The Terror Finance Blog

Swiss Mega-Bank UBS Sued by Victims of Terrorism

By: Aaron Eitan Meyer

July 30th, 1997. September 4th, 1997.
March 28th, 2001. August 9, 2001. December 1, 2001.

By themselves, the dates would appear to have nothing in common. But to the victims of terrorist bombings by Hamas, these dates will not soon be forgotten. And in Rothstein et al v. UBS AG, filed on May 9th, 2008, survivors of the attacks and relatives of those murdered brought suit against the Swiss banking giant, joined in the lawsuit by survivors of the July 13, 2006 Hizbollah rocket attacks on Safed, Israel.

In the Complaint, the plaintiffs detail the role of Iran as a longtime supporter of the terrorist entities Hamas, Hizbollah and Islamic Jihad for the time period of 1996 to the present. As stated therein, “The financial support provided by Iran to Hamas, Hizbollah and the PIJ between 1996 and the present day included tens of millions of dollars in cash annually.”1

The Complaint went further to detail the alleged complicity on the part of UBS in allowing vast sums of hard currency to be made available to Iran, thus allowing that nation to provide financial support to the terrorist groups, in contravention of applicable United States laws designed expressly to prevent the same. As set forth in the Complaint, that hard currency directly enabled the terrorist groups to carry out attacks.

In 2003, a New York Times article reported that American soldiers in Iraq had found a significant cache of sequentially numbered dollars in a building within one of Saddam Hussein’s palace complexes.2 More importantly, the bills bore wrappers of the Federal Reserve. In 1996, the Federal Reserve had designated several foreign banks as Extended Custodial Inventory (“ECI”) facilities, storing Federal Reserve-issued new bills as a means to facilitate foreign distribution of United States currency.

Like Iran, Iraq had long since been on the list of countries to which new bills were prohibited. After a federal investigation was conducted into the matter, UBS reluctantly handed over to investigators a list of countries to whom it had sent dollars. That hitherto confidential list included transfers to Iran.

When further information emerged from UBS’ records, unlawful transfers to Iran were accompanied by similar transfers to Cuba and Libya, in contravention of applicable US law. The findings led to the elimination of UBS as an ECI facility, and a further $100 million fine. As more fully set forth in the Complaint, congressional hearings conducted on the matter included testimony by General Counsel of the New York Federal Reserve Thomas C. Baxter, Jr., who stated that “The dollar is so desired around the world because it is a stable, always reliable medium of exchange and store of value.”3

As alleged in the Complaint, had UBS not allowed cash to be sent to Iran, that cash could not have been routed to Hamas, and that but for that fact, Hamas could not have carried out the horrific attacks in Mahane Yehuda market, Ben Yehuda mall, and bus stop near Neve Yamin. The Hizbollah rocket attacks on Safed followed the same pattern.

After setting forth the factual allegations, the Complaint presented the legal argument. Underlying a tort claim is the requirement that the defendant knew of the consequences of its actions, in this case being the fact that Iran presented a “grave danger … to the United States and its citizens”5 by sponsoring international terrorism in the form of substantial material support to terrorist organizations including Hamas and Hizbollah.

In turn, that conduct proximately led to the terrorist attacks on the dates mentioned above, according to the Complaint. Establishing proximate cause was the next step in establishing liability on UBS’ part, pursuant in this case to 18 U.S.C. § 2333. Moreover, the Complaint continued to stress that UBS’ alleged conduct rose to the level of being “…criminal in nature, dangerous to human life, outrageous, extreme, wanton, willful, malicious…”6 sufficient to warrant punitive damages.

The Eighth Count of the Complaint consists of a further tort claim in Negligence under Israeli law, pursuant to Section 35 of Israel’s Civil Wrongs Ordinance (“CWO”). A key difference between this count and others in the Complaint is that this count does not rely on the actions of UBS per se, but instead focus on a breach in the duty of care that UBS owed to avoid injuries to the general public. The standard there is whether an ordinarily prudent or reasonable person would have acted in the same fashion under those circumstances.

The final Count of the Complaint was also under Israeli law, specifically § 12 of the CWO, which confers liability on anyone who “…participates in, assists, advises or solicits an act or omission, committed or about to be committed by another person, or who orders, authorizes, or ratifies such an act or omission…”7

The relief sought by plaintiffs consists of a demand for compensatory damages to be set at no less than $500 million as well as punitive damages for the reasons set forth earlier. In addition, the Complaint calls for treble damages pursuant to 18 U.S.C. § 2333(a) and attorneys’ fees and costs, as well as any other relief in the interests of justice.

The potential ramifications of a plaintiffs’ victory in this case can scarcely be overstated. Partly as a result of the American sub-prime mortgage crisis, UBS wrote off some $13.7 billion, dropping it $2 billion into the red.8 Were the Court to find for the plaintiffs, and grant the compensatory damages requested in the Complaint, that ruling, accompanied by the trebling of damages by statute, would constitute a $1.5 billion loss to UBS. Assuming punitive damages at even a 2:1 ratio, UBS losses could near $5 billion.

It may safely be assumed that UBS will put forth a considerable defense, and an inevitable appeal in the event of a ruling for the Plaintiffs. However, at a glance, it appears that the case will come down to whether the Court deems UBS’ complicity in providing hard currency to Iran sufficient to merit significant compensatory and punitive damages, in addition to a ruling on basic liability and negligence claims.

This case presents a different strategy than that employed in several other recent high-profile suits against banks.9 It does not predicate its claims on the Alien Tort Act or violations of international standards so much as traditional concepts of liability and negligence, amplified by applicable counter-terrorism statutes.

In his 2004 testimony to the Senate Committee on Banking, Housing, and Urban Affairs, R. Richard Newcomb, Director of the Treasury Department’s Office of Foreign Assets Control described UBS’ penalty as “a significant fine to the Federal Reserve Bank of New York for deception.”10

It could (and almost certainly will) be argued that UBS has already paid for its deceptive actions. However, that does not free the banking giant of the civil liability incurred due to the subject matter of its deception. To stretch an analogy somewhat, pleading guilty to obstructing justice doesn’t let one off the hook for the action that was the real issue.

In the larger picture of holding banks accountable for permitting funds to be transferred to terrorist organizations, this case could well prove anomalous. Surely, the majority of suits brought will not be able to rely on the ‘smoking gun’ of hard currency that US troops found in Iraq, much less the Federal Reserve’s subsequent investigation and fine. Regardless, it represents the first civil action brought by American victims of Hizbollah rocket attacks, and worthy of note if for that alone.

The plaintiffs are represented by attorneys Robert Tolchin of New York City and Nitsana Darshan-Leitner of Tel Aviv, Israel.

1. Complaint at 51.
2. $762 million, according to a NY Sun article http://www.nysun.com/foreign/probers-want-us-to-block-assets-of-cuba-at-ubs/21478
3. Complaint at 87.
4. Complaint at 91
5. Complaint at 117
6. Complaint at 124
7. Complaint at 173
8. “UBS warns of a difficult 2008 as profits dive” Times Online
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3367199.ece
9. See, e.g. Almog v. Arab Bank, 2007 WL 214433 (E.D.N.Y., 2007)
10. JS-1670, May 20, 2004, http://www.ustreas.gov/press/releases/js1670.htm

Charities for terror

by David Frankfurter

With court cases and wide debate surrounding the linkage between certain Islamic Charities and the funding of terror organisations, it is interesting to note that even the Palestinian Authority is worried enough to take action. 

