Dear Charles, One of the features of Shariah-Compliant Finance is that financial institutions who participate in it may well be helping to finance terrorism through monies contributed to Islamic charities. As the article below reveals, some of these so-called “legitimate” charities have been funding and continue to fund terrorism. Charities and Terrorism by Phil Leggiere Thursday, 06 November 2008 http://www.hstoday.us/index.php?option=com_content&task=view&id=5956&Itemid=128 New paper examines how Al Qaeda uses moderate Muslims to ‘microfinance” terror. Terrorist networks and organizations have many “underground” means of financing themselves, from drug smuggling to cybercrime. As challenging as these clandestine methods are to globally eradicate, an equally vexing problem is how to shut-off jihadist funding siphoned off from so-called “legitimate” charities. Addressing that problem, according to Tolga Koker Department of Economics and Carlos Yordan Department of Political Science Drew University, means addressing the question of why tens of thousands of Muslims who are not terrorists and often opposed themselves to terrorism nonetheless support the work of charities that support jihadist operations. Their new paper, titled Microfinancing Terrorism: A Study in Al Qaeda Financing Strategy, published Tuesday by the Social Science Research Network, tries to do just that. Although new banking and financial regulations may have made it difficult for terrorist groups to move funds around the world, the authors argue, these groups have be quite resourceful in finding ways to adapt to the new regulatory environment and to undermine it. “For terrorist networks,” they write, “especially those informed by jihadist ideologies, one source of finance is Muslims’ religious donations to Islamic charities. Although Al Qaeda and its affiliates have employed other funding mechanisms, individual donations are a key source of financing because it is a steady flow of funds. Charities, according to the report, have been a fundamental part of Al Qaeda’s financial Infrastructure, not only helping Al Qaeda raise funds, but allowing it to move funds across national boundaries and hide the transfers from financial regulators. Though some charities, according to the authors knowingly and actively supported Al Qaeda’s efforts, “most were not aware that al Qaeda operatives working for these charities or that they were siphoning off thousands of dollars to fund terrorist activities and to build Al Qaeda’s global network, which supported jihadist struggles in Chechnya, the Balkans, Kashmir, Afghanistan, Central Asia, and Southeast Asia.” "Given that Al Qaeda and other groups fund most of their activities through donations, collected by Islamic charities, why would Muslims provide funds to these organizations," the authors ask. The answer, the authors conclude, is that "social pressure forces moderate Muslims to publicly support the work of charities that may provide assistance to Al Qaeda or groups inspired by a jihadist worldview." As they explain it, an individual will comply with social pressures and donate funds to a charity that may supports jihadi causes if he perceives it as critical to his reputation and public recognition as a “practicing” Muslim. Given the primacy of charitable donations in the culture and status system of Muslim communities the need to maintain reputation in this sphere is a powerful force, one that Al Qaeda has been able to tap. “Microfinancing jihadi charities has a snowballing effect,” they write. “A Muslim who previously refrained from donating to Islamic charities is likely to find himself in a position to provide some funds to religious organizations if he constantly observes his fellow acquaintances’ donations. As a bigger portion of Muslims are yielding to social pressures to contribute extra monies to jihadi charities, al Qaeda and other groups informed by jihadi goals will secure more funds to run their violent operations.” The reputational model of charitable behavior, the authors believe, has strong implications for policy and counter-terror strategy. “The model implies,” they say, “that identifying first and then publicly exposing such charities may help pious Muslims, especially those with high expressive drive to sincerely voice their concern among their communities. Encouraging individual donors with high threshold to voice their opinion against violence may create a snowballing effect deterring others from contributing to possible jihadi charities.” “More importantly,” they conclude, “finding ways to decrease reputational benefits is crucial in curbing the financial resources flowing terrorist networks. However, this is not an easy task. It needs the involvement of secular charities to provide several basic services that were considerably diminished with the neo-liberal polices since the 1980s in Muslim countries and elsewhere. Strictly regulated foreign aid to secular charities may help in this regard.” The ultimate goal of this campaign of cultural outreach will be “making contribution to jihadi charities unpopular, and hence, changing the direction of social pressure from donating monies to such charities to avoiding such organization will have a paramount effect in the fight against terrorism. This is a long-term goal which is not feasible in the very short run since it asks for major revisions in world politics of which the jihadi charities are by-products.” ------------------------------------------------------------------------------------------- ACT for America P.O. 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