Islamic ﬁnancial institutions:
conduits for money laundering?
Siti Faridah Abdul Jabbar
Sustainable and Inclusive Development Centre,
Faculty of Economics and Management, Universiti Kebangsaan Malaysia,
Purpose –The purpose of this paper is to discuss various situations in the Islamic ﬁnancial services
industrythat are asserted to facilitate money laundering and the counter-argumentsto the assertions.
Design/methodology/approach –The approach adopted by this paperis a review of literature and of
severalpractices of Islamic ﬁnancial institutions in a number of countries.
Findings –There is no evidence to support the contentions that Islamic ﬁnancial institutions facilitate
money laundering. Further,Islamic ﬁnancial institutions are not any more susceptible to money laundering
than conventionalﬁnancial institutions are.
Originality/value –This paper demonstratesthat Islamic ﬁnancial institutions are not conduitsfor money
Keywords Finance, Money laundering, Islam, Crimes
Paper type General review
Islamic ﬁnancial institutions are said to not only be susceptible to money laundering but
also facilitate such activity. This paper discusses several situations in the Islamic ﬁnancial
services industry that are asserted to facilitate money laundering. At the same time, this
paper presents the counterarguments to the assertionsand supports the counterarguments
by discussing several practices in the Islamic ﬁnancial services industry in a number of
countries. Nonetheless, what is money laundering that it is so abhorred and why is it so
detested? This paper starts with a brief discussion on what money laundering is and the
rationales for its prohibition before continuing with the discussion on the assertions and
What is money laundering?
Thereisnosingledeﬁnition of money laundering and some of the deﬁnitions are “the
process by which proceeds from a criminal activity are disguised to conceal their illicit
origins”(Schott, 2006); “the process of transforming the proceeds of illegal activities
into legitimate capital”(Alldridge, 2003); “the process by which criminals attempt to
conceal the true origin and ownership of their criminal activities”(Drage, 1992); “the
process of converting or ‘cleansing’property, knowing that such property is derived
from serious crime, for the purpose of disguising its origin”(Sherman, 1993); and “the
process by which criminals attempt to hide and disguise the true origin and ownership
of the proceeds of their criminal activities, thereby avoiding prosecution, conviction
and conﬁscation of the criminal funds”(Commonwealth Secretariat, 2006).
Journalof Money Laundering
Vol.23 No. 2, 2020
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