Ha'aretz reported earlier today:  "The [senior Israeli security] source noted that the PA has outlawed 300 charity organizations, most of them affiliated with Hamas, and its security forces have stepped up their monitoring of imams in West Bank mosques."

And who should know better than the Palestinian Authority on this particular topic?

Navel-gazing and the financing of legal terrorism

By David Nordell

If the sign of having made it as a celebrity is to be featured in the pages of ’Hello!’ or ’OK!’ or some similar gossip rag, best of all on the front cover, then the sign of having done something significant in the real world, or at least being involved in something significant, most surely be to be written about in the ’Economist.’

According to this criterion, the Terror Finance Blog’s own Rachel Ehrenfeld has definitely ’made it’ for her central involvement in something significant, by being written up in an article entitled "Hacks vs Beaks" in the magazine’s 8th May edition, which focuses on the shamefully weak protection that legitimate freedom of speech enjoys in English courts. I don’t say this in order to continue the self-involved navel-gazing that has sometimes become noticeable in our blog’s discussion of the celebrated libel case brought against her in London by Saudi billionaire Khalid bin Mahfouz, and the subsequent attempts to give legal protection in the USA against libel cases for anyone who in the future tries to blow the whistle on people apparently involved in financing or encouraging terrorism. We may, I fear, already have done the subject of libel tourism to death by giving this one case, important and meritorious though it is, a great deal of attention.

But there is another, broader, aspect of freedom of speech and public interest that underlies the bin Mahfouz vs. Ehrenfeld case. In an article here a few days ago, "Exorcising the ’Saudi Spell’," I described three ways in which Saudi-financed propaganda was not only brainwashing young Muslims to hate the non-Muslim world and to be willing to sacrifice themselves in the cause of jihad, but also, more insidiously, fosters the belief in the Western societies that are the target of this jihad that it is illegitimate and politically incorrect to criticise Islam or the political ambitions of the Arab world, which necessarily weakens Western defences.

Yet there is a fourth, even more insidious, way in which Arab oil money is destroying the defences of the democratic West, especially in Great Britain, and Rachel Ehrenfeld’s experience is the example par excellence. English libel law, although theoretically protecting the reputations of the innocent against those who have defamed them, is notoriously one-sided: it’s on the side of the rich against the poor (if both sides are rich, so much the better for the lawyers). If you have been defamed, however horrible and baseless the libel, but can’t afford the very hefty fees of good libel lawyers -- and I say this from personal experience -- you basically shouldn’t even bother sending a pre-action letter, let alone file claim: actually, most good libel lawyers won’t even give you the time of day. But if you’re rich, and the person who you claim has defamed you isn’t, you can usually intimidate him into a grovelling apology, and possibly bankrupt him in the process, even if the facts were on his side. The fact that Rachel refused to apologise or even recognise the court’s jurisdiction in the case is entirely to her credit, but doesn’t change the picture one iota.

The bottom line is this: if, especially after bin Mahfouz vs. Ehrenfeld has set a precedent, some brave journalist or analyst wants in the future to expose the involvement of some individual or organisation in glorifying, financing or recruiting for terrorism, he or she will probably think twice because of the sheer torture and expense of a libel trial in the High Court of Justice, especially if he doesn’t enjoy Rachel’s advantage of living in New York.

What of it? Well, terrorism isn’t only about innocent people being blown apart by suicide bombers or being consumed in the fireball when an airliner is flown into an office building. That’s the terrorism we all recognise. But the terrorism that very few of us recognise is being put in fear of expressing our genuine opinions, of exposing dangerous facts, of revealing the unpleasant truth, by the threat of a libel action in which, at least according to English law, the truth is not always a strong enough defence. Free democratic society can not function without both freedom of information and freedom of expression: so when these freedoms are chilled by the fear of legal action, however vexatious, democracy dies a little bit. The USA at least has constitutional protection for freedom of speech: Britain, however much it prides itself on Magna Carta, the mother of parliaments and all the rest, provides very limited protection; and therein endangers all its other freedoms.

I don’t know if Khalid bin Mahfouz was ever involved in financing what we all think of as terrorism, with blood and charred flesh and TV newsflashes; and for the purpose of this discussion, it doesn’t matter. But he has financed, from his pocket to those of his lawyers, a far more dangerous and destructive form of terrorism, against the basic freedoms that keep Britain a democracy, without shedding a single drop of blood or breaking a single law. It’s called legal terrorism. In fact, doubly legal terrorism: by means of the law, and with the backing of the law. The damage, not only to Britain to the entire free West, is likely to be far greater than that of 7/7 or even 9/11. You read it here first.

From coffins, to yet more coffins

By David Nordell

In the old James Bond film ’Diamonds are Forever’ there is a scene, if I remember well, in which Bond discovers that a coffin flown into the United States for cremation is actually being used to smuggle diamonds for an American Mafia gang. Not just life imitates art, apparently, but terrorism too: according to a blog article I just received today (although it’s two months old), a Belgian-Moroccan terrorist smuggled both weapons and money from Belgium to Morocco in order to help his colleagues there.

The ’Islam in Europe blog’ article quotes from a more extensive article in the Belgian newspaper HLN (Het Laatste Nieuws) that Abdelkader Belliraj hit on the idea of using coffins because neither police nor customs would want to upset Muslim sensitivities by opening them to check their contents. He would therefore break into funeral homes to open up the caskets and hide weapons in them. By the time Belliraj was arrested in Morocco in mid-February, he had been smuggling weapons using this technique for 15 years, since 1993. In some cases, there wasn’t even a dead body in the coffin, said HLN, just money and weapons.

The director of a firm that repatriates some 500 Muslims’ bodies to Morocco every year, Jamal Ben Tahar, told the newspaper that it was impossible to take advantage of his firm for this kind of his smuggling. But it seems more than unlikely that Belliraj acted completely without accomplices: he must have known which coffins to choose to ’pad’ with resources for his fellow gang members, or must have had accomplices at the Moroccan end to open the right coffins after they were unloaded from the aircraft, or both.

But there are two things that are much more worrying about this story than the mere fact of a clever ruse to smuggle money and guns for terrorist use in Morocco. One is that neither the Belgian nor the Moroccan authorities, which have both been aware for years of the potential for the Moroccan émigré community in Belgium to support terrorist activity in both countries, never took the initiative to do at least spot-checks, if not complete screening, of the steady traffic of dead Moroccans to their homeland -- and who knows how many other dead bodies are being exploited in this way in other countries in order to increase terrorism’s death toll. From a technical point of view, checking the coffins without opening them may indeed have been problematic: metal caskets would probably not be transparent enough to X-ray scanners to show weapons inside, while even if wooden caskets were used, bundles of banknotes probably wouldn’t show up either. Given the risks involved, maybe it is indeed time for national security authorities to find ways to check the cross-border movements of coffins, even at the risk of giving offence.

The other, according to other HLN reports in the last few days quoted by the blog, is that the Belgian security service knew about Belliraj’s smuggling operation but did nothing to stop him, while the Belgian and Moroccan security services are both accusing each other of withholding vital intelligence information that could indeed have stopped this gang. It can’t be said often enough, especially in the wake of 9/11, that intelligence not shared with the right partners is wasted. In this case, it would seem, the 45 people killed in Casablanca in 2003 by a local terrorist group financed by Moroccan gangs in Belgium bear mute witness to this foul-up, whether or not they were eventually buried in coffins.

