Sharia’s Growing Influence on U.S. Finance

One of the areas where Sharia law appears to be making inroads into American society is through the U.S. financial system.

Under Sharia, or Islamic, law, charging interest (“riba”) on loans or earning interest on deposits is forbidden for even observant Muslims living in America, a strange anachronism in a country where interest- and credit-based finance is a cornerstone of the economy.

According to Sharia-compliant fatwas, or rulings, recently issued by the Fiqh Council of North America, Muslims are prohibited even from investing in the stocks of any companies whose interest-based debt exceeds 30% of their market capitalization, or whose interest-based deposits exceed 30% of the market cap of their total equity. Investing in the U.S. aerospace-defense industry is also forbidden (haram). So too is investing in any industries dealing in conventional banking and finance, pork products, entertainment, alcohol, or gambling. Or companies doing business with Israel.

Following pressure campaigns by Muslim lobby groups, American financial giants, including Morgan Stanley, AIG, Bank of America, Wells Fargo, Merrill Lynch, Citicorp, Goldman Sachs, and JPMorgan Chase, now offer Sharia-compliant products that strictly adhere to such Islamic criteria.

Islamic restrictions on certain investments have also been integrated into Wall Street mutual funds and indexes, where they’ve been not only recognized but accommodated by U.S. regulators, including the Treasury Department and Securities and Exchange Commission (SEC).

In addition, the Federal Housing Finance Agency, which controls Freddie Mac and Fannie Mae, has authorized the mortgage giants to buy Islamic mortgages, which are an interest-free alternative to conventional loans. According to federal data, Fannie and Freddie are now the primary investors in Islamic mortgages, providing billions of dollars in liquidity.

“The Treasury Department and other agencies of the U.S. government have been warned repeatedly, and in detail, that Sharia-compliant finance is used [by Islamist activists] to legitimate and facilitate the penetration of Sharia [in American society],” according to a report by the Washington-based Center for Security Policy. “As such, it is inherently antithetical to American law.”

Muslim advocates counter that investing based on Islamic moral code is no different than investing by secular progressives in so-called ESG funds based on environmental, social, and governance criteria.

Critics argue that Muslim investors and depositors are more apt to donate proceeds to Islamic charities as required by Sharia law. And many of these charities are either hostile to the United States or support terrorist organizations such as Hamas, according to the Thomas More Law Center, which has sued federal regulators for allowing financial giants to promote Sharia-compliant finance products.

Sharia-compliant finance “amounts to a way to dress up substantial opportunities for illegal material support for terror as a protected religious practice of tithing,” according to the Center for Security Policy.

The center also warns that, as Islamists control more U.S. stocks through mutual funds in an age of activist investors, they can use their growing holdings as leverage to shape how and where companies do business.

“The mere threat to withdraw approval of large pieces of a bank’s lending portfolio, for example, because another part of the enterprise is doing business with, say, Israel, may be sufficient to enforce what amounts to a boycott of the Jewish state,” CSP said.

U.S.-based Amana Mutual Funds Trust, a Sharia-compliant investment fund with $6.4 billion in assets, now has the financial clout to influence shareholder meetings at the 33 U.S. companies it holds in its portfolio. Amana has taken large stakes in Google, Apple, NVIDIA, and Microsoft, even though the firm was established by groups the Justice Department says are part of the radical Muslim Brotherhood.

In the wake of the recent Israeli-Gaza war, Amana’s investors have argued for divesting from Google, Microsoft, and other holdings until they stop providing computer services to the Israeli military.

A formal governing body that works with FCNA, the Accounting and Auditing Organization of Islamic Financial Institutions, runs a regular screen to filter out such “unclean” or “impure” investments. AAOIFI was developed from a so-called “Dow Jones fatwa.” (FCNA also receives a steady income by acting as Sharia adviser to Islamic mutual funds.)

“Investment banks and other financial institutions have been hiring Muslim religious authorities to sit on corporate Sharia-compliant finance boards that directly influence the investment of billions of U.S. dollars,” the Center for Security Policy warned.

In effect, critics argue, radical Muslims are running a “parallel financial system” with help from Corporate America and the U.S. government. Wall Street banks say that by catering to the needs of Muslims, they are merely tapping into a fast-growing market.

The Muslim population is forecast to grow twice as fast as the non-Muslim population through 2030, according to the Federal Reserve. And there is “a large latent demand” for Islamic financial products in the United States.

Globally, the Islamic finance industry is almost $6 trillion in size, with the potential North American market valued at more than $1 trillion, according to Cognitive Market Research, which cites among contributing factors “a growing Muslim population, rising awareness of Sharia-compliant financial products, and favorable regulatory environments.”

Some national security experts compare Sharia-compliant finance to a “Trojan Horse” for implementing Islamic law in America. And they warn that if Wall Street and Washington continue to accommodate it, along with mass Muslim immigration, America could soon see the level of Sharia penetration witnessed in the U.K., where the Islamic finance market is now valued at more than $9 billion.

Experts note that in 2014, Britain became the first non-Muslim country to issue Sharia-compliant bonds, known as “sukuk.” More recently, London stopped requiring Muslim students to pay interest on government loans.

Patrick Sookhdeo, a London scholar and Sharia finance expert, says Islamic groups in Britain use their growing financial holdings as leverage to pressure London officials and corporate boards to adopt Sharia practices. He says it’s part of an overall strategy to Islamize British society.

“Islamic banking and finance is one of the multiple tools they use to further their cause,” Sookhdeo says. “It is economic jihad – a key and integrated part of the larger civilizational jihad.”

But many financial advisers argue Islamic banking is nothing more than an “ethical” alternative for Muslims to bank and invest. And they note that by avoiding interest-based loans, Sharia-compliant finance helps mitigate the risk of defaults and financial crises driven by excessive borrowing and debt.

“Muslim investors are increasingly concerned not just with riba (interest and debt-financing) and gambling, but also with the ethical impact of their capital – [and] rightly so,” said Ibrahim Khan, an Islamic finance and investment specialist.

Original article link: RealClearInvestigations

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