Money laundering refers to a financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money. Through the definition of money laundering, it is indicated that it is an act violating the ethics and human values that call for the Halal earning of money in non-compliance with the Holy Book of Allah “Qur’an” and the traditions of his Prophet-Peace be upon him. Therefore, it is deemed as a legal crime represented in the trial of making Haram “illegitimate” money as Halal “legitimate” money. There are many evidences from the Holy Qur’an and Sunna for the prohibition of this type of financial crimes.
There is no doubt that the money laundering negatively affects the economy and development and opens the door for the Haram money that is significantly related to illegal activities such as the drug trade, prostitution, arms trade, smuggling of goods, terrorist activities, counterfeiting or money stealing.
Money Laundering In the Holy Qur’an
(1) Suart al Baqarah – verse 188 “And do not consume one another’s wealth unjustly or send it [in bribery] to the rulers in order that [they might aid] you [to] consume a portion of the wealth of the people in sin, while you know [it is unlawful].” The verse stated expressly the prohibition of illegal earning of money such as bribery and theft.
(2) Suart Al Maidah – verse 2 “And cooperate in righteousness and piety, but do not cooperate in sin and aggression”. This verse refers to the prevention of cooperation with any individual trying to affect the society.
(3) Suart Al Araf – verse 157 “who enjoins upon them what is right and forbids them what is wrong and makes lawful for them the good things and prohibits for them the evil and relieves them of their burden and the shackles which were upon them”. This verse indicates that the money laundering is deemed as a prohibited earning of money.
(4) Suart Al Nisa – verse 29 “O you who have believed, do not consume one another’s wealth unjustly but only in lawful business by mutual consent”. The verse includes a general legislation prohibiting invalid treatment and the circumvention of people’s money through the injustice and monument.
Money Laundering in the Sunna:
(1) The prophet Mohammed (PBUH) has stated in his last sermon “Verily your blood, your property are as sacred and inviolable as the sacredness of this day of yours, in this month of yours, in this town of yours”. The Hadith refers to the preservation of Muslim’s money and the prohibition of illegal earning of which. In general, it includes all of financial and economic crimes, including the money laundering. (Reference : Sahih Muslim 1218)
(2) Reference to Sahih Al Bukhari No. 2059 – The prophet Mohammed (PBUH) said “A time will come when one will not care how one gains one’s money, legally or illegally”. The Hadith expects the future of corruption of consciences and immorality. Therefore, people became indifferent to the source of money, whether it is Halal or Haram.
Conclusion:
The money laundering is deemed as a legal crime and contrary to the Shariah. It is prohibited earning and all efforts should be unified for the prevention of such crime for its social, economic and political risks.
Shariah Compliant is not in isolation. Call centers play a vital role in maximizing the profitability of financial institutions. In today’s competitive financial marketplace, most call centers have made the transition from cost-centers into revenue-generation centers. This places an imperative emphasis on boosting sales through inbound and outbound agents.
Traditionally, the main objectives of a conventional financial institution call center were based on a set of Key Performance Indicators (KPIs) such as service level, abandoned rates, productivity, Quality monitoring, Customer’s satisfaction, revenue and overall Return on Investment (ROI). The typical approach of a conventional bank’s call center is to provide various products and services to the bank’s customers through service calls handled by inbound agents and subsequently these calls would be followed up by an outbound team for execution of sale.
Similarly, Call centers offering Islamic products and services are using the same sales techniques such as cross-selling and up-selling for the purpose of generating leads. These particular call centers are obliged to comply with Islamic teachings as revealed in the Quranic injunctions and Sunnah, and avoid dealing or transacting in prohibited activities which are subject to Riba (Interest) or Gharar (deceit). Thus, whether the call center is operated under a fully-fledged Islamic bank or through an Islamic Banking window, the framework of operational activities carried out by the call center should be in-line with the principles of Sharia’a.
From an Islamic perspective, scholars have declared different fatwas pertaining to the selling of Islamic banking products within the conventional banking environment as follows:
First, agents may sell Islamic banking products on the basis of “Islamic Product First” and if the customer does not show interest in this product, the agent may offer/sell the alternate conventional product.