High-value crime, terror finance and the African Problem

By David Nordell

Two news items today serve to remind us that an increasing amount of high-value crime today is not necessarily motivated by personal greed, but is connected to terrorism, most often to the financing of future terrorist activities. Equally, they serve to remind us that however much the world media tend to focus on the threats to the USA, Europe and various parts of the Middle East, terrorism is a global problem, and that in fact Africa is probably its worst-suffering victim.

The first piece, published by South African news site News24 and entitled ’Kidnappers gets $19mn ransom’ quoted Algerian Interior Minister Noureddine Yazid Zerhouni as telling government newspaper El Moudjahid that families of Algerian kidnap victims paid $18.7mn in ransom during 2007; of the 375 kidnap cases, 115 were terrorism-related, Zerhouni said. The publication of detailed crime figures in Algeria is rare, so Zerhouni’s statement must be seen as an indication of the seriousness with which his government takes the phenomenon, as is the government’s plan to increase the police force from 140,000 to 200,000.

In the other piece, the BBC reported that a Jordanian cargo ship carrying 4,000 tons of sugar in food aid to Somalia had been hijacked off the Somalian coast. There’s nothing very new in the hijacking: piracy in the Horn of Africa region is by now a non-event, with 12 ships hijacked since the beginning of 2008 alone. But, as the London Daily Telegraph reported last year, the hijackings in this region are mainly directed at raising money for terrorist groups, rather than the common criminal motive of personal gain.

It’s not the first time I’ve referred to this phenomenon, of crime funding terrorism, and almost certainly won’t be the last: I already described it in Çrime does pay -- for terrorism’ three months ago, in the context of large-scale robberies conducted by Moroccan immigrants in Belgium paying for subsequent terror attacks in Morocco. And indeed, news reports and other articles are increasingly focussing attention on this problem: credit card and overdraft fraud, for example, are now recognised by British financial crime experts as one of the main ways in which radicalised young Muslims in the UK are financing terrorist activity.

Nevertheless, there seem to be specific patterns relevant to Africa. One is the prevalence of piracy, whether on the high seas or on the highways: with so much of the continent embroiled in civil wars, famines and natural disasters, there is an unrivalled opportunity to hijack desperately needed food and medical supplies, usually contributed by the taxpayers of more affluent countries, and then sell the swag on the black market in order to buy more weapons with which to worsen the vicious circle of human suffering. Another is the sheer scale of the crimes, whether burgling armoured trucks in Europe (one escapade in Luxemburg netted in $26.5mn), kidnapping in Algeria, or piracy all over Africa. Nobody, as far as I am aware, has estimated the scale of the so-called Nigerian 419 fraud phenomenon, although in private conversation a few years ago a senior Swiss intelligence official told me that Nigerian-run fraud, drug smuggling and other crime in his country alone amounted to many millions. But there are certainly estimates that the amount of money being made from piracy against Nigeria’s oil industry, including the illegal siphoning off of oil from pipelines, can already be measured in the billions. And this piracy is run mainly by large, well-organised gangs of outlaws, private armies to all intents and purposes, whose main motivation isn’t even political ideology but pillage and personal power.

This points to another distinction from the terrorism of the Western world, which for the purpose of this article I’d like to call the ’African Problem.’ Whereas terrorist activity in the USA and Europe has mainly been carried out by small jihadi cells against iconic targets, in order to panic and demoralise public and politicians alike, and with a long-term apocalyptic goal, terrorism in African is certainly not restricted to Islam-against-the-rest (in spite of the janjaweed in Sudan); it’s very much about immediate power; and it mainly follows a pattern of larger-scale tribal and ethnic violence, carried out by larger groups in order to intimidate, or sometimes exterminate, rival populations. If the Robin Hood could have been said to rob the rich to give to the poor, African terrorists seem on the whole to rob both rich and poor indiscriminately, in order to torment the poor even further. In fact, terrorism seems to be endemic to Africa.

The corrupt rulers, on the other hand, don’t seem to suffer too often. On the contrary, they are among the most cynical promoters of terrorism against their own peoples, in some cases using state revenues from mineral wealth or other sources not just to enrich themselves (Mobuto Sese Seko was a prime example) but to torture and murder any dissenters. Zimbabwe’s Robert Mugabe is a particularly horrible example of this kind of top-down terrorism, although he is merely the most currently newsworthy of a fairly large group.

Since this blog is devoted to the analysis of terror finance and how to prevent it, the question needs to be asked, what’s special about this African problem and how should terror financing be fought there. I can’t pretend there are any easy solutions. Most of the techniques discussed at professional conferences in London and New York, of yet more sophisticated software for monitoring and analysing suspicious transactions and identifying the financial system’s customers, simply don’t apply in Africa, at least not very well. For all that most of Africa now does have modern banking, including SWIFT transfers and all the rest, a lot of the financial transactions simply bypass the official institutions that can be monitored. Gold, diamonds and simple cash dollars are moved around in large quantities; most of the borders are porous; officials are easily bribed or intimidated. The Jordanian freighter just hijacked near Mogadishu can end up with its cargo offloaded and sold in a small port just down the coast; the cash proceeds may end up being taken by truck to Darfur, or Chad, to pay for weapons or terror gangs’ wages without anyone being able to track them.

What, then, can be done? On the one hand, crime-fighting, whether in Brussels or Birmingham, needs to be more aggressive and determined, and needs to be supported by more effective intelligence against members of African crime gangs. This doesn’t mean racial discrimination, and doesn’t have to be seen as such: if political and police leaders get the message across successfully (especially to immigrant communities in Europe) that they are trying to protect the innocent majority, both locally and in Africa itself, they will be rewarded by better intelligence. Anti-money laundering techniques developed for sophisticated banking systems need to be adapted for the mixture of hawala, money transfer networks and 21st-century mobile-telephony payments that is used all over Africa. The Western democratic countries need to be willing to use much more force in combatting piracy, on sea or land: the situation where the British government is unwilling to let the Royal Navy use overwhelming force against pirates, because of the fear of violating their human rights, is nauseatingly hypocritical, to say nothing of disgraceful. UN troops that sit in their camps and refuse to use force unless fired upon first are worse than useless: their inaction simply encourages the murderers. Not least, Western democracies must find ways to freeze the assets, and thereby restrict the freedom of action, of the most barbaric African leaders, starting with Mugabe -- with or without the consensus support of the African Union and the United Nations.

The more radical African leaders like to blame European colonialist policies for everything that is wrong with the continent, especially for the millions of lives lost in the past. On the whole, they’re wrong, and simply looking for an excuse not to take responsibility for their own futures, starting with the rule of law. But in one respect, they are right in spite of themselves: if European and American political leaders don’t do more to impose law and order in Africa, whether by direct intervention there or even by action outside Africa’s borders, the blood of millions of Africans will continue to cry up from the earth.

Exorcising the 'Saudi Spell'

By David Nordell

Rachel Ehrenfeld is completely right to point out in her article just published here, ’The Saudi Spell,’ the risks attached to the newly-announced policy of the Bush Administration to promote nuclear cooperation with Saudi Arabia. However much the United States (and European countries, led by Britain) try to pretend that Saudi Arabia is a friend and ally of the democratic West, the Saudis are fair-weather friends at the very best, and for the foreseeable future, the onus should be entirely on them to prove the extent and strength of their friendship with the democratic world.

