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by Alyssa A. Lappen


The first market day after President-elect Obama announced plans to appoint Federal Reserve Bank of New York president Timothy Geithner as Secretary of the U.S. Treasury, U.S. equities rose 6.5%. Pundits praised[1] his experience handling crises and understanding of the troubled economy. But possibly, the market hoopla was premature, or even unwarranted. Some analysts seek his retirement.[2]

As turmoil built, Geithner criticized Wall Street's self-regulatory system, negative incentives and market forces, sought tighter supervision and berated insufficient "derivative securities" regulation and "credit-default" swaps allowing investors to "insure" against loses — only to fail. The Treasury Department's former attaché to the International Monetary Fund had overseen U.S. responses to the 1990s Mexican, Indonesian and Korean bailouts. But at the Fed, Geithner did not[3] use regulatory powers to check abuses, or advocate for more regulation, impartial supervision or new laws. He even concluded that markets were improving — and after Bear Stearns' collapse confessed, nobody "understands [the causes] yet."

Worst of all, since Nov. 2003,[4] Geithner let dangerous new Islamic and shari'a-based securities, markets and financial institutions gain business currency — despite the Fed's role[5] in U.S. monetary policy, currency distribution, government securities markets, legal supervision,[6] regulatory enforcement, bank and capital markets investigation, foreign accounts and a payments mechanism handling over $4 trillion daily in funds and securities transfers. Not to mention Fed officials' admitted lack of understanding.

On July 1, 2004, eight months after Geithner assumed command, the New York Fed hosted Asim Ghanfoor (sic), AG Group founder and managing director,[7] to address its Seventh Annual Global Economic Forum on "ABCs of Islamic Financing"[8] and Islam's increasing global financial role. A month later, Senators Charles Grassley[9] and John Kyl identified Ghafoor as a representative of Boston's terror-funding Boston's Care International,[10] the Global Relief Foundation (GRF) and the Al Harimain Islamic Foundation,[11] which the U.S. Treasury specially designated a terrorist organization in September 2004 and again in June 2008.[12] Given Ghafoor's connections, how could the Fed have featured him, much less warmly accepted Islamic finance?

In fairness, the New York Fed began authorizing obscure shari'a banking institutions, structured shari'a issues, and opaque Islamic securities trading long before Geithner arrived. "Islamic bankers have been quite ingenious in developing financial transactions that suit their needs," New York Fed first vice president Ernest T. Patrikis[13] told an Islamic Finance conference in May 1996. "We bank supervisors, too, can be ingenious and will want to work with any of you should you decide that you want to engage in Islamic banking" in the U.S.

The dangers of Islamic finance should have been apparent. From 1996[14] on, all 12 Federal Reserve banks received, and were charged to enforce many Treasury Department Office of Foreign Assets Control[15] circulars designating Islamic groups and banks as terrorist-financing institutions, organizations and individuals. In 1998, OFAC warned the Fed against transactions with Osama bin Laden and his affiliates, in 1999 froze Taliban[16] assets, in 2002 reminded banks to check customers against known terrorist[17] lists and in 2003 warned against trading with any unnamed counter-party.[18]

Meanwhile, had the Fed only noticed, there were warning signs elsewhere too. In 1999, Saudi scholar Mohammad Nejatullah Siddiqi[19] proposed at Harvard that banning interest would "cure the ills of contemporary finance," "create a safer, saner financial world," incorporate the "institution of waqf [Islamic trust]" in economics and create "morally inspired" behavior. In 2001, Siddiqi openly labeled[20] shari'a finance a revolution-driver — an "universal endeavor" to replace "excesses of capitalism."

Alarm bells should have gone off at a New York Fed event on Nov. 21, 2002,[21] furthermore, where shari'a banking proponent Wafiq Fannoun described Islam as "Peace through submission to Allah (God), however, "revelation-based [the Qur'an, Hadith] ... complete way of life" — that is, a system of religious law proscribed by the U.S. Constitution from inclusion in secular legislation or regulatory systems. Equally at odds with Constitutional law and Western capitalism are other Islamic notions he described — namely that Allah is both creator and "owner" of all material things, and that "individuals" may not possess "natural resources important to society." as "alternative financing for Muslims" and others recognizing individual ownership rights.

True, most of that happened before Geithner ran the New York Fed. But after he took the helm in November 2003, the bank missed several still more critical red flags on Islamic banking.

