Viewing cable 06STATE93016
Title: (U) ISLAMIC FINANCE (C-TN6-00207)

IdentifierCreatedReleasedClassificationOrigin
06STATE930162006-06-07 23:17:00 2011-08-30 01:44:00 CONFIDENTIAL Secretary of State
R 072317Z JUN 06
FM SECSTATE WASHDC
TO AMEMBASSY ABU DHABI 
AMEMBASSY ANKARA 
AMEMBASSY CAIRO 
AMEMBASSY DAMASCUS 
AMEMBASSY DHAKA 
AMEMBASSY DOHA 
AMEMBASSY ISLAMABAD 
AMEMBASSY JAKARTA 
AMEMBASSY KUALA LUMPUR 
AMEMBASSY LONDON 
AMEMBASSY MUSCAT 
AMEMBASSY RIYADH 
AMEMBASSY SANAA 
AMEMBASSY SARAJEVO 
AMEMBASSY SINGAPORE 
AMEMBASSY TIRANA 
AMCONSUL PESHAWAR 
AMCONSUL LAHORE 
AMCONSUL KARACHI 
INFO AMEMBASSY KUWAIT 
AMEMBASSY MANAMA
C O N F I D E N T I A L STATE 093016 
 
 
E.O. 12958: DECL: 05/02/2031 
TAGS: PINR ECIN EFIN AL BA BK EG ID KU MU MY PK QA SA
SN, SY, TC, TU, UK, YM 
SUBJECT: (U)  ISLAMIC FINANCE (C-TN6-00207) 
 
REF: A. 05 PORT LOUIS 000466 
     ¶B. 05 KUALA LUMPUR 004086 
     ¶C. 05 KUALA LUMPUR 003066 
     ¶D. 05 KUWAIT 002197 
     ¶E. 05 MANAMA 000747 
     ¶F. 05 CAIRO 009387 
     ¶G. 05 CAIRO 007466 
     ¶H. 05 CAIRO 002593 
 
Classified By: JON M. GIBNEY, ACTING DIRECTOR, INR/I 
 
¶1.  (C)  AS POSTS ARE AWARE, POLICY MAKERS ARE INTERESTED IN 
THE GROWTH AND IMPLICATIONS OF ISLAMIC FINANCIAL 
INSTITUTIONS, WHICH OFFER PRODUCTS AND SERVICES DESIGNED TO 
COMPLY WITH ISLAMIC LAW, WHICH FORBIDS PAYING OR RECEIVING 
INTEREST, MANDATES THAT FINANCIAL TRANSACTIONS BE BASED ON 
REAL ECONOMIC ACTIVITY, AND PROHIBITS INVESTMENT IN SECTORS 
SUCH AS TOBACCO, ALCOHOL, GAMBLING, AND ARMAMENTS.  ISLAMIC 
FINANCIAL INSTITUTIONS INCLUDE BANKS AND NON-BANKS SUCH AS 
INSURANCE COMPANIES AND INVESTMENTS FUNDS.  MORE THAN 300 
ISLAMIC FINANCIAL INSTITUTIONS OPERATE IN MORE THAN 75 
COUNTRIES, WITH BAHRAIN AND MALAYSIA THE BIGGEST HUBS.  TOTAL 
ISLAMIC ASSETS EXCEED U.S. $250 BILLION AND ARE GROWING 15 
PERCENT A YEAR, ACCORDING TO THE IMF. 
 
¶2.  (C)  WASHINGTON ANALYSTS APPRECIATE THE DETAILS ON 
ISLAMIC INVESTMENT PROVIDED IN REFTELS AND SEEK THE SAME TYPE 
OF AND/OR UPDATED COMMENTARY REGARDING ISLAMIC FINACIAL 
INVESTMENT CLIMATE IN THE FOLLOWING COUNTRIES: BANGLADESH, 
BOSNIA AND HERZEGOVINA, EGYPT, INDONESIA, IRAN, MALAYSIA, 
PAKISTAN, QATAR, SAUDI ARABIA, SINGAPORE, SUDAN, TURKEY, 
UNITED ARAB EMIRATES, UNITED KINGDOM, AND YEMEN. 
 
¶3.  (C)  AS POST'S TIME AND RESOURCES PERMIT, WASHINGTON 
ANALYSTS WOULD APPRECIATE POST'S COMMENTARY, INSIGHT, AND 
KNOWLEDGE ON THE FOLLOWING TOPICS RELATED TO THE GROWTH OF 
ISLAMIC FINANCIAL INSTITUTIONS IN POST'S AREA OF 
RESPONSIBILITY. 
 
¶A.  (C)  ISLAMIC FINANCIAL INSTITUTIONS' VULNERABILITY TO 
EXPLOITATION FOR ILLICIT OR TERRORIST PURPOSES, SUCH AS 
STRUCTURING ACCOUNTS TO MASK ILLICIT ACTIVITY OR MONEY 
LAUNDERING, PARTICULARLY THROUGH THE SHARIAH BOARD 
RESPONSIBLE FOR ISLAMIC CHARITABLE CONTRIBUTIONS. 
 