To be fair, as I have tried to point in previous articles here, the Saudis suffer from a split personality in everything to do with their political position and especially their role in international terrorism. On the one hand, the Saudi economy depends to a great extent on the continued revenue from oil exports, which depends almost entirely on the health of the US and other Western economies: although the main pressure on oil prices today is indeed the growing demand for energy of the Chinese economy, as many analysts have pointed out, China’s economic boom -- and therefore its massive consumption of oil and other commodities -- is in itself fuelled by exports to the USA and other wealthy countries that consume Chinese products. If, therefore, the USA enters a genuine recession, whether for purely economic reasons or, say, as the economic expression of future terror attacks, China will be the second country to suffer, and Saudi Arabia the third. Moreover, Saudi Arabia, and indeed the rest of the oil-producing states of the Gulf, is basically defenceless without the US military umbrella. However much money has been spent on buying expensive American and British aircraft and other military hardware and on training the Saudi armed forces, sources familiar with the Saudi military say that these are basically useless: indeed, during one crisis a few years ago, the Saudis imported large numbers of Jordanian troops, basically as mercenaries, to bolster the regime’s defences.

But at the same time, Saudi Arabia is at the very heart of the jihadi movement. It’s not only a question of Saudi skyjackers being at the heart of the 9/11 terrorist outrages. Nor is it only a question of the very large sums of money that Saudi backers have pumped into other terrorist activities, whether via the funds transferred via Arab Bank in New York to the families of Palestinian ’martyrs’ or the very significant support reportedly given by Saudi billionaires to various terrorist groups. Most of all, it is the billions that the Saudi royal family -- and let’s remember that Saudi Arabia to all intents and purposes belongs to the royal family and its oil revenues flow mostly to this huge family and its flunkies -- has over the year donated to Islamic organisations all over the world in order to promote the fundamentalist Salafi ideology within Islam, not only to bring errant Muslims back to the ’true faith’ but also to convert as many non-Muslims as possible to the umma. Islamic schools and colleges, endowed chairs and research centres at universities, have sprung up all over the West thanks to the boundless generosity of the al-Saud family and others (not least the world’s hundreds of millions of car drivers); and while I certainly believe that Muslims have just as much right as Jews, Catholics or Hindus to educate their children in their religion and culture, and that non-Muslims should have the chance to learn about Islam, the problem is that this vast ’education’ network is actually pumping out propaganda aimed at colonising dar al-harb, the non-Muslim free world.

This propaganda takes many forms. One is simply brainwashing millions of Muslim children and adults worldwide into a fundamentalist view of Islam according to which Jews and Christians are pigs and apes, to be slaughtered or at least enslaved: perhaps worse in terms of the Muslim world’s own interests, a view according to which the word Islam, submission, is to be understood literally as a pretext for total, uncritical submission to authority. A second form, basically a corollary of the first, is the view that any means are legitimate to fight to infidels (including the Western states in which so many Muslims live today), including the murder of civilians, and any form of crime against these host societies is justified by the will of Allah. These two forms together are what enable the jihadi movement to recruit both passive supporters and active participants in terrorist acts, from accomplices to the actual suicide bombers; and they also provide the justification for members of Muslim communities worldwide to raise even more money for terrorist activities, provide safe houses, and other resources. A third, even more insidious, form of propaganda is that aimed at the majority populations in the free world: here, the message, partly pumped out by ’research centres’ funded by wealthy Arab donors, basically exploits the political correctness and worship of bogus human rights that have deadened all political discourse: it is no longer legitimate to criticise Islam and the Arab world, even in their most extreme manifestations, in most universities around the world; and Islamic political violence is condoned or ignored by the police and politicians of the West, most of all in Britain. In all of this frightening picture, Saudi Arabia is the master painter directing a larger studio of apprentices: even though the Saudi kingdom as such has only existed since 1926, its basic ideology, at least since its stupendous oil wealth has made this possible, has been to revive the Muslim conquest of the world started by Muhammed and his immediate successors, and interrupted variously by the battle of Lepanto in 1571 and the defeat of the Ottoman army at Vienna in 1683. To be fair, King Abdallah is relatively pragmatic and understands that his regime may actually collapse if the USA is not there, or too weak, to support it; but the most likely successor, Prince Nayef, is much more extreme in his views.

So, what of the nuclear agreement with Saudi Arabia? I’m not too concerned that Saudi Arabia will be able to develop nuclear weapons in the foreseeable future if this agreement actually turns into something tangible (and this is by no means certain: Saudi capacity for absorbing and exploiting this level of technology is not so high, and the whole agreement may mainly be window-dressing on the part of the regime to gain prestige internally). In any case, the West’s attention and efforts must remain focussed on the much more tangible Iranian nuclear threat; and if an American or Israeli military strike takes place against Iran’s nuclear infrastructure, which I believe is the only practical scenario for removing this threat decisively, I suspect that Saudi Arabia’s appetite for a real nuclear capability, however ostensibly peaceful, may suddenly vanish.

What does concern me far more is another set of scenarios if Saudi Arabia is allowed to build any kind of nuclear plants (which they obviously don’t need in order to generate energy, unless they really have taken a long view of their economic survival). One scenario is that, given the security problems that are bound to afflict Saudi nuclear plants, radioactive material will be stolen with relative ease (or even taken with the collusion of the regime itself), and used by terrorist groups to carry out outrages in the USA or Europe: even if only a handful of people were killed by the radiation, the trauma and dislocation would be far greater than 9/11. The other is that a terrorist group acting within Saudi Arabia itself -- it could be a Salafist group that sees the regime as too pro-Western, or one sponsored by Iran -- would carry out an attack on a reactor that would release sufficient fallout to threaten the oil fields and downstream production facilities. This would of course cause a panic in the oil market, no less than if Iran mined the Arabian Gulf, with knock-on effects for the global economy that would dwarf those of 9/11 or those of the current crisis atmosphere surrounding the rise in both energy and food prices. If the aim of the jihadi movement is indeed to destabilise the world, nuclear installations in Saudi Arabia would be an ideal place to start.

What should be done about this situation? Clearly, the Bush Administration isn’t going to do anything: even were Bush’s own leadership more credible, he only has seven months left in office, and so it’s unlikely that the White House’s announcement will be followed by any action at all until the next president is sworn in and starts organising his government. I somehow can’t imagine Obama Barack taking a very determined position against Saudi Arabia if, as seems likely, he takes the Democratic nomination, and as seems much less likely, he gets elected in November. But if John McCain is elected, something I personally hope will happen, I would humbly suggest that he calls Saudi Arabia’s bluff -- and it is in many ways a bluff, because for all the oil and the apparent wealth, Saudi Arabia is a weak state with vast political and economic problems that can’t ensure its own survival. He should basically present an ultimatum: legal and even constitutional action to prevent Saudi funding of education and propaganda in the USA and its allies, unless Saudi Arabia agrees to allow open non-Muslim worship for the many Christians and others working and living in Saudi Arabia (a condition that the Saudis are almost certain to reject out of hand); and unless the Saudis agree to and actually implement a much stronger regime of monitoring terror financing and money laundering. The implementation of any nuclear cooperation, however festively announced, would only start to take form after the fulfilment of these and other conditions, including the adoption of genuinely stringent security arrangements monitored and controlled by the USA. Is all of this feasible? Yes: Saudi Arabia is one of the world’s most autocratic countries, with levels of state control that most dictators can only dream of, and if its leaders were to focus their attention on moving out of the 18th century and developing a genuine partnership with the West, they could succeed without totally destablising their country. When there’s a will, there’s a way.