First came Basel II Capital Accord,[22] supposedly designed to strengthen the "regulatory capital framework" for big international banks. Authorities increasingly expected to trust banks to internally assess their own credit and operational risks. However, in July 2004 Switzerland's Bank for International Settlements[23] (BIS) reported, 53% of Middle Eastern bank supervisory staffs lacked the necessary training to meet Basel II's December 2007[24] deadline. Middle Eastern banks originated and still predominate in Islamic banking. Nevertheless, by 2007, they still needed historical data[25] to fashion reliable risk models but instead counted on "heavy" collateral and "exceptional" economic conditions to eliminate risks.

Islamic institutions had manufactured "special purpose entities" (SPEs) — renamed, "special-purpose vehicles (SPVs)" — such as coincidentally helped destroy Enron. These legal devices restructured "interest-bearing debt, collecting interest [as] rent or [a] price mark-up," Rice University Islamic economics chairman Mahmoud el-Gamal[26] warned in May 2007. "Interest-based" Islamic finance equaled "shari'a arbitrage," concerned only "religious identity" and merely employed Western securitization methods to transform liquid, traceable cash flows from interest-bearing debt into illiquid, opaque assets.

Shari'a banking, though, had far fewer regulatory and accounting protections than sub-prime mortgages — and like "portfolio insurance" in 1987, mortgage-backed bonds in 1994, and sub-prime mortgages in 2008, could also cause huge market declines. Islamic banking purveyors admitted shari'a regulations could "override commercial decisions;"[27] didn't "standardize" documentation; and used complex "inter-creditor agreements" and "off-balance sheet financing."

Even hosting hosting Islamic financier Asim Ghafoor, a representative to three terror-funding organizations,[28] on July 1, 2004[29] apparently gave no one inside Geithner's Fed reason to pause from its rush to further accommodate shari'a banking.

In March 2005, New York Fed general counsel Thomas C. Baxter Jr.[30] asserted the Constitutional "wall of separation between church and state" Thomas Jefferson had described was "not absolute." Chief Justice Warren Burger had in 1984 suggested that the Constitution "affirmatively mandates accommodation, not merely tolerance, of all religions," Baxter told an Islamic financial industry "Legal Issues" seminar. "[S]ecular law should ... accommodate differing religious practices," he indicated, apparently even if that meant specially excepting Islamic banking from secular laws and regulations.

In April 2005, New York Fed executive vice president William Rutledge[31] admitted that the bank was "in no position to take a stance on shari'a interpretation." He also claimed the bank would hold Islamic finance to "the same high licensing and supervision standards" as conventional banks.

Despite the New York Fed's role as a legal supervisor[32] of Islamic banking, neither Rutledge nor Geithner noticed, however, that shari'a banking, a 20th century "tradition" invented by the Muslim Brotherhood, can't be severed from Islamic law — statutes that Mohammed initiated, which caliphs, scholars and jurists developed over the last 1,400 years. They hold that shari'a grants Muslims (the ummah) supremacy over all others — along with all land and property to hold in trust for Allah. Thus as Fannoun effectively told the Fed in Nov. 2002, land or property, once conquered or acquired by Muslims (or for Allah), can't generally revert to their original owners. Shari'a commands Muslims to wage jihad warfare until they subdue all "infidels" under universal Muslim rule, as Ibn Khaldun avowed in the Muqaddimah (trans., Franz Rosenthal, Princeton Univ. Press, 9th printing, 1989, p. 183).

Confiscating possessions from non-believers exacts "revenge," wrote jurist Abul Hasan al Mawardi (d. 1058). Qur'an 57:2 argued, "To Him belongs all dominions of the heavens and earth." Qur'an 59:7 echoed, "That which Allah giveth as spoil [war booty] unto his Messenger…" Allah authorized 2nd Islamic Caliph, Umar Ibn Khattab, to confiscate property by force, fulfilling an Islamic trust, or ruling under Allah’s law. It was thereby just to take anything from nonbelievers, (The Laws of Islamic Governance, Taha Publishing, 1996, pp. 207-251) including all territories Islam ever controlled.[33]

Apparently, Fed officials also neglected to investigate the alliances and beliefs of shari'a advisors and their affiliates in the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)[34] and Islamic Financial Services Board (IFSB)[35] standards agencies.

The shari'a-based Islamic Development Bank[36] established the AAOIFI in 1990 to set Islamic finance standards. Its trustees[37] include executives of Kuwait Finance House, Saudi Arabia's Dallah al Baraka Group and al-Rajhi Banking & Investment Corporation — all implicated in al-Qa’ida and other terror-funding — and Sudanese (and until recently Iranian) officials, both U.S. Treasury-sanctioned countries.