Second, agents should sell Sharia’a compliant products only and if the customer is seeking an additional conventional product, he/she should be redirected to agents handling conventional products.
Third, Call centers should have a dedicated team of agents who are specialized in Islamic products and are not involved in selling any conventional products.
In fact, call centers operated under fully fledged Islamic banking umbrella may not have the same risk of non-compliance to Sharia’a as those operated under dual-banking system (Islamic banking window). The Islamic banking call centers are challenging dual banking system call centers due to the following:-
1 – Complying with the principle of “Islamic Product First” may not be possible to be ascertained unless all recorded calls are monitored by quality specialists/independent controllers which is extremely difficult;
2 – Inability to comply with Code of Ethics for employees working for Islamic Financial Institutions in accordance with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards due to involvement of staff in selling impermissible products – which have elements of Riba and Gharar – and earning commissions/incentives from selling forbidden products;
3 – Lack of confidence in the dual banking system. Customers believe, since Islamic and conventional operations are not segregated, their funds may mix with interest based transactions;
4 – Muslim customers are increasingly voicing distrust in the legitimacy of Islamic banking transactions. Thus, they may act on this distrust and end their relationship with the bank;
5 – There are no specific measures to determine the degree of compliance to the principles of Sharia’a with respect to its functional and operational activities undertaken by inbound and outbound agents.
In “full fledged” Islamic Financial Institutions, the risk of operations being incompatible with the provisions of Islamic Sharia’a is much lower than it may be in a Conventional Financial Institution offering products under an “Islamic window” approach. There are numerous obstacles facing call centers dealing with Islamic Finance Products, including:-
[1] Operational and Managerial Constraints
First, Call center management are always concentrating on Service Level benchmark, calls volume, average speed of answer (ASA), calls answered, abandoned ratios, agents’ productivity, sales and revenue. However, adherence to Sharia’a is out of the scope;
Second, most call centers have a dedicated contact number for Islamic operations. However, the skill-set based routing system may have some agents with multi skills under dual skill-set for conventional and Islamic contact numbers;
Third, the procedures and detailed work-instructions outlined in the Standard Operating Procedures (SOPs) are neither referring to Sharia’a considerations nor highlighting precautions on critical activities in a dual banking system work frame;
Fourth, absence of an end-to-end handling process of Islamic activities by a dedicated team of agents having no direct or indirect interaction with conventional activities;
Fifth, team coaching sessions are concentrating on individual performance, service level trends and overall sales achievements without any reference to SSB’s instructions;
Sixth, lack of governance and absence of transparency in sharing details of transactions processed without complying with Sharia’a requirements for the purpose of learning and continuous improvement;
Seventh, sales scripts do not refer to the fact that all products’ programmes, contracts, process notes and application forms were reviewed and approved by the Financial Institution’s Sharia’a Supervisory Board;
Eighth, agents assigned to Islamic banking operations may also handle some conventional operational activities at the back office which are subject to (Riba) and (Gharar) such as approving/increasing the conventional credit cards limit, execution of balance building transactions through customers’ credit cards, issuance of conventional insurance policies (life, property, vehicle, etc..) or postponement of the loan installment, etc;
Ninth, quality assurance specialists are normally concentrating on the accuracy and courtesy of the call in-line with the predefined quality standards such as interpreting customer requirements, accurate capturing of data and providing accurate information about product/service to clients. However, these quality standards do not include any measures to determine the degree of compliance with Sharia’a law.
[2] Prohibited Activities / Misconduct
First, financial Services’ agents, dealing in securities and commodities, may advise clients to buy shares in a particular promising company as per market expectations (unless they are delegated to do so and carry the risk of such recommendation). The same concept may be applicable in Real Estate business where the agent may suggest to investors to buy property in a specific location that is subject to takeover in future. Both transactions involve considerable risk and may be subject to the element of Gharar (deceit);
Second, activation or subscribing customers for services without obtaining prior permission, such as mobile banking, e-statement, Telephone Identification Number (TIN), Internet-banking, SMS campaigns and newsletter;
Third, all-in-one concept of selling bundle products to the client in the same call, i.e. selling Murabaha Home Finance and Revolving Overdraft facility (ROD) which is subject to predetermined interest (Riba).