The Saudi Spell

By Rachel Ehrenfeld

As if Saudis flying civilian airplanes into buildings in New York and Washington, DC, were not enough, the Bush Administration is now supporting the development of “ civilian nuclear power” in Saudi Arabia.

In a feeble attempt to deflect criticism, the Administration published its agreement with the Saudis to “Improve Peace And Stability In The Region Through Nuclear Cooperation,” detailing the kingdom’s commitments to participate” in the Proliferation Security Initiative (PSI).”

This agreement, according to the While House press release (May 16), is to “ensure a smooth supply of [Saudi} energy to the world.” Judging by previous Saudi compliance with and adherence to agreements with the U.S. (like stopping funds to terrorist organizations such as Hamas), expect a Saudi nuclear weapon as fast as their trillions of petrodollars (your money) can buy.

Instead of neutralizing Iran’s nuclear facilities, the U.S. now openly contributes to nuclear proliferation in the Middle East. What remains to be seen is who will use its nuclear weapons against the U.S. or Israel first, the Saudis, or Iran?

See the agreement below:

THE WHITE HOUSE

Office of the Press Secretary
(Jerusalem)
___________________________________________________________
For Immediate Release May 16, 2008


Strengthening Diplomatic Ties With Saudi Arabia
United States And Saudi Arabia Improve Peace And Stability In The Region Through Nuclear Cooperation

Today, President Bush met with King Abdallah to commemorate the 75th anniversary of formal diplomatic relations between the United States and Saudi Arabia. Since 1933, these two nations have enjoyed formal relations. In 1945, during the waning months of World War II, King Abdallah's father ˆ King Abd al-Aziz ˆ met with President Franklin Delano Roosevelt aboard the U.S.S. Quincy in the Red Sea, and the two leaders chose to deepen the strategic relationship between the two countries. The President's visit today builds on this tradition of friendship and close cooperation.

Ø It is in the spirit of that meeting that the United States and Saudi Arabia have completed four critical agreements to strengthen the protection of energy resources, enhance peaceful nuclear cooperation, broaden the fight against global terrorism, and bolster nonproliferation. These agreements further cement the longstanding U.S.-Saudi friendship and close cooperation to help bring peace and stability to the region and its people.

The United States And Saudi Arabia Will Work Together To Further Our Relationship

The Saudis bear a special responsibility for protecting key energy facilities of global importance and the world benefits from their abundant energy supplies. Our global economy depends greatly on Saudi Arabian energy. The U.S. has a keen interest in helping the Saudis protect their energy infrastructure against terrorism, as demonstrated by the unsuccessful terrorist attack against the Kingdom's Abqaiq Plants in February 2006. To this end, the United States and Saudi Arabia have agreed to cooperate in safeguarding the Kingdom's energy resources by protecting key infrastructure, enhancing Saudi border security, and meeting Saudi Arabia's expanding energy needs in an environmentally responsible manner.

1. Saudi Arabia will join the 70 partner nations of the Global Initiative to Combat Nuclear Terrorism. As a partner in this multilateral initiative, Saudi Arabia will:
· Enhance its accountability and physical protection of nuclear systems
· Advance its capability to search for and confiscate unlawfully held nuclear material
· Improve its ability to detect nuclear material to prevent illicit trafficking
· Enhance its means to secure civilian nuclear facilities
· Deny safe havens and economic resources to terrorists
· Create legal frameworks to enforce criminal liability for terrorists
· Improve its response and mitigation capabilities in the event of a terrorist attack
· Promote information sharing to suppress acts of nuclear terrorism

2. The Kingdom of Saudi Arabia will also join more than 85 states participating in the Proliferation Security Initiative (PSI). The PSI is a response to the growing challenge posed by the proliferation of weapons of mass destruction, their delivery vehicles, and related materials worldwide. PSI participants will now include Saudi Arabia and all states that border it.

3. The U.S. will help the Saudis develop both human and infrastructure resources in accordance with International Atomic Energy Agency guidance and standards.
In order to ensure a smooth supply of energy to the world, Saudi Arabia must be able to effectively safeguard its borders and coasts, and ensure consistent supplies of water and power to its citizens.
Under the Critical Infrastructure Protection agreement, the two nations have agreed to establish a Joint Commission on Infrastructure and Border Protection to facilitate training, the exchange of experts and specialized knowledge, and other support services as needed.
The U.S. and Saudi Arabia will also conclude a security agreement that will allow for broadened cooperation between the Saudi Ministry of Interior and the U.S. Government.


4. The U.S. and Saudi Arabia will sign a Memorandum of Understanding in the area of peaceful civil nuclear energy cooperation. This agreement will pave the way for Saudi Arabia's access to safe, reliable fuel sources for energy reactors and demonstrate Saudi leadership as a positive non-proliferation model for the region.
The United States will assist the Kingdom of Saudi Arabia to develop civilian nuclear power for use in medicine, industry, and power generation.
The Government of the United States and the Kingdom of Saudi Arabia will establish a comprehensive framework for cooperation in the development of environmentally sustainable, safe, and secure civilian nuclear energy through a series of complementary agreements.
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Conference on Libel Tourism Highlights Importance of Speech, Freedom Part III

By Aaron Eitan Meyer

Report on the conference "Free Speech in an Age of Jihad: Libel Tourism, “Hate Speech,” and Political Freedom":

The third and final panel of the conference was entitled “What is to be Done? Legislative Opportunities and Pitfalls” and was moderated by Jay Nordlinger, Senior Editor of the National Review, who gave a very brief introduction. Unsurprisingly, the potentially expansive topic took something of a divided nature, with a measure of contentiousness thrown in.

Andrew C. McCarthy, Director for the Foundation for the Defense of Democracies’ Center for Law & Counterterrorism, gave the opening presentation, beginning by noting the fact that there has been some judicial usurpation of what were traditionally political powers, citing the recent Medellin decision, where Chief Justice Roberts reiterated that foreign policy is properly the province of the political branches of government. However, the thrust of his presentation was on the crucial importance that the American concept of free speech, and a ‘marketplace of ideas’ plays in the battle against Jihadism.

As Mr. McCarthy put it, Jihadists seek to quell freedom of speech by narrowing the list of acceptable attitudes and avenues of inquiry, thus setting up any potential discussion firmly on their ground. The War of Ideas, in other words, would begin with a significant handicap on the part of Western Society once our traditional notion of free and wide-ranging discussion is undermined from the start.

Mr. McCarthy then mentioned the case of Dow Jones v. Jameel, wherein the Law Lords of Britain in fact brought British defamation laws somewhat closer to U.S. standards, but hastened that the Alms for Jihad fiasco was a year after that decision, raising the question as to how much the Jameel decision actually accomplished.

He then turned to the issue of Khalid bin Mahfouz, citing Richard Clark, who told the government in 2003 that bin Mafouz was funneling $3 million to Osama bin Laden. Mr. McCarthy pointed out that when Dr. Ehrenfeld’s book came out, bin Mahfouz fought hardest to avoid U.S.courts, even though it was only those courts who could have given him a meaningful chance to refute Dr. Ehrenfeld and actually collect a judgment.

Mr. McCarthy briefly discussed California’s anti-SLAPP statutes. SLAPP stands for Strategic Lawsuits Against Public Participation, predatory suits against individuals and groups for exercising their First Amendment rights. From there, he moved to the possibility of enacting legislation that would force Libel Tourists to sue in the United States, where it would be free (by virtue of our wide discovery laws), and would allow people targeted, such as Dr. Ehrenfeld, to analyze the documents of the Libel Tourist – effectively turning the tables.

