The Anatomy of an Alms for Jihad Transaction

Zakat, a legitimate Sharia tax can be used for many different things, including alms for the poor and even paying a Mujahadiin's expenses. To the payer it is simply a mandatory religious tax on money left in the bank. Many of these funds are rerouted (called money laundering) and used to pay for terrorism.

Someone fighting a" religious cause" or Holy war is a legitimate candidate for Zakat funds under Sharia law. The following is a hypothetical anatamoy of what an alms for jihad transaction looks like:

• A Jihadist logistical leader hunts down wealthy or well connected Ikhwans, (Muslim Brotherhood) believers who are ideologically aligned with a particular Jihad.
• They meet them on line, at conferences, through funding Brokers (UBL brokered deals like this at high levels, for example the Golden Chain List).
• They come to agreement about funding. The Funder need not be aware of the details of what the funding is for as long as he gets credit for the Zakat religious taxes they owe in accordance with Sharia.

• Then they transfer the funds using a Hawala or remmitance company. For example, a not-so-hypothetical funder in UAE agrees to fund a Mujahadeen group in Northern Nigeria, Somalia, Cameroon, Western Sahara, or even the new country of South Sudan.

The Zakat transaction recorder gives the name and number of one or more of his independent Hawala agents to the fund provider who is located in the funder's country, in this case, the UAE.

• The Agent looks up an agent in the receiving country from his agent directory, or more likely is given a preferred agent by the terrorist logistician in the country where the funds are needed; in our example, Northern Nigeria,
• The Sending Hawala Agent calls the receiving Hawala agent, and they make a deal.
• They then call the Hawala Agency, in our example, Dahabshiil (based in Somalia) and the Agency agrees to back the transaction.
• Dahabshiil is supposed to ask questions about what the transaction is for. In our example, the sending Independent Hawala Agent tells the agency that he thinks it is for "farm equipment".
• The Funder gives the funds to the sending Independent Hawala agent. The agent charges a 4% commission for the transfer. He keeps 25% of the commission, the agency (Dahabshiil in this case) keeps 50% of the commission, and the receiving Independent Hawala Agent keeps 25% of the commission.
• There are many transactions like this a month, and Dahabshiil settles up with the Independent Agents by receiving and paying the funds out in Aggregate every week or month.
• The terrorist in the receiving country gets a phone call with an agent's contact information if needed, and a transaction code number.
• The Terrorist goes to the receiving agent in Northern Nigeria and gets the cash.
• The funder takes his Zakat religious tax receipt for "farm equipment"from the sending Hawala back to the Zakat accountant - he may never know to whom his Zakat is going, or what it is used for. This is permissible under Sharia.

The steps in this process provide deniability for terrorism support at every level. It may be true that someone thought their zakat funds were going for the medical needs of children, and they were actually used to buy an explosive vest used by a child.

• The funder could say they did not know the funds were for a child's explosive vest
• The Sender could say they did not know the funds were for a child's explosive vest
• Dahabshiil could say they did not know the funds were for a child's explosive vest
• The receiver might say they did not know the funds were for a child's explosive vest
• The fund user could say he did not know the funds were for childrens' medical needs, and he buys the child's explosive vest.

Only one person commits the crime, but no one else in the process accepts responsibility for equipping the war criminal to use a child as a bomb.

Note: Dahabshiil is used as an example. There are many many Hawalas in almost every country on earth. Dahabshiil and its leaders were severely sanctioned after 9-11 for a history of unaccountable transactions.

Since that time, they have taken steps to mitigate the process and many sanctions against Dahabshiil have been lifted by the US. This global corporation has taken strategic steps to look more like a bank, but every day diaspora around the world send money home to their families and clans using the Hawala system... And some of those transactions fund terrorists.

The following posts from a discussion among Hawala

Al-Rajhi Bank

This year Al-Rajhi Bank started operations in neighboring Kuwait and more recently in Jordan, where it was granted a license by the Central Bank of Jordan last year to open a branch in Amman. This is a far cry from only a decade or so ago when the bank was renowned for its insularity, parochialism and conservative approach to banking - both in terms of geographic expansion and product innovation. Even in more recent years, Al-Rajhi Bank was a notable absentee from the flourishing global sukuk market, for instance, both as an originator and as investor on the grounds that its Shariah Board was not satisfied with the structures of the sukuk on offer in the market.

