Bank. The Chase executive, Omair Mooraj, is managing director and head of Islamic banking for the entire region.
Mr. Gaffney warned each of the addressee firms that they may be exposed to reputational risk and price risk if they are invested in or have prime broker relationships with banks engaged in Shariah-Compliant Finance. Such risks became evident in the Philadelphia lawsuit as several of the key defendants are "Shariah-compliant" banks and virtually all are "Shariah-compliant" businesses.
Mr. Gaffney observed that SCF is a device used to legitimize Shariah Law, a brutally oppressive theocratic-political-military doctrine. The Taliban imposed Shariah Law in Afghanistan. Today, it is the law of the land in Iran, Sudan and Saudi Arabia, three of the most repressive regimes in the world, all of which have extensive ties to jihadist terrorism. According to its adherents, Shariah Law requires companies engaged in SCF to donate to Islamic charities using zakat (tithing for charitable purposes) and the "purification" of proceeds of investments that Shariah advisors deem to be "impure." There are eight categories of Shariah-approved charities, of which half can be interpreted to mean vehicles for funding violent jihad.
The Philadelphia lawsuit alleges that Dubai Islamic Bank and other named Islamic Shariah banks have funneled zakat and "purified" funds to Islamic charities, which then funded al-Qaeda terror. There is growing concern on the part of the SEC, Treasury and Justice Departments and the Congress about the lack of transparency in the Shariah-Compliant Finance market and its implications for compliance with existing securities laws.
Mr. Gaffney provided each bank and fund with a legal memorandum entitled Civil Liability and Criminal Exposure for U.S. Financial Institutions and Businesses engaged in Shariah-Compliant Finance.
(http://www.stopshariahnow.citymax.com/f/Research_Memo_re_Legal_Risks_of_SCF_(3).pdf. It concludes that any U.S. financial institution promoting Shariah-Compliant Finance here or abroad is at risk of violating federal and state securities laws that require due diligence, transparency and disclosure, RICO statutes and other laws that prohibit funding of terror.
The Center's letters strongly recommended that each firm examine their portfolios for exposure to Dubai Islamic Bank and other named defendants in the Philadelphia lawsuit. Additionally, he warned that their prime brokers may be involved in Shariah-Compliant Finance and urged their brokers to ask if they are disclosing: material facts about Shariah Law; its mandate for jihad; public verbal and written statements calling for jihad made by their paid Shariah advisors; methods of purification of funds; and the beneficiaries of such funds and zakat.
Mr. Gaffney cautioned each firm about broader questions over the United Arab Emirates' ties to Islamist extremism, terrorism and smuggling prohibited goods into Iran:
"Directors and officers of financial institutions often profess no knowledge about Shariah. They typically claim to have no responsibility or accountability for their actions that explicitly or tacitly support SCF. On receipt of the legal memorandum, however, they can no longer maintain a willful blindness and ignore their responsibility to disclose the violent theopolitical goals and methods of Shariah.
"Specifically, the addressees can no longer claim that they know nothing about Shariah advisors, and therefore have no responsibility or accountability to disclose the statements by those advisors supporting violent jihad, terrorist organizations, warfare against all non-Muslim states and discrimination against, and, in many cases execution of non-Muslims of all faiths, ex-Muslims (apostates), homosexuals, anyone supporting separation of church and state, etc."
For more information about the Center's efforts to counter Shariah-Compliant Finance and related work on the dangers posed by the seditious agenda it is advancing, please visit www.StopShariahNow.org. The Center for Security Policy (www.centerforsecuritypolicy.org) is a non-profit, non-partisan national security organization that specializes in identifying policies, actions, and resource needs that are vital to American security and then ensures that such issues are the subject of both focused, principled examination and effective action by recognized policy experts, appropriate officials, opinion leaders, and the general public....
Read the Example Letter and review the entire list of hedge fund and banking recipients here...
May 11: Financial Jihad - What Americans Need To Know
Announcing an important new whitepaper for the ordinary investor: "Financial Jihad - What Americans Need to Know," authored by Christopher Holton, Vice President, Center for Security Policy - Download it here.
Excerpt:
"In his excellent essay, “What Drives Saudi Arabia to Persist in Terrorist Financing?,
IDF LTCOL Jonathan D. Halevi succinctly explained why individual Muslims and
Islamic powers fund terrorism:
“All Islamic scholars are unanimous in their interpretation of these verses
regarding the centrality and importance of financial jihad as part of Allah’s jihad
commandment to Muslims…In his edict on jihad in Chechnya, (noted Saudi Islamic
scholar Hamud bin Uqla) al-Shuaibi determined that the significance of financial jihad is
not inferior to self-sacrificing jihad, being even more important.”