Former Malaysian Prime Minister Mohamed Mahathir in 2002 christened IFSB "a universal Islamic banking system" and "a jihad worth pursuing…." Its board members include the terror-funding Iranian, Sudanese and Syrian central banks and Palestinian Monetary Authority.[38]

Yusuf Qaradawi, an U.S.-designated foreign terrorist barred entry since 1999 for example, supports wife-beating, suicide bombings, murder of American military forces and female suicide "martyr operations." A large shareholder of Al Taqwa Bank,[39] Qaradawi also chairs the recently designated terrorist-funding Union of Good "charity,"[40] Qatar National Bank,[41] its al-Islami subsidiary, Qatar Islamic Bank, and Qatar International Islamic Bank[42] — and follows AAOIFI standards he helped create.

Similarly, Dow Jones Islamic Market Indexes (DJIM)[43] shari'a board uses "stringent and published"[44] methods to determine "compliance of index-eligible companies." But its industry screens, financial ratios and biographies[45] omit advisors’ affiliations or beliefs. Dow Jones Citigroup Sukuk Index (DJCSI)’s shari'a board certifies Islamic asset-backed bonds if structures meet "AAOIFI standards" and shari'a principles,[46] but don't mention AAOIFI history or governance.

Until July 2008,[47] shari'a banks, the Dow Jones Islamic Index board and an North American Islamic Trust (NAIT) fund also employed a 20-year veteran of Pakistan’s Shari'a Supreme Court, former judge Taqi Usmani,[48] who taught at the Taliban spawning ground, Jamia Darul Uloom Karachi,[49] headed the AAOIFI religious board,[50] endorsed suicide bombing, and in 2007 advised U.K. Muslims to impose shari'a when their numbers suffice.

Shari'a finance advisor Muslim Brother Yusuf Talal DeLorenzo advised Pakistan's tyrannical Zia ul-Haq from 1981 to 1984,[50] and ran the Virginia Islamic Saudi Academy educational program cited in 2008 for using hateful Islamic texts.[51] Trained at Karachi's terror-espousing[52] Jamia Al Alomia Al Islamia, he served the Muslim Brotherhood International Institute of Islamic Thought (IIIT) and from 1989, was secretary to the MB's Fiqh Council of North America.[53]

Perhaps Treasury Secretary-designate Geithner seriously meant to keep Rutledge's promise to grant Islamic financiers no special favors. But allowing shari'a finance to exist at all is itself a special favor.

Moreover, on November 23, 2008 Geithner, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke agreed to add another $20 billion taxpayer-gilded bailout[54] to Citibank's previous $25 billion bailout — and offer $306 billion in new loans to cover Citi's losses on soured real estate debts and securities.

Only three days earlier[55] Citigroup uber-shareolder Prince Alwaleed bin Talal, a godfather of Islamic finance, had announced plans to up his stake in America's largest (failing and "underpriced") bank from 4% to 5%. On March 20, 2006, the Saudi Kingdom Holding Co. CEO was "honored for humanitarian contribution to Islam"[56] at a "glittering gala to celebrate excellence in Islamic Finance" that also featured terror-financier[57] and Dallah al-Baraka[58] founder and president Saleh Abdullah Kamel.[59]












[11] alharamain-public-excerpts?from_email_04_friend_send=1


[13] ep960523.html








[21] /2002/passage/Islamic Finance.ppt



[24] PressRelease_Details.aspx?PressRel_id=11416


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[34] outlaw_shari_a_finance.html




[38] palestinian_authoritys_us_assets_are_frozen/

[39] Multi_page_sections=sHeading_4

[40] 2007 Brochure.pdf

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[42] QNBNewDocs&blobkey=id&blobwhere=1196665802626&blobheader=application/pdf





[47] D0A52215-262C-4438-A3CD-8073D0DE26CB



[50] 2451040585/restricted

[51] academy-doesnt-want-you-to-know/



[54] mod=article-outset-box




[58] 1E90E478-FA24-45F9-A43D-F47D8C4B9CE2


EDITOR'S ADDENDUM: This is a list of shariah compliant banks from
It was compiled by Sonia Nusenbaum