The rationale then was that the bank's balance sheet was large enough and very profitable and therefore there was no need to venture beyond the shores of Saudi Arabia and into exotic products whose Shariah-compliance was contentious. This was symptomatic of an institution which had the audacity (or the folly some would say) to take the entire risk of the SR800 million Al-Shuaiba Power Plant (Eastern) on its books by refusing to sell down the financing to others or through a syndication.

However, the breakthrough came in 2010 when Al-Rajhi Bank collaborated with Cagamas Berhad, the National Mortgage Corporation of Malaysia and leading securitization house, to develop and launch the Sukuk al-Amanah Li al-Istithmar (Sukuk ALIm), which was the underlying structure for Cagamas's RM5 billion Islamic Commercial Paper (ICP) and Islamic Medium Term Note (IMTN) program.

This "first-of-its-kind" and "innovative" structure was sold to investors in Saudi Arabia and is a manifestation of Al-Rajhi's new-found strategy of bridging the gap and facilitating cross-border activity in the Islamic capital market between Malaysia and the Middle East.

Al-Rajhi Bank of course traces its roots to its trading and money changing operations established in the Kingdom in 1957 by the founder Saleh bin Abdul Aziz Al-Rajhi and his brothers. In 1987 the group's money changing business was consolidated into a joint stock holding company and a full-fledged Islamic bank, Al-Rajhi Banking & Investment Corporation (ARABIC), which is regulated by the Saudi Arabian Monetary Agency (SAMA). It has since then been transformed into a mega bank complete with name change to Al-Rajhi Bank with total assets of around $46 billion and a paid up capital of $4 billion, and employing some 7,500 people and serving more than 3.25 million customers largely in Saudi Arabia, Malaysia, Kuwait and Jordan.

The link with Malaysia has several important implications and will also impact on Al-Rajhi Bank's approach in doing business in Kuwait and Jordan. Over the last two years there has been much talk about setting up mega Islamic banks with a paid-up capital of between $1 billion to $5 billion. Saleh Kamel of Albaraka Banking Group (ABG) has been championing such an institution but without much success because ABG was expecting others to contribute much of the equity.
Saleh passed on the project to the Islamic Development Bank, which has commissioned Ernst & Young to do a third consecutive feasibility study on the viability of such a mega bank. Last year, Bank Negara Malaysia announced that it plans to give licenses for three mega Islamic banks to qualifying promoters on condition that the paid-up capital was a minimum of $1 billion and of course subject to the provisions of the Islamic Banking Act 1983.

The reality is that while these other projects are pretenders, Al-Rajhi Bank is the original Islamic mega bank. The fact that it is now creeping out of its shell and expanding abroad augurs well for the Islamic banking industry.

Its expansion into Malaysia is a unique success story of how a foreign bank can successfully penetrate a new market and take on some of the major domestic players in the commercial banking market. Al-Rajhi Bank's strategy in Malaysia was based on a sound strategy, patience, requisite resources and initial product offerings and the right leadership. In the space of a mere few years Al-Rajhi Bank Malaysia has expanded with over 24 branches and an ATM network with over 21,000 POS installed throughout the country. In terms of product innovation it recently launched a physical gold-based investment product and is expanding into the equities market - all with the aim of bridging the GCC/Middle East and Asia markets.

There are those who would like Al-Rajhi Bank to expand even faster as the torchbearer of a successful mega Islamic bank with the capacity, products and services, and the resources of the likes of the conventional banking majors. The other Islamic banks that have the potential of becoming mega banks include Dubai Islamic Bank, Kuwait Finance House (KFH), CIMB and Maybank. Dubai Islamic Bank has been plagued by two major scandals since it was established as the world's first commercial Islamic bank in 1975. KFH has the potential but it has had corporate governance issues and its business has been affected in the aftermath of the global financial crisis. CIMB and Maybank, while the two biggest banks in Malaysia, have not ventured abroad in any meaningful way.

