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Jewish World Review
June 24, 2008
/ 21 Sivan 5768
Frank J. Gaffney, Jr.
In recent months, a growing number of U.S. commercial banks,
hedge funds and other financial institutions have begun promoting
products described as "Shariah-Compliant." By so doing, they hope to
attract some of the immense petro-wealth now accumulating in the Islamic
Middle East. Neither the management nor shareholders of the firms
engaged in such Shariah-Compliant Finance (SCF) appear to admit,
however, the civil and criminal exposure to which they are exposing
themselves and the serious dangers this practice entails for their
The problem lies with "Shariah." This is the term used by the most
powerful and virulent Islamic authorities to describe their
theo-political-military doctrine. Its stated purpose is to replace
sovereign, secular nations like the United States with a transnational
Islamic order governed by a ruling authority, the Sunni's Caliph or his
Shiite counterpart, with Shariah as its foundational law or
constitution. Under Shariah Law, violent means are ordered if necessary
to effect the world's submission to Islam.
Shariah is what the Taliban brutally practiced in Afghanistan. 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. It is characterized by such barbaric practices as
beheadings of apostates, subjugation of Jews and Christians, stonings
for adulterers, flagellation for women deemed "unchaste," amputations
for petty crimes, female genital mutilation and martyrdom in the service
Why on earth would Western bankers want to be promoting practices that
comply with, and therefore institutionalize and legitimate, this
repugnant and repressive code?
The answer, of course, is that they perceive in SCF a new
way to make money. The sub-prime fiasco demonstrates that it is
perfectly possible for American financiers to turn a blind eye to
practices that are unwise, even reckless and criminal, when there are
profits and bonuses to be garnered. Unfortunately, Shariah-Compliant
Finance has the potential to create a national sub-prime meltdown on
The reason? As a legal memorandum prepared for the Center
for Security Policy by experienced securities litigator David Yerushalmi
_SCF_(3).pdf) makes clear, Shariah-Compliant Finance entails
considerable civil and criminal exposure for firms that engage in it.
For starters, the authoritative Shariah Law is inherently
seditious, as it explicitly calls for the violent overthrow of
governments like that of the United States and the replacement of
democratic, constitutional government with its theocratic code.
The Shariah advisors Islamist scholars who adhere to the
most fundamentalist traditions and interpretations of their faith
enable Shariah-Compliant Finance. They do so in ways that expose their
employers on Wall Street to such liabilities as racketeering, anti-trust
violations and securities and consumer fraud. Incredible as it may
seem, leading Shariah authorities like Mufti Usmani, employed by Dow
Jones and HSBC SCF funds, have called for violent jihad against the
West. Usmani has even published a book in English explaining how and
why this is obligatory for all Shariah-faithful Muslims.
Worse yet, through practices known as zakat (the tithing to
charities required of observant Muslims) and "purification" of funds
(the donation to approved charities of proceeds from investments that
are "tainted" by interest, speculation, pork or other
non-Shariah-compliant activities), SCF's Shariah advisors and their
financial industry employers may be involved in material support for
It is unlikely that American investors in the post-9/11
environment would want to support such practices. One would hope that
financial institutions would not want to assume the exposure associated
with them, either. Yet, because the material facts about Shariah, its
authorities and their charities are not being disclosed to investors,
both are at serious risk. So is America to the extent that Shariah Law
is being legitimated, its adherents are being empowered and its
so-called "charities" are being enriched (four out of eight
Shariah-approved uses for zakat can translate into support of terrorism
For these reasons, the Center for Security Policy recently
sent the CEOs of dozens of the nation's leading commercial banks, hedge
funds and other financial institutions copies of Mr. Yerushalmi's
analysis. In an accompanying letter, I warned that they "may be exposed
to personal civil and criminal liability and [their] firm will be
exposed to reputational risk and/or price risk" should they be involved
in Shariah-Compliant Finance. (See www.SecureFreedom.org
for more on this correspondence.)
From now on, the leading Wall Street firms will not be able
to profess ignorance of such risks. They will have a responsibility to
disclose them to investors. Call it guilty knowledge.
Unfortunately, it nonetheless may take action by the
Securities and Exchange Commission, the Department of the Treasury, the
Justice Department and/or Capitol Hill to get Wall Street's attention on
SCF. The $800 billion invested in such products to date is expected to
grow by 15-25% in the future, powered in part by the dictators' slush
funds known as "Sovereign Wealth" that are recycling petrodollars into
various, strategically ominous investments in the United States.
Alternatively, bringing to light the true nature and dangers
associated with Shariah-Compliant Finance may fall to civil litigants
like those who have brought suit in federal court in connection with
Saudi and other interests' (many of them Shariah-compliant) ties to the
9/11 terrorist attacks. The cost to Wall Street of such litigation
could be in the billions.
Either way, the financial sector will have guilty knowledge
about Shariah-Compliant Finance and be vulnerable to problems that will
make sub-prime look like a day at the beach. Those involved are on
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JWR contributor Frank J. Gaffney, Jr. heads the Center for Security Policy. Comments by clicking here.
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