Two of the chief concerns associated with Shariah-Compliant Finance are the obligatory tithing to “zakat” and obligatory donations of “tainted” revenue.

Shariah-Compliant Finance can entail contributions of up to 1/40 (2.5%) of assets per year in a charitable gift (known as zakat) that observant Muslims, Islamic organizations and businesses are obliged to make. Shariah advisors, men like Sheikh Yusef al-Qaradawi and Mufti Muhammed Taqi Usmani, are responsible for determining the recipients of such contributions.

Perhaps even more significant is a process known as “purification,” which is required of a Shariah-compliant investment or financial transaction that has been tainted with forbidden revenue, whether from interest, illicit speculation (such as trading in commodity futures) or a forbidden commercial enterprise (such as the pork industry). These “tainted” funds must be purified by donating the revenue to an acceptable charity, again typically selected by Shariah advisors. 

The recipients of zakat and purification payments are currently not disclosed and the process is non-transparent.  It should be noted that Shariah classifies Jihadi warriors in the defense of Islam and their families as an accepted category for such payments.

That makes the following story all the more disturbing…

No case reveals more about the role that Muslim charities have played in funding jihad than that of the organizations which carried out the Mumbai attacks.

Given that one of the tenets of Shariah-Compliant Finance is the system of zakat in which 2.5% of assets are donated to charities chosen by Shariah scholars, this story raises significant questions about the due diligence and disclosure practices of Shariah finance.

The Mumbai terror attacks were conducted by an Al Qaeda affiliate known as Lashkar –e-Taiba of Pakistan. This organization was outlawed by Pakistan in 2002 after pressure from the U.S. But Lashkar-e-Taiba continued to operate and merely formed a political/charitable arm known as Jamaat –ud-Dawa.

The Associated Press reported that U.S. government sources indicated that Lashkar-e-Taiba had operations in Chechnya, Bosnia and Southeast Asia and also sent operatives and funds to battle U.S. forces in Iraq. This same A.P. report said that Lashkar-e-Taiba received funding from organizations in Saudi Arabia and Kuwait.

Jamaat-ud-Dawa played a major role in the recovery efforts following the October 2005 earthquake in Pakistan and, according to British authorities, the organization siphoned off large sums of donations and put them to use in direct support of Jihadist terrorism.

In fact, the British discovered that Muslim Charity UK sent a great deal of money to banks in Mirpur, Pakistan in December 2005 as earthquake relief money. This money went into accounts in Saudi Pak Bank, Standard Chartered Bank and Habib Bank, Ltd. The money ended up being used to fund a bomb plot according to MI5 investigators.

British National Terrorist Financial Investigation Unit authorities found that a large portion of the money sent from Britain to charity was diverted for terrorism. Of $10 Million U.S. sent, less than half went to actual earthquake relief operations.

This is hardly surprising given that Jamaat-us-Dawa resembles other such Muslim organizations in that it is both a political organization and a militant group, like HAMAS and Hezbollah.

The level of involvement of Muslim charitable organizations in Jihad is reflected in the fact that the U.S. government has shut out no fewer than 27 Muslim charities for funding terrorism.

The Saudis themselves have explained that it is difficult to stop such funding because the money is run through charities at both ends of the pipeline: Zakat collected by Saudi charities and mosques are sent to charities in Pakistan, specifically to avoid “smoking gun” evidence of terrorism financing.

Obviously there are key questions which arise from these reports.

How safe is it to donate to Muslim charities? The largest Muslim charity in the U.S. was shut down for terrorism financing. What of other charities?

Who knows how zakat will be used? What steps have Shariah-Compliant Finance banks and investment firms taken to address these concerns? What level of due diligence and disclosure is there now for zakat and other payments by financial institutions to Muslim charities?

An Aid Gone Awry by Prateek Sharma:

Man Arrested In Mumbai Probe is a Cop, Police Say by Manik Banerjee:

Did the Saudis help fund the terror school behind Mumbai? By Gerald Posner:


Comments are closed.

Looking for something?

Use the form below to search the site:

Still not finding what you're looking for? Drop a comment on a post or contact us so we can take care of it!