Combating Money Laundering and Terrorism Financing: Perspectives from Maqāsid al-Sharīʿah

• Date: 26 August 2019
• Pages: 129-144
• DOI: https://doi.org/10.1108/978-1-78973-545-120191014
• Published date: 26 August 2019
• Author: Raja Madihah Raja Alias,Norhashimah Mohd Yasin,Badruddin Hj Ibrahim,Mohd Yazid Zul Kepli

Chapter 8

Combating Money Laundering and

Terrorism Financing: Perspectives

from Maqāsid al-Sharīʿah

Raja Madihah Raja Alias, Norhashimah Mohd Yasin,

Badruddin Hj Ibrahim and Mohd Yazid Zul Kepli

Abstract

Money laundering and terrorism nancing are nancial crimes which affect

the economic stability and integrity of the country. In this respect, the

relevant regulator has a duty to preserve and protect the nancial stability

of the country. This duty is in line with the concept of the protection of

wealth (hifz al-mal) under the maqāsid al-Sharīʿah or higher objectives of

Islamic law framework. The objective of this chapter is to examine the

protection of wealth vis-á-vis money laundering and terrorism nancing

from the maqāsid al-Sharīʿah perspective. This study analyses the primary

and secondary legal sources on the laws and regulations on anti-money

laundering and counter nancing of terrorism while also considering the

primary and secondary sources of Islamic law. This study is signicant

as it makes an exploration of the maqāsid al-Sharīʿah perspectives and

discusses the position of unlawful wealth that is acquired from the illicit

gain of property from the abuse of money laundering and the nancing of

terrorist activities. This chapter suggests that Islamic law emphasises on

the lawful ownership of wealth and prohibits a person from acquiring illicit

wealth. This study will contribute towards the study on the deployment

of maqāsid al-Sharīʿah, which is benecial in safeguarding an individual

action as well as the country’s commitment against abuse and misuse of

wealth for nancial crimes.

Keywords: Money laundering; terrorism nancing; nancial crimes;

unlawful wealth; wealth acquisition; maqāsid al-Sharīʿah

Emerging Issues in Islamic Finance Law and Practice in Malaysia, 129–144

Copyright © 2019 by Emerald Publishing Limited

All rights of reproduction in any form reserved

doi:10.1108/978-1-78973-545-120191014

130 Raja Madihah Raja Alias et al.

Introduction

The crimes of money laundering and terrorism nancing have gained wide atten-

tion from the global community after all countries across the world were required

to introduce laws and regulations to combat these nancial crimes. In general,

money laundering is associated with the proceeds of illegally obtained money or

property by concealing or disguising it so that it appears to be legitimate money.

The launderers then channel their dirty money into various sources, for instance,

by placing it in nancial institutions as well as purchasing properties to make

their money look legitimate. Terrorism nancing does not focus on the sources of

money or property, but it is concerned with the use of the property or money for

terrorist purposes.

Since the 1980s, rigorous efforts have been made by international organisa-

tions to provide international standards by urging all countries to legislate to

combat these nancial crimes. At the initial stage of combating these crimes, the

conduit for the crime of money laundering has come to the attention of relevant

international organisations that urge all the countries to identify the origins and

legitimacy of the money or property used for transactions in their nancial insti-

tutions. After the 11 September 2001 attacks, authorities stepped up measures

to counter terrorist nancing. Following this attack, the international focus on

anti-money laundering (AML) now also includes the procedures for countering

the nancing of terrorism (CFT) (Johnson, 2008). Therefore, the international

standards now include the AML/CFT as preventive measures in combating these

crimes which have been endorsed by over 180 countries, including Malaysia

(Financial Action Task Force, 2018, Updated October).

The unacceptability of nancial crimes such as money laundering and ter-

rorism nancing is also evident in Islamic law. This is due to the fact that these

nancial crimes bring many negative effects to the countries from both the nan-

cial stability aspect as well as the security of the country. In this regard, although

money laundering and terrorism nancing are considered to be contemporary

crimes, the concept of unlawful property or illicit gain of property has been

addressed in the Qur’an since the early days of Islam (Al-Agha, 2007). Islamic

law has taken a great concern pertaining to the position of property or wealth

(mal) where Islam encourages Muslims and humanity in general to acquire prop-

erty through the lawful manner of the preservation and protection of wealth (hifz

al-mal) under the principle of maqāsid al-Sharīʿah. In this regard, Islam prohib-

its all business conducts that have an element of injustice, and where wealth is

acquired from criminal activities (Sanusi, 2008).

Hence, the focal point of this chapter is to explore the objectives of Islamic

law or maqāsid al-Sharīʿah in relation to combating money laundering and ter-

rorism nancing. This chapter is divided into three parts. The rst part focusses

on the legal aspects of combating money laundering and terrorism nancing. The

discussion includes the denition and nature of money laundering and terrorism

nancing as well as international efforts and Malaysian experience in combat-

ing these crimes. This section also discusses the methods and techniques used by

criminals. The second part of this chapter examines combating these nancial