Shari'Ah's Black Box: Civil Liability and Criminal Exposure Surrounding Shari'Ah-Compliant Finance

72 Pages Posted: 12 Mar 2008

Date Written: March 2008


This article examines the multitude of legal issues - both criminal and civil - that Shari'ah-compliant finance (SCF) presents to U.S. financial institutions and their professional advisers.

In short, SCF is the practice of investing in conformity with Islamic law (Shari'ah). Such investment appears at first glance innocuous. With only a modicum of probing, however, SCF turns out to be a black box, where the financial industry and their legal professionals have hidden a doctrine at war with the West and have ignored the dangers and risks posed by Shari'ah authorities who determine the rules and principles of this industry.

While SCF is marketed as primarily the avoidance of transactions involving interest and also includes a prohibition on investing in vice industries, this appearance ignores the reality of Shari'ah as determined by the contemporary and authoritative historical Shari'ah scholars. With a modicum of due diligence, one learns that the SCF black box fails to disclose the fact that leading Shari'ah authorities have issued authoritative Shari'ah legal rulings calling for violent Jihad against the non-Muslim world. As such, SCF presents U.S. investors and legal advisers with considerable risk under securities, anti-terrorism, antitrust, and racketeering laws.

To this point, the civil liability and criminal exposure surrounding SCF have been ignored by legal academia. Although some scholars have broached the topic of SCF, these scholars have merely trumpeted the practice's virtues without questioning its legality. In an area that begs for vigorous analysis, only those with a vested interest in the success of SCF has been presented in the legal literature. This article, by identifying both professional responsibility and substantive legal issues inherent in SCF, seeks to fill in the current gap and instigate a much needed critical examination among practitioners, scholars, and policymakers.

This article is truly the first of its kind. Given academia's failure to challenge Shari'ah - compliant finance or even engage in serious debate about its feasibility in the U.S. legal system, the article is certain to provoke strong responses from both proponents and detractors of the SCF industry.

Keywords: shari'ah, shari'ah-compliant, finance, securities, antitrust, RICO, racketeering

Suggested Citation

Yerushalmi, David, Shari'Ah's Black Box: Civil Liability and Criminal Exposure Surrounding Shari'Ah-Compliant Finance (March 2008). Utah Law Review, Forthcoming, Available at SSRN:

David Yerushalmi (Contact Author)

Center for Security Policy ( email )

1901 Pennsylvania Avenue, NW
Suite 201
Washington, DC 20006
United States


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