In Vetting Correspondent Islamic Institutions, Questions About Charity Accounts Are Key, Say Consultants

By Colby Adams

For bank compliance staff, the news might sound alarming: U.S. officials have questioned the British government over whether Islamic banking institutions have played loose with counterterrorism financing controls for charity accounts. The diplomatic cable, sent in June 2006 by the U.S. Secretary of State and published in March 15 by, questions the alleged vulnerability of Sharia-compliant banks to structuring transactions below reporting requirements to funnel charitable donations to al-Qaida. The concerns led to a U.S. embassy investigation of how the British government was supervising the institutions, according to the cable. But concerns about the Muslim banks, which are designed...