Finance

Empirically, the claim is far from the truth, for the rules and principles governing Islamic banking and finance are principles in the Holy Quran (The Muslims Holy Book) which are holy laws that must not be compromised. Since the laws are peculiar, there are several regulating bodies that ensures that the Islamic system are run in accordance to all its principles, hence in the process scrutinizing all transactions, money launderers are highly liable to discovery. Professor Mahmoud El-Gamal, an economics lecturer at Rice University in Texas, in his statement prepared for hearing at the US Senates committee on terrorism, he affirmed that the stringent focus on  separating mode of interest in Islamic banking system from the Western banking system and the advent of September 11  HYPERLINK unitesd United States attack has continued to increasingly mitigate against all intending money launderers to use Islamic banks for their acts as they are exposed to close scrutiny and can be easily be discovered.                                                

Islamic Banking Perspective
Islamic scholars have proven that Islamic banking and finance ardently follow the precepts of the Islamic injunction. The Holy Quran and the Sunnah have explicitly stated all the forms of business transactions that must be practiced by Muslims. Scholars claim Islamic banking must be divorced from Islamic militants, for the two do not share same philosophy. Yet again, Muslims are all aware that Islamic banking system is based on the principles of Shariah law. Shariah law does not in any way support interest on capital, loans or deposits. The Shariah only supports profit sharing, hence Islamic bank dwells on the principle of sharing of profit on all loans and business transactions but not imposing a fixed interest rates. Islamic banks have hence devised contemporary methods of interest sharing that can favourably compete with that of western banks. These are trading transactions prescribed by the holy Quran, which include Murahaba, sukuk and more. Researchers have proven that Islamic bank system does not in any way support money laundering, in actual fact, Islamic laws forbids all sorts of illegal business transactions. It upholds trustworthiness and transparency in all business transactions. Embezzlement, misappropriation, obtaining money through any illegal means and falsifying are all criminal acts in Islamic law, as stated in the holy Quran.

Islam law prohibits all business which compromise unjustified consumption and misappropriation of ones wealth financial crimes and the concept of money laundering have been categorized as a division of Islamic criminal law which has been addressed via many provisions in the Quran and Prophets Sunnah (Mahmood Mohamedi,2008).

The Hisbah has been constituted to monitor and curb all these criminal acts in Islamic banking. Money laundering obviously is an act of indulging in illegal gains (al-Kasb al Haram) which Islamic laws vehemently frown at. Hence, intensive efforts have been made by Islamic banks to curb money laundering. Many of these Islamic banks are strongly dedicated to the laws operating in their resident countries. They abide by the rules of the countries they are operating. It is pertinent to indicate in this regard that Islamic banks, by their nature, are less likely to engage in money laundering and other illegal activities. They cannot undertake activities which are detrimental to society and its moral values and have to go through an exhaustive test of Shariah compliance. (Mahmood Mohamedi.2008).

In the United Arab Emirate, the government enacted the law that money laundering attracts the punishment of a maximum of seven year imprisonment or a fine of AED300,000 (about 44,430), and not less than AED30,000 (4,430), in addition to confiscation of the proceeds. (Anderson M Wexler A. 2000).According to the Sharia principles, Muslims and Islamic bank alike cannot invest in transactions pertaining to prostitution, alcohol or narcotics, gambling and other taboos in Islam (Haram). Therefore customers of Islamic banks ought to be decent and legitimate investors and business people who engage only in legitimate business. Yet again, researches have proven that there is a stringent Know Your Customer (KYC) policy that has been incorporated into the Islamic banking system which ensures that banks are fully acquitted with their customers and their mode of business. Finally, in April 2003, the Governor of the central Bank in Pakistan addressed an international audience at a seminar in London on The Financial War on Terrorism and the Role of Islamic Banking claimed that Islamic banking operations is inclined to discourage questionable or undisclosed means of wealth which form the basis of money-laundering operations. The Islamic banks disclosure standards are stringent because they require the customers to divulge the origins of their funds in order to ensure that they are not derived from un-Islamic means. ( HYPERLINK httpwww.islamicbank www.islamicbankandfinance.com).

In view of this, many Islamic banks have devised international standards methods of fighting against money laundering and other related crime. One of such methods is the Know Your Customer (KYC) regulation, which monitors customers diverse transaction in order to alert necessary institutions about transactions of dubious nature.
                                     
Western Banking Perspective
The western banking system is equally battling with diverse means of eradicating money laundering. Since the arrest of Al Capone in 1931 by the United States government, the combat against money laundering has not stopped. Several governments across the globe have enacted diverse laws to combat the crime. (Australian Journal of Politics and History, vol. 49, 2003)

The United States law against money laundering is relatively strict. It gives a punishment of a maximum of years in jail or a maximum fine of 500,000 or even as much as double the value of the laundered asset or both.  The reason for this strict measure is not far fetched. It has a lot to do with the September 11 attack on the US. In England, penalty against money laundering are not as strict as that of Americas, however, there are four major acts that controls money laundering, they are-The Terrorism Act 2000,  The Anti-Terrorist Crime  Security Act 2001, The Proceeds of Crime Act 2002, lastly the Serious organized Crime and Police Act 2005.(www.auscert.org.aurender.html)

The western banking system has also used Know Your Customers (KYC) to control money laundering. All financial institutions are mandated to know their customers. This will ensure that all transactions are scrutinized as any case of suspicious or irregular transactions may be signs of money laundering. As many of these banks deal with several thousands or even millions of customers, KYC becomes almost impossible, hence the need to use the aid of computer and other technological gargets. Diverse countries have since developed several software and programs to assist in the process. However, we must note that investigation remains the best method of curbing money laundering.