The Islamists know the importance of economic warfare well. They are in the process ofinfiltrating our financial markets through something called “Islamic Finance.”
Meanwhile, Americans are funding some of our worst enemies in the war on terror
through our own investments.
In short, America is losing the financial war on terror because Wall Street is embracing a subversive enemy ideology on one hand and providing corporate life support to state sponsors of terrorism on the other hand.
To create the setting for the situation America finds itself in today, consider an analogy. Imagine that it is 1943 and titans of Wall Street are promoting something called “Shinto Finance,” based on the Japanese theopolitical doctrine, while at the same time, they invest American dollars in foreign companies with active business ties to Imperial Japan. That would not have been acceptable in 1943 and it shouldn’t be acceptable in 2008. But accepted it is; in fact in some circles in America, notably Harvard Law School and the National Foreign Trade Council, this deplorable situation is celebrated....."
Read the rest here: Financial Jihad - What Americans Need To Know
May 10: A Secular Nightmare - Investigative Report from Alyssa Lappen
The global sub-prime mortgage mess would have been “unthinkable in the Islamic capital markets sector,” Malaysian Islamic finance scholar Mohammed Mahmud Awan told Arab News on April 24; Islamic law, or “shari'a principles” would prohibit selling “a debt against a debt,” Awan said at a Bahrain university globalization conference. Trading trillions of dollars in debt without assets backing them caused the crisis, Awan claimed, adding that the “Islamic finance model...would have easily prevented the current economic crisis.”
Others disagree. All “Islamic finance today is interest based,” notes Rice University Islamic economics, finance and management chairman Mahmoud el-Gamal in the Financial Times. Islamic banking, merely “shari’a arbitrage,” is “first and foremost about religious identity,” el-Gamal says.
Indeed, Islamic finance debt instruments are no better than Western mortgage securities, and probably worse. Islamic sukuk al-ijara (shari’a bonds) are merely reverse-engineered structured finance instruments. Many grave secular risks accompany the growing foothold of shari'a finance in the West.
Despite claims of their superior safety by International Center for Education in Islamic Finance professor Awan, Islamic financial institutions manufacture “special purpose entities” (SPEs)---which coincidentally helped destroy Enron. Islamic financial engineers merely renamed the prickly SPEs “special-purpose vehicles (SPVs)”---legal devices to “restructure interest-bearing debt, collecting interest [as] rent or [a] price mark-up,” el-Gamal observes.
Here's how they work: sukuk bond issuers sell real estate or assets to SPVs, which then capitalize their investment by selling share certificates. In turn, the SPVs then lease back the assets they purchased to the sukuk issuers, collecting principal plus interest, which they pass on to sukuk investors as “rent.” When the sukuk matures, the SPVs sell or return the property to the sukuk issuers. Supposedly safe “alternative” Islamic finance instruments that claim to avoid usury, in short, use Western structured finance tools---“some of the most complex ever created.”
Repeat. Using Western securitization technology, shari’a finance banks now transform liquid, traceable cash flows from interest-bearing debt---that is, real interest-bearing assets---into illiquid assets. ......
Read the entire investigative report here at Front Page Magazine....
April 22: Statements against Shariah-Compliant Finance - from American Muslims and ex-Muslims who reject the authoritarian system of Shariah
Listen to Wafa Sultan's statement, recorded from hiding, against Shariah law and al Qaradawi's fatwa against her - AUDIO TEXT
Zuhdi Jasser, President of the American Islamic Forum for Democracy, statement against Shariah Compliant Finance
Manda Zand Ervin, President of the Alliance for Iranian Women, statement against Shariah Compliant Finance
April 21: Harvard Board of Governors warned of moral responsibilities as they promote Shariah law in America...
Center for Security Policy President Frank Gaffney has sent the following letter to the Board of Governors of Harvard University (excerpts):
"In keeping with the efforts we made last week to convey to the Board our Center’s serious concerns about the then-impending Eighth Harvard Islamic Finance Forum, I wanted to make sure you also received a copy of the joint letter disseminated at the panel discussion convened on this subject last Thursday at Pound Hall in the University’s
Law School.
(See the enclosed press releases.)
"We will shortly be communicating further about the failure of the Forum either to afford an opportunity for Center representatives to provide information about the civil and criminal exposure inherent in Shariah-Compliant Finance (the subject of the legal memorandum previously sent to you and members of the Board of Overseers), or otherwise to provide disclosure of such information to participants.