Its foray into Jordan has other implications for it will compete with Jordan Islamic Bank (JIB), which was established in 1978 as one of the pioneering commercial Islamic banks, and with Arab International Islamic Bank (AIIB), a wholly-owned subsidiary of Arab Bank Group. Al-Rajhi Bank has already opened two fully operational branches in Amman - one in Shmeisani and another in Abdullah Ghosheh Street, with more branches expected to be launch in the near future at various locations nationwide.

With its edge in resources and product suites, the Bank threatens to provide stiff competition to the other two Islamic banks, JIB and AIIB. The bank, for instance, is now the only one in Jordan to offer a Murabaha-based personal finance product that also allows customers to consolidate debts in a single installment.

According to Tarek Akel, regional manger of Al-Rajhi Bank in Jordan, the bank is a manifestation of the group's commitment to establishing a global Islamic banking network, and is eager to bring its varied array of Islamic banking solutions to the Jordanian market. The aim is to introduce quality products and services specifically tailored to meet the demands of the local market.

]The dominant market position of JIB, one of the unassuming success stories of Islamic finance, is likely to remain uncontested over the foreseeable future. But once Al-Rajhi Bank Jordan consolidates its operations and position in Jordan (like the group did in Malaysia), the bank's market share inevitably will increase. JIB is a relatively smaller bank than Al-Rajhi Bank and AIIB is inextricably linked to the group Islamic banking strategy.

Jordan is also constrained by the size of its economy and financial services sector.
As such, with their huge experience in Islamic finance, Jordanian Islamic banks should be the natural gateway for Islamic finance in the Palestinian Territories and perhaps more importantly to Iraq and Syria. While the former two are still mired in political deadlock in their respective situations, Islamic finance is starting to make genuine inroads into Syria, where the Central Bank has already authorized five Islamic banks. However, with the street protests in Syria set to continue, the financial sector there is also in retreat.

The Rest @ Arab News

islamic Financial Institutions (outside Pakistan and Iran)

• Australia Islamic Investment Company, Melbourne.

• Bahamas Dar al Mal al Islami,
• Nassau Islamic Investment Company Ltd,
• Nassau, Masraf Faisal Islamic Bank & Trust, Bahamas Ltd.

• Bahrain Albaraka Islamic Investment Bank,
• Manama, Bahrain Islamic Bank, Manama,
• Bahrain Islamic Investment Company, Manama,
• Islamic Investment Company of the Gulf,
• Masraf Faisal al Islami, Bahrain.

Bangladesh Islamic Bank of Bangladesh Ltd, Dhaka.

Denmark Islamic Bank International of Denmark, Copenhagen.

• Egypt Albaraka Nile Valley Company, Cairo,
• Arab Investment Bank (Islamic Banking Operations), Cairo.
• Bank Misr (Islamic Branches), Cairo,
• Faisal Islamic Bank of Egypt, Cairo,
• General Investment Company, Cairo,
• Islamic International Bank for Investment and Development, Cairo,
• Islamic Investment and Development Company, Cairo,
• Nasir Social Bank, Cairo.

Guinea Islamic Investment Company of Guinea, Conakry,

Masraf Faisal al Islami of Guinea, Conakry.

India Baitun Nasr Urban Cooperative Society, Bombay.

• Jordan Islamic Investment House Company Ltd Amman,
• Jordan Finance House, Amman, Jordan Islamic
• Bank for Finance and Investment, Amman. Kibris (Turkish Cyprus)
• Faisal Islamic Bank of Kibris, Lefkosa.

Kuwait Al Tukhaim International Exchange Company, Safat.,

Kuwait Finance House, Safat.

Liberia African Arabian Islamic Bank, Monrovia.

• Liechtenstein Arinco Arab Investment Company, Vaduz,

• Islamic Banking System Finance S.A. Vaduz. Luxembourg
• Islamic Finance House Universal Holding S.A.

• Malaysia Bank Islam Malaysia Berhad, Kuala Lumpur,
• Pilgrims Management and Fund Board, Kuala Lumpur.
• Mauritania Albaraka Islamic Bank, Mauritania.

• Niger Faisal Islamic Bank of Niger, Niamy.

