'Interest-free' my ass! That's the hook and few will look beyond that enticing phrase. Go ahead and pretend that sharia-compliant finance is benignly secular. It is not. Sharia is sharia and is NOT compatible in any way with the notions of liberty or free-enterprise.
Here's a fascinating look at the unspoken risk of sharia-compliant finance (SCF):
Civil Liability and Criminal Exposure for
U.S. Financial Institutions and Businesses
Engaged in Shari’ah-Compliant Finance
Prepared for:
Shari’ah Risk Due Diligence Project
Center for Security Policy, Washington, D.C.
Prepared by:
Law Offices of David Yerushalmi
Washington, D.C., California, Arizona
....
Conclusion
SCF exposes the financial institutions and other businesses which attempt to exploit this
new industry to a whole host of disclosure, due diligence, and compliance issues, all of
which elevate substantially the civil liability and criminal exposure such companies
otherwise factor into their business risk profiles. What is clear from this preliminary
legal analysis of what might be called the SCF industry is that very little of this increased
civil and criminal exposure has been recognized, analyzed, or guarded against in any
meaningful way.391
The salient points of this analysis are:
• The Shari’ah black box syndrome: U.S. financial institutions and businesses
involved in SCF risk grave consequences by willfully ignoring the
endogenous elements of Shari’ah. Ignoring what Shari’ah is -- both in theory
and in practice -- and its intimate connection to Islamic terror and holy war
against the non-Muslim world amounts to corporate recklessness.
• Putting Shari’ah in a black box and treating its prohibitions as if they were
benign secular and objective “screens” ignores the duty of disclosure of the
most important elements of Shari’ah: its purposes and its ultimate methods.
• Undoubtedly, a reasonable post-9/11 investor contemplating an SCF
investment would consider (a) the goal of establishing Shari’ah as the law of
the land and (b) the promulgation of the Law of Jihad to establish this goal
material to the investment decision.
• To the extent that U.S. Shari’ah authorities or foreign Shari’ah authorities
retained by U.S. businesses advocate the implementation of historical and
traditional Shari’ah, they risk being charged with a violation of 18 U.S.C. §
2385.
• U.S. financial institutions and businesses have a duty to conduct reasonable
due diligence investigations to be certain that their respective Shari’ah
authorities are neither advocating crimes in the name of Shari’ah nor
promoting the material support of terror, either through legal rulings or
through the funneling of “purification” funds to terrorists. Failure to conduct
such due diligence might very well lead to civil liability, if not criminal
exposure.
• The Shari’ah black box is yet another financial fad like the sub-prime market
where transparency is shrouded in opacity in the mad rush to market-share and
quick profits. U.S. mutual funds are poised to embrace SCF without a word
about the risks associated specifically with Shari’ah. U.S. banks are cavalierly
promoting Shari’ah-compliant loans as “interest-free” when in fact they are
merely repackaged loans at standard interest rates. This violates any number
of consumer protection statutes. Financial institutions are underwriting
Shari’ah-compliant loans and bond issuances without really understanding the
risks associated with default and bankruptcy treatment.
• Insofar as U.S. financial institutions participate in and cooperate with the
Shari’ah authorities’ efforts to establish the rules and regulations for the SCF
industry, antitrust issues such as rules collusion are likely to present yet
additional issues of exposure for those embracing this new industry.
• The current structure of the SCF industry in which two dozen of the most
influential Shari’ah authorities control the way funds go in and out of the
largest financial enterprises in the world creates the paradigmatic pattern of
predicate racketeering activity any aggressive prosecutor or plaintiff’s lawyer
looks for in a RICO cause of action.
The failure by corporate management and their legal advisors to confront these issues in
any serious fashion is not surprising given the wholesale failure of the participants and
facilitators in this industry to have undertaken a serious analysis of these risks. The extant
legal academic and professional literature reads more like promotional material and not
serious legal analysis conducted by men and women trained to protect clients from their
own blind enthusiasm. The legal industry has gone down this road too many times in the
past. The difference this time is that the risk is not simply financial; it is potentially
existential.
http://www.saneworks.us/uploads/application/28.pdf
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