"Suffice it to say for the moment that we consider such failures to be significant breaches of the University’s civic and academic responsibilities. Together with our co-signers, we urge you to take corrective action forthwith...."
Read the entire letter with co-signers
Co-signers:
Frank Gaffney, President, Center for Security Policy
Zuhdi Jasser, American Islamic Forum for Democracy
Beth Gilinski, Code Red/Women’s International Action Alliance
Stuart Kaufman, Center for Policy Research in American Education
Manda Zand Ervin, Alliance of Iranian Women
Tom Trento, Florida Security Council
Sarah Stern, Endowment for Middle East Truth
Joel Pollak, Harvard Law Alliance for Israel
Richard Thompson, Thomas More Law Center
Rev. James M. Hutchens, The Jerusalem Connection, International
Ibn Warraq, Author, “Defending the West”
Michael G. Hoehn and Harry M. Argo, Alliance for Vigilance
Janet Levy, Women Against Shariah, David Horowitz Freedom Center
Robert Spencer, Author, The Politically Incorrect Guide to Islam (and the Crusades)
Andrew Bostom, Author, The Legacy of Islamic Antisemitism
Director of the Chino Valley, CA Chapter, and Regional Director, Southern California for ACT for America
Dr. Wafa Sultan
ACT for America, Los Angeles Chapter
April 17: Stop Shariah Now Project Launches National Campaign at Harvard University
On Thursday, April 17, 2008 The Center for Security Policy will announce the launch of a national campaign to warn the public that U.S. financial institutions and businesses engaged in Shariah-Compliant Finance may have criminal and civil exposure on the grounds of: securities fraud, consumer fraud, racketeering, antitrust violations, material support for terrorism and aiding and abetting sedition.
The Center will present a letter to the Harvard board of governors, signed by a broad coalition of interfaith and civic organizations, stating “We believe that Harvard has a civic and academic responsibility to disclose fully all material information about Shariah. We also urge you, in your official capacity with the University, to exercise due diligence by ensuring that the Islamic Finance Project provides an opportunity on April 19th or 20th for the presentation of a more complete and critical treatment of SCF to the entire group of Forum participants.
The Center’s letter to the board of governors, sample materials from the new national campaign to stop Shariah-Compliant Finance in the U.S., and a lunchtime panel discussion on the crucial link between Shariah-Compliant Finance and the authoritarian, anti-civil liberties doctrine of Shariah Law will be presented on Thursday, April 17 from 12:00 – 1:00 PM in Pound Hall, Room 107, Harvard University, 1563 Massachusetts Avenue, Cambridge. The press and public are invited to attend.
Over the last two months, the Center for Security Policy has briefed officials at the U.S. Treasury, Members of Congress and their staff, the Securities and Exchange Commission, law enforcement personnel, and finance industry executives on their in-depth legal memorandum on Shariah-Compliant Finance: “Civil Liability and Criminal Exposure for U.S. Financial Institutions and Businesses Engaged in Shariah-Compliant Finance” (a shorter version of which will be published in the Utah Law Review in Sept 2008). Copies of the Center’s legal memorandum, and a request to present at the Forum, were sent last week to the Islamic Finance Project, the Harvard seven-member governing board, and the thirty-member Board of Overseers. No recipients have responded to date to the Center’s request.
The Center is holding the panel discussion at Harvard on April 17, because in the course of the coming weekend, the Islamic Finance Project of Harvard University Law School’s Islamic Legal Studies Program will present the Eighth Harvard University Forum on Islamic Finance. The Center for Security Policy has challenged Harvard on the grounds that this Forum will provide NO information about the serious risks that Shariah-Compliant Finance (SCF) poses for U.S. financial institutions, ordinary post-9/11 investors and the national security of the United States of America....more here
What do we mean by "Shariah"?
Throughout this website, the term Shariah is used to denote the authoritative and authoritarian corpus juris of Islamic law as it has been articulated by the recognized Shariah authorities over more than a millennium. We do not accept the legitimacy of this body of law in any way within U.S. financial institutions, regulatory agencies, government, or any other institution of civil society in a constitutional, democratic republic.
The term Shariah as used here does not refer to that personal, subjective, pietistic understanding of the word or concept of Shariah, as practiced by many Muslims in America and worldwide. This personal, non-authoritarian understanding of the word Shariah is closer to its literal meaning in Arabic without any of the legalistic connotations it has developed as an authoritative institution in Islamic history and as it is currently practiced in such countries as Iran, Saudi Arabia, and Sudan and as it is meant when referred to in the various laws and constitutions of most of the Arabic countries.
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