Alpha Natural ResourcesAsset Acceptance Capital Corporation
Aviva Plc
Barclays PLC
BNP Paribas Group
Citibank, N.A.
Credit Agricole, S.A.
Deutsche Bank AG
Dow Jones & Company Inc.
Equity Insurance Group Limited
Goldman Sachs Group
HBOS plc
HSBC Holdings plc
INVESCO Perpetual
Julius Baer Group
Maersk Logistics
Merrill Lynch & Co., Inc.
Morgan Stanley
NYSE Euronext
Silicon Graphics, Inc.
Singapore Power

National Security and Financial Risks: Islamists are attempting to impose Shariah Compliant Finance (SCF) on Western institutions to use our own financial strengths against us. The most serious problem with SCF is that it legitimates and institutionalizes Shariah law (i.e., Islamic law), a theo-political- legal doctrine violently opposed to Western values. With $1 -$2 trillion petrodollars annually looking for an investment home, blind exuberance is driving financial institutions to adopt SCF, without even a minimal baseline for legal compliance. This willful blindness, and lack of both transparency and due diligence may cause SCF to be the next sub-prime crisis, but this time with deadly consequences.

Legal Risks: Western financial institutions which adopt SCF may have criminal and civil exposure to claims of aiding and abetting sedition and the material support of terrorism, securities fraud, consumer fraud, racketeering, and antitrust violations, as well as exposure to tort claims for sedition and terrorism, and for the violation of internationally recognized norms of the law of nations.

Terror Financing Mechanism: SCF as monitored by paid Shariah law advisors to U.S. banking institutions must "purify" certain return on investment (ROI) dollars that do not meet Shariah law standards. This money must be donated to Islamic charities - including some that promote Jihad and support suicide bombing. Investment disclosures state that these profits can be as high as 6% of profits of investments. With $800 billion already in SCF assets, the potential for billions of dollars to be siphoned off for terrorism is real. This would be a serious criminal violation of U.S. law.

Consider this example: Shariah Mutual Funds promote themselves as "ethical funds." To be Shariah-compliant, they donate "tainted" revenues to Shariah-compliant "charities." A post 9-11 U.S. investor in a Shariah-compliant "ethical investment" is not told that Shariah law also requires imposing Shariah as U.S. law, execution of gays and female apartheid. Is he a victim of consumer fraud? Is this same post 9-11 investor unwittingly funding terror? The government has shut down the three largest Shariah-compliant charities in the U.S. - the Holy Land Foundation, Benevolence International Foundation, and the Global Relief Foundation - after proving they funded terrorist organizations. The American taxpayer deserves answers to these questions. The Center for Security Policy (CSP) is meeting directly with members of Congress, US. regulatory agencies and Wall Street financial institutions in order to ensure the enforcement of existing U.S. laws on sedition, disclosure, material support of terrorism, and money-laundering. CSP is committed to revealing the civil liability and criminal exposure of Shariah law and Shariah-compliant finance.


Understanding Shariah law is integral to understanding the dangers of Shariah-compliant finance. Shariah law is Islamic law dating back to the 7th century and is today the law of the land in Saudi Arabia, Iran, Sudan and the law under which the Taliban operates. Recent polls reveal that only 10-15% of Muslims worldwide want to live under this all-encompassing system of Islamic jurisprudence that covers all aspects of a Muslim’s life including religious, social, political, and military obligations. However, with a current population of 1.5 billion Muslims, this translates to a huge pool of Jihadist recruits and supporters - a base of approximately 150 - 225 million Muslims. Shariah law authorities, some of whom are now being paid handsomely by Barclays, Dow Jones, Standard & Poors, HSBC, Citibank, Merrill Lynch, Deutschebank, Goldman Sachs, Morgan Stanley, UBS, Credit Suisse and others have the power to dictate Shariah compliance as deemed by "scholarly consensus" on matters of finance, family, penal law, apostasy, and war. Examples of authoritarian Shariah law include: requirement of women to obtain permission from husbands for daily freedoms; beating of disobedient woman and girls; execution of homosexuals; engagement of polygamy and forced child marriages; the testimony of four male witnesses to prove rape; honor killings of those, principally women, who have dishonored the family; death to apostate Muslims who chose to leave Islam; inferior status of non-Muslims, and capital punishment for those "slander Islam."

Alyssa A. Lappen is a former Senior Fellow of the American Center for Democracy, former Senior Editor of Institutional Investor, Working Woman and Corporate Finance, and former Associate Editor of Forbes. Her website is

This article appeared December 11, 2008 in


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