The key, Mr. McCarthy went on, is to arm Americans to stave off attacks. To that end, we still need a federal statute to protect against Libel Tourism, going further than the New York statute, and perhaps including double or treble damages if the defendant can prove that the suit was brought as part of a scheme to disrupt the research of an academic. By enacting a national law, the U.S. marketplace of ideas would be revitalized, to better serve as a bulwark against Jihadism.

The Honorable Robert H. Bork spoke next, preemptively registering his disagreement with a recent article by another panelist, John J. Walsh, stating that Mr. Walsh’s article “misses the point,” in that it appears to posit that the First Amendment’s protections stop at our shores.

Judge Bork mentioned that he doesn’t care for the term ‘Marketplace of Ideas,’ calling it one of Justice Holmes’ better rhetorical moments, but alas, not one of his better analytical ones. He went further by explaining that the term seems to imply some form of moral equivalence between speech here and in countries such as Iran, and cautioning that “we’re in a struggle, not a debating society.”

Looking past the immediate benefits of proposed legislation, Judge Bork provided a cautionary admonition that even the non-enforcement of foreign libel judgments would only go so far for publishers, who would still be liable in those foreign countries. Moving on, he said that while legislation is certainly worth doing, perhaps it is not enough. He would use the likes of the Canadian Human Rights Commissions, saying that “one of the best ways of getting rid of a bad law is by enforcing it.”

Turning fully to the ultimate issue, Judge Bork stressed that we need a stronger understanding that we’re in a war, and one that could result in the submission of the West. After all, he continued, civilizations are fragile if you hit in the right place, “and our defenses so far have been feeble.”

Mr. McCarthy interjected that the term ‘Marketplace of Ideas’ wasn’t his favorite phrase either, but that we “need to make policy fully aware of all essential facts.”

Daniel Kornstein, of Kornstein Veisz Wexler & Pollard, LLC, sought-after attorney in libel tourism cases, and counsel for Dr. Rachel Ehrenfeld in her case against Khalid bin Mahfouz, spoke next. He stressed that the problem is old/new, and is at its core, “abuse of litigation.” After reminiscing briefly about his experiences as a student of then-Professor Bork at Yale Law, he stated that the real-world effect of fighting libel tourist suits is less important than the symbolic effect, that the key is “keeping the banner aloft.”

Ultimately, Mr. Kornstein said, there will be a need for an international treaty to deal with the matter, and that large companies often have assets worldwide, so that non-enforcement of foreign judgments is an impossibility.

The next speaker was John J. Walsh, of Carter Ledyard & Milburn LLP, a trial lawyer, and self-described ‘spoilsport,’ as issue was taken with his November 20 article in the New York Law Journal, entitled “The Myth of Libel Tourism.” Stressing his orientation as a trial lawyer, Mr. Walsh began by stating that he had many questions based on evidentiary concerns, though he said that he “holds no brief” for Khalid bin Mahfouz.

In a somewhat self-contradictory presentation, he then turned to a sentence in Dr. Ehrenfeld’s revised and expanded edition of Funding Evil, where Dr. Ehrenfeld said that she would challenge bin Mahfouz in England, and then changed course. Mr. Walsh mentioned that perhaps the change of course was due to the chance of a larger victory, but stated that there’s got to be a reason why nobody else has taken bin Mahfouz on. As he put it, “English law is not as monstrous as you’ve been led to believe here.”

Essentially, the hub of Mr. Walsh’s objection to the Libel Tourism Act was that he saw it as ‘unnecessary’ since enforcement can only be done through a judicial proceeding. He mentioned that Dr. Ehrenfeld defaulted in the British court, something “which has legal consequences.” Mr. Walsh believed that bin Mahfouz’ strategy is a legal one, and that people have been fighting to protect reputation since the dawning of civilization.

Mr. Walsh also noted that there is a globalization issue as well, and that it is not the business of the state of  New York to decide this matter, but properly the business of the nation’s political branches. He ended by stating that we need comity, and cannot afford to be insular.

Mr. Kornstein rose to refute Mr. Walsh, noting that Judge Eady, the British jurist responsible for over 20 of bin Mahfouz’ libel judgments, is the Chief Judge of that Court, and so picks which libel cases he hears.

Perhaps not catching the subtext of Mr. Kornstein’s comment about Judge Eady, Mr. Walsh again questioned, rhetorically, why nobody has challenged bin Mahfouz in British courts. As he put it, the test for enforcement of foreign libel judgments shouldn’t be comparative law, but the evidence actually brought – not the relative burden of proof. What Mr. Walsh sidestepped was the fact that the burden of proof is an essential part of the law of evidence, directly impacting what evidence can be and is brought before the court.

In closing, Judge Bork spoke once more, reiterating that “we have a crisis of confidence,” that we are very comfortable, and that “people, a lot of people, don’t want to think” of unpleasantness.

Mr. McCarthy stressed again that we cannot afford to have legal strictures of other countries imposed upon us – echoing a jurisprudential doctrine since the days of the venerable Chief Justice John Marshall.

Mr. Kornstein closed his comments by keying into the chilling effect of allowing foreign laws to trump First Amendment rights, and asking what [else] could be the greatest harm?

One question that was posed from the audience centered on the gossamer jurisdiction being asserted by British and other courts in libel tourism cases. As the questioner continued, our own due process incorporates the minimum threshold set forth in the International Shoe decision, only after which jurisdiction can be conferred.

Despite the acrimony surrounding Mr. Walsh’s view on the subject, the third panel provided a significant perspective on the nature and reach of potential legislation in combating Libel Tourism, and indeed, Islamist Lawfare as a strategy. Though no simple resolution or comprehensive plan could be presented in a single panel, the totality of the discussion framed many of the potential benefits and pitfalls that would accompany various types of legislation enacted to counteract the problem. While a conclusive answer was outside the scope of the conference, it served to inform the audience not only of the forces arrayed against the West, but also pointed to several avenues to counteract the tactics and strategy of Islamist Lawfare, and that the ultimate response lies not in new doctrines, but stems from the core of fundamentally American values. And as such, though we may be too complacent, we are scarcely unarmed in what may very rightly be termed the current battle of civilizations.

A Secular Market Nightmare

By Alyssa A. Lappen
FrontPageMagazine | May 9, 2008

The global sub-prime mortgage mess would have been “unthinkable in the Islamic capital markets sector,” Malaysian Islamic finance scholar Mohammed Mahmud Awan told Arab News on April 24; Islamic law, or “shari’a principles” would prohibit selling “a debt against a debt,” Awan said at a Bahrain university globalization conference. Trading trillions of dollars in debt without assets backing them caused the crisis, Awan claimed, adding that the “Islamic finance model…would have easily prevented the current economic crisis.”

Others disagree. All “Islamic finance today is interest based,” notes Rice University Islamic economics, finance and management chairman Mahmoud el-Gamal in the Financial Times. Islamic banking, merely “shari’a arbitrage,” is “first and foremost about religious identity,” el-Gamal says.

Indeed, Islamic finance debt instruments are no better than Western mortgage securities, and probably worse. Islamic sukuk al-ijara (shari’a bonds) are merely reverse-engineered structured finance instruments. Many grave secular risks accompany the growing foothold of shari’a finance in the West.