• Philippines Philippine Amanah Bank, Zamboanga.

• Qatar Islamic Exchange and Investment Company, Doha, Qatar Islamic Bank.

• Saudi Arabia Albaraka Investment and Development Company, Jeddah, Islamic Development Bank, Jeddah.

• Senegal Faisal Islamic Bank of Senegal, Dakar, Islamic Investment Company of Senegal, Dakar.

South Africa JAAME Ltd, Durban.

• Sudan Bank al Baraka al Sudani, Khartoum,
• Faisal Islamic Bank of Sudan, Khartoum,
• Islamic Bank of Western Sudan, Khartoum,
• Islamic Cooperative Development Bank, Khartoum,
• Islamic Investment Company of Sudan, Khartoum, Sudan
• Islamic Bank, Khartoum, Tadamun
• Islamic Bank, Khartoum, Jersey
• The Islamic Investment Company, St Helier, Masraf Faisal al Islami, St Helier.

• Switzerland Dar al Mal al Islami, Geneva.,
• Islamic Investment Company Ltd, Geneva,
• Shariah Investment Services, PIG, Geneva.

Thailand Arabian Thai Investment Company Ltd, Bangkok.

Tunisia Bank al Tamwil al Saudi al Tunisi.

Turkey Albaraka Turkish Finance House, Istanbul,

Faisal Finance Institution, Istanbul.

U.A.E. Dubai Islamic Bank, Dubai, Islamic Investment Company Ltd, Sharjah.

• U.K. Albaraka International Ltd, London,
• Albaraka Investment Co. Ltd, London,
• Al Rajhi Company for Islamic Investment Ltd, London,
• Islamic Finance House Public Ltd Co., London.

The list includes Islamic banks as well as Islamic investment companies but it does not include Islamic insurance or takaful companies. Source: Siddiqi (l988)

-Islam.net

South Africa Looking for Sharia INvestment

1 September 2010

South African Islamic investors and financiers are likely to be recognised via a new insertion in the Income Tax Act, says consultancy firm Grant Thornton SA, enabling the country to attract further foreign investors to its financial markets.

Islamic finance is derived from the Shariah, and essentially involves profit and risk sharing and forbids the paying or receiving of interest or investment in certain industries.

"Interest is considered economically harmful by Shariah law, as the extension of credit increases money supply, which stimulates demand for goods and services but does not always result in real, tangible economic activity," Grant Thornton tax consultant Tasneem Gangat said in a statement last month.

"It believes interest-bearing transactions result in economic ills, including issues such as high inflation and unemployment."

Three account types

The proposed new section takes into account three types of Islamic financing and will be aligned to Shariah law.

For investment account agreements, or Mudarabah, tax will be payable on any profits derived by the client as these will be deemed as interest, thus making them taxable at the hand of the client.

Any Murahaba, or financing transactions, between a client and the financier will see "marked up" amounts within the agreement as the taxable amount payable in favour of the bank for tax purposes.

For joint ownership financing – known as Diminishing Musharaka – the client purchases the bank's "portion" of ownership in the asset over time, and the amount paid monthly to the bank includes both the premium payable and taxable amount owed to the bank.

Growing investment trend

According to Grant Thornton, South Africa joins Australia, Hong Kong, the United Kingdom and a growing number of other non-Muslim countries developing their Islamic finance sector by changing regulations to attract investors who can only put their money in Shariah-compliant assets.

The changes will be effective from a date to be announced by Finance Minister Pravin Gordhan.

Shariah law states that the emphasis on economic activity must ensure that money changes hands (from provider to user), accompanied by an increase in trade, manufacture, service provision and, as a result, employment.

The basis of Islamic finance is equity through profit and loss sharing schemes and rental income, usually mutually developed through agreements between the bank and client. The Islamic financier will assume the risk of the purpose of the funds he is investing and share in pre-agreed ratios in profit or loss which result from the transactions.

"The principles of investment management such as sector diversification, low risk versus high risk, income versus capital growth et cetera, will still apply to an Islamic investor, but the manner in which these objectives are achieved, as well as the investments utilised, will differ from conventional finance," said Gangat.

The Rest @ South Africa Info