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FACULTY OF ECONOMICS AND MUAMALAT

BACHELOR OF MUAMALAT ADMINISTRATION (HONOURS)

INDIVIDUAL ASIGNMENT ARTICLE ANALYSIS


THE UNDERGROUND BANKING SYSTEM AND THEIR IMPACT ON
CONTROL OF MONEY LAUNDERING

PREPARED BY:
NOORITA BT MOHD NASIR
1070899

Article Analysis Submitted to Mr. Abdullaah Jalil in


Partial Fulfillment of the Requirement for MBA 4013

(MANAGEMENT OF BANKING AND TAKAFUL INSTITUTIONS)

SEMESTER 2
SESSION 2010/2011

ARTICLE REVIEW

Title : The underground banking system and their impact on control of


money laundering
Authors : Dr Fath El Rahman Abdalla El Sheikh, Legal Adviser, Kuwait
Investment
Reviewer : Noorita bt Mohd Nasir

About the author: Dr Fath El Rahman Abdalla El Sheikh, Legal Adviser, Kuwait Investment Authority, formerly
Head of Department of International and Comparative Law, University of Khartoum, Sudan.

About the article:


This

article

study

about

how

much

islamic

law

contributed

to

control

money

laundering.Sheikh show the ways to solve this problem and discussed how this phenomena
happen.The establishment of Islamic banks and financial institutions has come as a result of
the new challenges posed by the wave of globalization which has swept all fields of life
worldwide.
General ideas of the article:Discuss about how much Islamic law contributed to controlling money laundering. No doubt
the Islamic underground banking system according to Islamic law should be investigated
thoroughly so as to reflect an insightful view of the practice, which might be different from the
theory, and this emanates from the dilemma of the Islamic system.
The organization and the content:1) Introduction
2) Review
3) Conclusion

Introduction
Establishment of Islamic banks and financial institutions has come as a result of the new
challenges posed by the wave of globalization which has swept all fields of life worldwide.
Sheikh shows how much Islamic law contributed to controlling money laundering.

Review
In concept of islamic banking that gaining momentum nowadays,they expect that they able to
manage half of the deposit of the islamic. Despite this rapid growth and expansion of Islamic
banking, there are many hurdles and dangers on that threaten on their political stability.
To control money laundering,islamic banks and financial instituition have to make sure that
there should be accountability and transprency.This thesis discussed how islamic banking
law solve this problem.In islamic system,like modern system there not use absolutism
system which normally public interest decide law and order should be maintained. Situations
where disclosure becomes mandatory in criminal cases especially in economic crimes such
as fraud, drug trafficking, and money laundering
While ,under tradisional islamic system they use the concept of Hisba which is certain
economic rights of the individual may be interfered for the benefit of the general public.It refer
the situation which this system controlling market prices and countering monopolies. Under
Sharia, Islamic banks and institutions are forbidden from involving in many transactions
which led to gharar, interest and riba such as gambling, prostitution and corrupt practices.
They are required to carry on business in a lawful way and not involve in any prohibited
profits and illegal activities.
Islamic banks have developed Islamic banking modalities such as Murabahah,Musharakah
(partnership), Mudharabah(profit-sharing),Ijarah(leasing), Istisna (manufacturing) and Takaful
(insurance) which requires more flexibility in order to accommodate new investment
instruments and products.
In investment and banking terms, Islamic banks related with the concept of banking secrecy
and confidentiality. This concept is reflected on the dealings with customers or each other
and it normally expressly stated that the parties should treat all communications under the
contract as confidential.
However,although the Islamic commands followed in letter or spirit and cannot be ignored on
the basis of rational arguments or inner desires, there has several violations in the practices

of Islamic banks,other financial institutions and individuals who claim to carry out business in
accordance with Sharia principles.

Conclusion
Although the theoretical regulation and control of banking activities under Islamic law for
combating money laundering are may loopholes in the Islamic system but it can proven the
innocence and require cogent evidence that might allow underground operations of money
laundering to be conducted. For the example,operations should not be left unchecked that
being exerted at all levels to uproot the damaging phenomenon of money laundering, which
is condemned by all legal systems. Islamic law is not an exception. However, international
cooperation is required to study about underground banking operations, which are the major
sources for conducting money laundering activities across international boundaries.

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