Despite claims of their superior safety by International Center for Education in Islamic Finance professor Awan, Islamic financial institutions manufacture “special purpose entities” (SPEs)—which coincidentally helped destroy Enron. Islamic financial engineers merely renamed the prickly SPEs “special-purpose vehicles (SPVs)”—legal devices to “restructure interest-bearing debt, collecting interest [as] rent or [a] price mark-up,” el-Gamal observes.

Here’s how they work: sukuk bond issuers sell real estate or assets to SPVs, which then capitalize their investment by selling share certificates. In turn, the SPVs then lease back the assets they purchased to the sukuk issuers, collecting principal plus interest, which they pass on to sukuk investors as “rent.” When the sukuk matures, the SPVs sell or return the property to the sukuk issuers. Supposedly safe “alternative” Islamic finance instruments that claim to avoid usury, in short, use Western structured finance tools—“some of the most complex ever created.”

Repeat. Using Western securitization technology, shari’a finance banks now transform liquid, traceable cash flows from interest-bearing debt—that is, real interest-bearing assets—into illiquid assets.

“Junk” synonymous with high yields

Shari’a finance is an “invented tradition” empowering Islamic radicals, writes USC King Faisal Professor of Islamic Thought, Timur Kuran, in Islam and Mammon: “Neither classical nor medieval Islamic civilization featured banks in the modern sense, let alone ‘Islamic banks’.” Thus, the Muslim Brotherhood (forefathers of current political Islam) heavily used modern Western securitization technology to advance MB founder Hassan al-Banna’s shari’a banking invention.

The messy sub-prime mortgage market—which some astute observers consider a mere extension of opaque Enron-era mark-to-fairly-tale accounting—could end tame compared to the 20th century-hatched shari’a banking boondoggle: The latter has far fewer regulatory or monitoring protections against abuses than the mortgage market. Even staunch Islamic banking purveyors admit: The industry’s “documentation is not standardized,” its “inter-creditor agreements can be complex,” it frequently employs “off-balance sheet financing,” it’s preferred by “certain corporate (sic) and individuals” — and “Shari’a regulations can override commercial decisions.”

Western markets are now dangerously in “panic mode.” And as frequent experience demonstrates, the bigger the financial innovation, the greater the “unforeseen consequences”—i.e. market declines. In the 1987 equity market crash, “portfolio insurance” played a key role; in 1994, mortgage-backed bonds wiped out $1 trillion in value—then roughly 10% of the U.S. bond market. They whacked huge pension funds, municipalities and institutional investors—and beached a few hedge funds like dead whales.

Secular market risks of shari’a finance show in above-market sukuk interest rates—oops—rents. Despite Western central banks’ historic 2007 rate cuts to limit losses feared equal to the 1986 to 1995 savings and loan crisis, a sukuk index with a mere 3.8 year duration on Nov. 30, 2007 sported 6.2% “coupon.” In mid January 2008, intermediate Treasury yields were 2.89%—and the Lehman Brothers intermediate U.S. corporate bond index yielded just 5.25%. Only long-term U.S. corporate debt then paid above 6.5%.

Among other Islamic market hazards are doubts on surety of payments for the scheduled life of the sukuk loans—and whether, on maturity, investors will recover 100% of their principal. Then there are the dubious underlying “profit and loss sharing” Islamic finance philosophy. And possible back taxes, interest or penalties, were the Internal Revenue Service to rule sukuk enterprises “uneconomic,” as it did innumerable similarly-structured 1980s tax-shelter schemes.

Moody’s Investors Service (like other financial rating agencies) now profits by formally assessing Islamic financial instruments. Yet the industry has several major risks, a 16-page Moody’s analysis reported in January 2008. These include its range of asset classes, “weak position of investment account holders,” “importance of the Shari’ah supervisory board,” rate-of-return-risks, new operation risks, short track record—and foundations in third world countries where transparency, corporate governance and risk management basically don’t exist.

Ideological pitfall: Once Islamic, always Islamic

Moody’s missed the biggest risk of all, however—the ideological risks of shari’a, or Islamic law— despite a significant precedent. Citibank Islamic financiers launched its Saudi American Bank subsidiary in Jeddah and opened a Riyadh branch in 1955 and 1966 respectively—apparently without due diligence on operating under shari’a. But in 1980, Citibank learned about the risk of sudden confiscation when the Saudis abruptly seized SAB by royal decree, denied Citi all future profits, and ordered the bank to train Saudis staffers—essentially because the bank was insufficiently Muslim. Evidently, it was a case where “shari’a regulations can override commercial decisions.”

Shari’a banking is not governed by secular finance law alone. And it cannot be severed from the complete body of Islamic law—statutes initiated by Mohammed and developed by caliphs, scholars and jurists over 1,400 years.

These laws grant the Islamic ummah (Muslim nation) supremacy over all others—and give them all land and property to hold in trust for Allah. Under shari’a, land or property once conquered or acquired by Muslims cannot generally revert to its original owners.

Possessions confiscated from non-believers “is a way of exacting revenge,” writes 11th century jurist Abul Hasan al Mawardi. As Qur’an 57:2 argues, “To Him belongs all dominions of the heavens and earth.” Echoes Qur’an 59:7: “That which Allah giveth as spoil [war booty] unto his Messenger…it is for Allah and His Messenger and for the near of kin.…”

Al-Mawardi (d. 1058) holds that Allah authorized the 2nd Islamic Caliph, Umar Ibn Khattab, to confiscate property in three ways—by fulfilling a trust to Islam, by force, or by ruling under Allah’s law—and that it is just to take anything from nonbelievers thereby. (The Laws of Islamic Governance, 1996 Ta-Ha edition, pp. 207-251)

Consider, moreover, modern Muslim Brotherhood applications of classical shari’a law. They claim all territories ever controlled by Islam. Islam will soon reconquer Rome, “the capital of the Catholics, or Crusader capital,” just like Constantinople, Hamas “legislator” Yunis Al-Astal preached on Al-Aqsa TV on April 11, 2008.

Similarly, Islamic laws are key to shari’a finance, MB “economic reforms,” and the MB central plan, “Towards a Worldwide Strategy for Islamic Policy.” Swiss police discovered the so-called Project, penned by Qaradawi, in MB chief financial officer Yusef Nada’s Lugano villa in November 2001.

The 12-point handbook rests on shari’a interpretations of MB founder Hassan al-Banna, who in 1928 envisioned a caliphate (Islamic empire) to impose shari’a law globally. To establish the universal Islamic state, the plan orders Muslims to conduct “gradual, parallel work to control local power centers …[with] institutional work as means to this end” and create “special Islamic economic, social and other institutions,” as well as “necessary economic institutions” to fund spreading fundamentalist Islam.

Far from benefiting investors, as Islamic finance “scholar” Nizam Yaquby claimed last October, shari’a doctrine advocates a supremacist ideology, commanding Muslims to wage jihad warfare until they subdue all “infidels” and “unbelievers” into accepting universal Muslim rule.

“Holy War is a religious duty, because of the universalism of the Muslim mission and (the obligation to) convert everybody to Islam either by persuasion or force,” argues 14th century Tunisian jurist Ibn Khaldun in The Muqaddimah. Unlike other faiths, he argues, Islam is obligated “to gain power over other nations.” (trans. Franz Rosenthal, abridged, Princeton Univ. Press, 9th printing, 1989, p. 183).

The MB invented shari’a banking and finance in the 20th century to implement classical financial jihad (jihad bi al-mal) and the Islamic statutes requiring it. Al Banna designed the political, economic and financial foundations that give 21st century Muslims tools to fulfill this classical form of jihad, mandated by and central to the Qur’an.