The governments of several nations have simply enacted rules that cash transaction involving huge amount must be reported for investigation. The figure of such transaction is usually dependant on the countrys economy, financial strength and trading abilities of residents. In the United States, all transactions above 10,000 most be reported. Despite all these measure, recent researches prove that money laundering by international banking experts and other concerned organization have confirmed that banks in both United states and United Kingdom alone launder an estimate of 750 billion annually. (Petras, 2009)
                                                       
Methodology
The paper has relied on the use of both primary and secondary sources. Information will also be retrieved from the archives of religious Holy book of the Muslims, such as the Quran, several Sunnahs (Ways and acts of the Muslims holy prophet) classical works of Muslim scholars and other religious books that contains the tenets of Islamic regulations. Secondary sources shall include journals and publication on the subject and object of the paper. This will include newspapers, book reviews, official websites of diverse organizations and more. The facts and figures of the paper are all derived from previous works of diverse scholars, archives of holy books, publications of seminar transcripts and speeches of diverse experts. The paper pursues a comprehensive research approach, laying emphasis on empirical fact rather suggestions or opinions.

The subject matter lies between several discipline cutting across political, economical and social disciplines, hence inferences are all extracted from these discipline to achieve the aim of a comprehensive research. The subject matter has generated several debates which have led to several seminars, conferences and global summit. The paper is hence a review of these several seminars. Other sources used that must be mentioned are the arguments of experts which were not published in either journals or newspapers but in interviews on sampling their opinions on money laundering.  All the extracted data are logically processed, following the trend of empirical framework laid down by diverse experts. Since the whole world is overly concerned in the struggle against terrorism, the facts and data used in this research has been easily accessible. All fervent researchers can access the sources. However, the comparism between Islamic banking and Western banking systems perspective on money laundering has been virtually unavailable. Virtually all previous works on money laundering addressed the issue using either the Islamic or the Western banking approach. The paper has hence taken a step further in the direction of previous researches by bring the two banking systems against each other.
                                             
Findings and Recommendation
The research has proven that Islamic banking has it principles based on Islamic laws known as Shariah. These laws are not in cognizance with the Western banking system. This however, does not mean that the two banking system have contradicting views on money laundering. The Shariah law only forbids all business transactions that involve interest on loans or capital. Money borrowed is placed on a pre-arranged basis of profit or loss. In both cases, both are shared accordingly. The intent of Sharia law is not to inconvenient fellow human. However, many people do not understand this principle and find it rather absurd. Many also link Islamic bank with Islamic activist, the two do not share any philosophy any the least. The recent indictment of the ex-United States Statesman, Mark Siljander and staffs of Islamic American Relief Agency, has further imprinted the erroneous belief that Muslims are inclined to money laundering (www.cnn.com). It must be noted that the strict regulation that ensures that Islamic banking operation do not deviate from the Islamic principles does not permit money launderers to use Islamic bank as their targets. Again, Islamic laws vehemently uphold that all business transaction must be transparent and must have intention of mutual benefits.

The Western banking system has started the race of eradicating money laundering long before Islamic banking system became famous in the Western world. It has hence gained vastness in the skill of combating. The development in technology has also aided the mission of combating the money laundering. Several investigators have napped several criminals involve in organized crime. This does not however mean that there can not be more to be done.

Both banks are to further foster their mutual support, if the fight against money laundering is to be successful. Since criminal still succeed in laundering money undiscovered. Both banking systems should ensure there is free access to each others data base in order to increase the chances of discovering suspicious transaction that can lead to detection of money laundering.
                                                       
Conclusion
Money laundering is not a recent crime, for it has been in existence since the early nineteenth century. The crime has only persisted and indeed developed from promoting prostitution and gambling into more complex criminal activities, such as terrorism, drug pushing, tax evasion and lot more. The world has hence since this development placed all hands on deck in combating this crime. Laws have been enacted, regulations put in place, yet the re-occurrence of this problem. Since the Islamic banking system and the Western banking system are the two world-wide operating systems, there is increasing need for the two to work together in order eradicate their mutual or common enemy.

The paper has proven that both Islamic and Western banking system do not support money laundering, despite the involvement of Muslims terrorist involvement in money laundering, Islamic laws in which Islamic banks operate do not support any form of illegality. It must be noted that non-Muslims are also involved in money laundering. What need to be done is for the two banking system to pull resources together in order to eradicate their mutual enemy.