¶B.  (C)  IDENTITY OF THE INSTITUTION, SUCH AS THE CENTRAL 
BANK OR MINISTRY OF SOCIAL AFFAIRS, WHICH REGULATES THE 
ISLAMIC FINANCIAL INSTITUTIONS AND THE EXTENT TO WHICH 
ISLAMIC FINANCIAL INSTITUTIONS ARE SUBJECT TO ANTI-MONEY 
LAUNDERING LAWS COMPARABLE TO THOSE APPLIED TO TRADITIONAL 
INTERNATIONAL FINANCIAL INSTITUTIONS SUCH AS CITIBANK. 
 
¶C.  (C)  THE CAPACITY OF REGULATORS, SUCH AS THE CENTRAL 
BANK, FINANCIAL SUPERVISOR, FINANCIAL INTELLIGENCE UNIT, AND 
ANTI-MONEY LAUNDERING/CORRUPTION AGENCY, TO SUPERVISE ISLAMIC 
FINANCIAL INSTITUTIONS EFFECTIVELY. 
 
¶D.  (C)  LOCAL LAW REQUIREMENTS FOR ISLAMIC BANKS TO OPEN 
BRANCHES AND HOW STRICTLY THOSE ARE FOLLOWED. 
 
¶E.  (C)  ISLAMIC FINANCIAL INSTITUTIONS' CORPORATE GOVERNANCE 
FRAMEWORK AND THE OVERSIGHT STRUCTURE OF THE ORGANIZATION'S 
BUSINESS OPERATIONS INCLUDING THE OPERATIONS OF THE SHARIAH 
BOARD. 
 
¶F.  (C)  SHIFT IN HOW SHARIAH INTERPRET ISLAMIC LAW AS 
APPLIED TO ISLAMIC BANKING ACTIONS TO BE EITHER BE MORE 
STRICT OR LIBERAL. 
 
¶G.  (C)  FINANCIAL HEALTH OF ISLAMIC FINANCIAL INSTITUTIONS 
AND IMPLICATIONS FOR BOTH THE LOCAL AND INTERNATIONAL 
FINANCIAL STABILITY. 
 
¶H.  (C)  THE TYPES OF CURRENCIES FAVORED BY ISLAMIC 
INSTITUTIONS, ESPECIALLY BANKS, TO INCLUDE THE EXTENT TO 
WHICH THEY AVOID OR DISCOURAGE DOLLAR TRANSACTIONS AND THEIR 
PREFERRED TRANSACTION CURRENCY SUCH AS EURO OR DOMESTIC 
CURRENCY. 
 
¶I.  (C)  HOW ISLAMIC FINANCIAL INSTITUTIONS' ARE EXPANDING 
AND DEVELOPING THEIR ACTIVITIES INTERNATIONALLY AND WHICH 
INSTITUTIONS ARE MOST AGGRESSIVE IN ENGAGING IN CROSS-BORDER 
TRANSACTIONS. 
 
¶J.  (C)  THE INDUSTRY'S PROGRESS IN CREATING NEW PRODUCTS AND 
SERVICES SUCH AS FORWARDS, OPTIONS, LONGER-TERM FINANCING 
SCHEMES, ETC. 
 
¶K.  (U)  FOR THE MIDDLE EASTERN ISLAMIC BANKS WHO WERE 
RECENTLY GRANTED LICENSES TO OPERATE IN MALAYSIA, PLEASE 
COMMENT ON THE STRATEGIES THEY WILL PURSUE IN THAT MARKET AND 
THEIR PROSPECTS TO ENGAGE IN NEW/MORE SOPHISTICATED BUSINESS 
LINES/PRODUCTS THAN IN THEIR HOME MARKET. 
 
¶L.  (C)  PLEASE COMMENT ON WHAT TYPES OF CUSTOMERS ISLAMIC 
BANKS ARE CATERING TO, SUCH AS RICH INDIVIDUALS, 
CORPORATIONS, POORER CLIENTS, PARTICULARLY THE FLAVOR OF 
ADVERTISEMENTS ON BILLBOARDS. 
 
¶M.  (C)  PLEASE COMMENT ON HOW LOCAL AND NATIONAL GOVERNMENTS 
VIEW ISLAMIC BANKING, IN PARTICULAR IN PAKISTAN, EGYPT, NORTH 
AFRICA, INDONESIA; COUNTRIES WHERE ISLAMIC BANKING HAS NOT 
TAKEN HOLD IN THE MAINSTREAM.  GOVERNMENTS, IN MANY 
INSTANCES, HAVE BEEN THE CATALYSTS OF ISLAMIC BANKING IN 
THEIR RESPECTIVE COUNTRIES. 
 
¶4.  (C)  PLEASE CITE C-TN6-00207 IN THE SUBJECT LINE OF 
REPORTING IN RESPONSE TO THE ABOVE QUESTIONS. 
 
 
RICE