“True believers are those who strive with their wealth and their lives,” states Qur’an 49:15. “Strive for the cause of Allah with your wealth and your lives,” reiterates Qur’an 61:10-11. “Financial jihad is more important than self-sacrificing,” (suicide bombing) instructs Saudi MB cleric Hamud bin Uqla al-Shuaibi. Their sacrifices for Islam necessitates collecting money for mujahadeen, commands Qaradawi.

MB links to Saudi Arabia

Arabian King Saud bin Abdel Aziz welcomed Muslim Brotherhood exiles from Egypt in 1954, 1961 and 1964. He funded the MB’s Islamic University of Medina in 1961 to spread fundamentalist Islam, particularly to foreign students. Later, Saud and his heirs subscribed to the Brotherhood’s bottom line: constructing a cornerstone global financial joint venture — to fund charitable foundations.

The vast resulting web of “relief” organizations include the Muslim World League, Rabitta al-Alam al-Islami, and the International Islamic Relief Organization (IIRO) — all implicated in funding al Qaeda, the 9/11 attacks, Hamas, and a vast array of other MB terrorist groups. As Qaradawi told BBC Panorama on July 30, 2006, donations constitute “jihad with money, because God has ordered us to fight enemies with our lives and our money.”

In 1969, the Saudis used MB guidelines to found the Organization of the Islamic Conference (OIC). In March 2008, President George W. Bush subserviently appointed Pakistani-born OIC “special envoy” Sada Cumber. Identifying with Texas “communities of the Muslim Umma” as much as the U.S., Cumber professes to bring to the OIC official U.S. resources to “tackle” Muslim world problems of “education, culture, the status of women, … science and technology, … [and] civil society…,” rather than present U.S. views there, as expected of diplomats.

More than solving problems, however, the OIC wants to “promote Islamic banking worldwide,” as with the 1973 founding of the Islamic Development Bank (IDB), which since 1975 approved over $50 billion in funding to Muslim nations. In 2001 alone, the IDB also transferred nearly $540 million from Saudi and Gulf royal telethons to fund suicide bombers and the Palestinian Authority war on Israel.

Universal Islamic banking—“a jihad worth supporting”

The MB and IDB Islamic banking architects also now control two central Islamic finance standard-setting agencies—the 1990-founded Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and “de facto Islamic central bank,” or Islamic Financial Services Board (IFSB). Former Malaysian Prime Minister Mahathir Mohamed christened the latter in November 2002 “to absorb the 11 September shock and reinforce the stability of Islamic finance,” and support “a jihad worth pursuing to abolish … slavery” to the West, namely, a “universal Islamic banking system.”

AAOIFI members include the Saudi Dallah al Baraka Group, al-Rajhi Banking & Investment Corporation, and Kuwait Finance House—all implicated in funding al Qaeda and other MB offspring, according to Richard Clarke, the former national coordinator for security, infrastructure protection, and counter-terrorism. Sudan and Iran—both on the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions list—are members too. Iran is also a U.S. State Department-designated terror-sponsoring nation.

IFSB members include the central banks of Iran, Sudan, and Syria (all designated state terrorism sponsors) and the Palestinian Monetary Authority (PMA), since its inception, widely documented to fund terrorism.

U.S. laws theoretically prohibit dealing with terrorists, their associates or enablers. Yet AAOIFI and its shari’a board advise many Western banks, Moody’s and Dow Jones. Moreover, terror-supporting Pakistani cleric Muhammad Taqi Usmani heads AAOIFI religious advisers. In September 2007, he ordered British followers to remain “peaceful” only until they are “strong enough for jihad” and to “establish the supremacy of Islam.” Such radicals adorn shari’a boards advising U.S. banks.

Religious banks obviously cannot prevent financial crisis.
Therefore, U.S. government and IRS regulators, bankers and investors should insist on keeping the best, safest and fairest secular markets in the world strictly unIslamic.

Proposal for Federal Free Speech Protection Act

By Ilan Weinglass

Following the recent signing of the Libel Terrorism Protection Act by New York Governor David Patterson, the U.S. House and Senate are realizing the importance of passing similar nationwide legislation.  Terror Finance Blog readers will recall that this is the result of a multi-year battle led by Blog contributor Rachel Ehrenfeld. 

Why this legislation was not passed years ago is a mystery to me.  Hundreds of thousands of dollars in legal costs, not to mention thousands of man-hours would have been saved, and we would have been able to read quite a few books that were never published.  On the downside, my copy of Alms for Jihad would not be worth $600.

At this stage, what is needed is for a U.S. publisher to test the law in court by publishing a book banned in the U.K., as it is important to establish a precedent to remove the "chilling effect" of British libel law in the U.S.

The Senate Judiciary Committee press release is as follows:

Specter, Lieberman, King Introduce Free Speech Protection Act

WASHINGTON, D.C. (May 7, 2008)—U.S. Senator Arlen Specter (R-PA), Ranking Member of the Senate Judiciary Committee, Senator Joseph Lieberman (I-CT), Chairman of the Senate Homeland Security and Governmental Affairs Committee, and U.S. Representative Peter King (R-NY), Ranking Member of the U.S. House of Representatives Committee on Homeland Security, today announced the introduction of the Free Speech Protection Act of 2008.  This bill would protect American journalists from libel suits brought in foreign courts that do not have the same protections for free speech that are found in the U.S. constitution.  It mirrors H.R. 5814, legislation recently introduced in the U.S. House of Representatives by Representative King. 

“Freedom of speech, freedom of the press, freedom of expression of ideas, opinions, and research, and freedom of exchange of information are all essential to the functioning of a democracy, and the fight against terrorism,” Senator Specter said. “There is a real danger that American writers and researchers will be afraid to address the crucial subject of terror funding and other important matters without these protections.”

“Discovering the truth requires full and open debate, which is not possible when courts are used to chill inquiry and research,” Senator Lieberman said.  “The freedom of American journalists should not be threatened by foreign courts that do not adhere to America’s principles of free speech.”

“Our journalists provide us with insight on issues that affect all Americans, such as war and terrorism,” Rep. King said. “We cannot allow their voices to be silenced by those who prefer to keep secret the inner details of these issues. American authors and journalists should be able to practice their first amendment right without the fear of a lawsuit.”

This legislation creates a federal cause of action and federal jurisdiction so that federal courts may determine whether there has been defamation under United States law when a U.S. journalist, speaker, or academic is sued in a foreign court for speech or publication in the United States.  The bill authorizes a court to issue an order barring enforcement of a foreign judgment and to award damages. 

The impetus for this legislation is litigation involving Dr. Rachel Ehrenfeld, a U.S. citizen and Director of the American Center for Democracy. Dr. Ehrenfeld’s 2003 book, Funding Evil: How Terrorism is Financed and How to Stop It, which was published solely in the United States by a U. S. publisher, alleged that a Saudi Arabian subject and his family financially supported Al Qaeda in the years preceding the attacks of September 11.  He sued Ehrenfeld for libel in England, although only 23 books were sold there.

The United Kingdom has become a popular venue for defamation plaintiffs from around the world, because under English law it is not necessary for a libel plaintiff to prove falsity or actual malice as is required in the United States. The U.S. journalists or publications who are named as defendants in these suits must deal with the expense, inconvenience and distress of being sued in foreign courts, even though their conduct is protected by the First Amendment in the United States