Western experts on Islamic finance such as Stella Cox, director, Dawnay Day Global Investments in London, who manages several billion dollars of Islamic financial investment portfolios, agree that the substance and structure of Islamic financial products have been well scrutinized, with emphasis on commercial viability and risk profile. The competition for Islamic institutional portfolios has been strong. She warns that while investor confidence is not impacted by regulatory and legal compliance (customers are now used to filling in reams of forms and giving photocopies of passports), it “is impacted by unfounded accusations.”

Dr. Ahmad Muhammad Ali, president of the Jeddah-based Islamic Development Bank (IDB), similarly stresses that unless bank regulators and supervisors, banks and law enforcement agencies in different jurisdictions utilize the same tools in effective, systematic and coordinated manners, the abuse of the international payments system cannot be controlled effectively.

The logisitics are daunting. According to David Artingsall of the Terrorist Finance Team at the National Crime Intelligence Service (NCIS) in the UK, global electronic payments total about 212 billion per year; and global cross border electronic payments 2.3 billion. In the UK, investment instruments alone total 200 million plus, and the leading UK financial institution alone has 15 million plus accounts.

Utilizing the same tools is one objective. But others would like to see a new consensus on the very concepts and definitions of ‘terrorism’; ‘charities’; and ‘terrorist funding’, which should transcend the East-West and North-South political and cultural divides. As the saying goes ‘One man’s terrorist is another man’s freedom fighter’. Is someone fighting the forces of occupation in his land or country, for instance, a terrorist? When does the money become ‘terrorist funding’?

The danger is that we might get bogged down in definitions, and lose sight of the wider initiative in reforming the financial systems worldwide, especially in the Muslim countries. The reality of course is that the Muslim countries and the Islamic banking sector are in a position of weakness thanks to 9/11 and the fact that the perpetrators were all Muslim. In anycase, the US, the sole superpower — hurt and humiliated by the events of 9/11 — will not relent, unless and until the menace of terrorism (aimed at it) is defeated and eradicated. The US and its allies, like the war in Iraq has shown, is acting from a position of strength. This is why the Bush administration can push through new extra territoriality requirements in its controversial US Patriots Act.

Yes, Islamic banking is a faith-based industry and that compliance is not only a legal requirement, but also a Shariah requirement as Islamic banks are under a moral and Shariah obligation to refrain from handling funds which are suspect. But Islamic banking has had its share of scandals, and corruption is entrenched in countless Muslim countries as it is in many other countries including the industrialized ones, albeit in more subtle ways.