Fourth, advising clients who are not eligible to apply for Islamic products under credit policy parameters of the Islamic Banking towards the alternative conventional product for the purpose of retaining customers from approaching another competitor;
Fifth, misrepresentations and presenting wrong/incomplete information about product features, pricing, terms & conditions and consequences/financial impact in case of cancellation or early exit.
[3] Knowledge and Expertise
First, absence of adequate level of understanding the elements of Islamic contracts, rights, obligations and classifications;
Second, agents are too inexperienced to recommend the appropriate Islamic solution to the client;
Third, lack in understanding the core differences between Islamic products such Murabaha and Ijarah or Salam and Istisna’a
Fourth, lack of expertise among agents of the consequences, regulatory, reputation and financial risks that may be borne to the financial institution due to non-compliance to Islamic Sharia’a law.
Conclusion
Taking into consideration the recent global financial crisis that hit the world in 2008, it has never been more critical for banks to focus on boosting sales. Selling of Islamic products can be a goldmine to the call center if agents are equipped with the appropriate level of skills and knowledge related to Islamic contracts and Sharia’a standards. Following are the proposed recommendations:-
1 – Islamic Financial Institutions are based on the foundations of Islamic religious ethics. Therefore, their sound governance, from an ethical and Sharia’a perspective, is crucial to their proper functioning. This is why top management should insist on aligning the call centers’ objectives and philosophies with the teachings of Quaran and Sunnah in accordance with approved fatwas by the SSB.
2 – Code of ethics should incorporate the principles developed by AAOIFI such as trustworthiness, legitimacy, Allah fearing, professional competence and due diligence, faith-driven conduct, professional conduct and teaching technical standards, man’s accountability before Allah, and righteousness while displaying the highest moral standards (this could be applicable for Muslim staff only);
3 – Inbound and outbound calls should be handled by a dedicated team of agents dealing exclusively with Islamic operational activities. This team should not, under any circumstances, perform any activities associated with conventional transactions. Similarly, back-office operations should be separated;
4 – Sales scripts should specify that products are being reviewed and approved by the SSB and SOPs should outline the Sharia’a instructions and restrictions while processing Islamic transactions;
5 – Quality monitoring specialists should evaluate the agents’ adherence to the Sharia’a law in addition to the common standards such as accuracy and courtesy;
6 – Management should provide appropriate training programmes, as well as real life case studies classified as non Sharia’a compliant due to the involvement of forbidden activities such as Riba and Gharar.
The considerable growth of Islamic Finance in the emerging markets as legitimate alternative to conventional products has triggered the interest of most of conventional financial institutions to adopt a dual-banking system and undertake Islamic financial activities to meet the demands of its clients seeking Shariah compliant products/services under the form of Islamic Windows.
Islamic Windows are operating under conventional banking umbrella and they offer Shariah compliant products and services. A typical Islamic-window “Islamic Windows” approach is a form of operating structure in a conventional bank which offers Islamic banking products and services through its conventional branches by dedicated team equipped with sufficient knowledge of Shariah aspects.
The framework of operational activities should be in-line with the rules and principles of Shariah as stated by the Shariah Supervisory Board. Such approach requires full segregation of accounts and operations, funds collected from depositors must be invested in Shariah-compliant transactions, liquidity management policy of funds should comply with Shariah law and staff employed under the Islamic-window should adhere to Islamic code of ethical conduct and should refrain from performing any roles towards conventional banking operations.
Taking into consideration that strict adherence to SSB guidelines and the standards of other regulatory bodies such as Accounting and Auditing Organization for Islamic Financial Institutions “AAOIFI” and Islamic Financial Services Board “IFSB” have a significant impact on how clients approach banking, the inadequate segregation of operations/accounts of conventional and Islamic activities, absence of Standard Operating Procedures from Shariah perspective and lack of Shariah trained staff to execute Islamic transactions create the following challenges for Islamic windows:
Lack of clients confidence that their funds may be co-mingled with funds in the conventional interest based transaction books
Efforts made for the innovation of investment products that meets desire of Muslims’ clients towards diversification of investments are always below expectations compared to wide-range of conventional products.
Non-disclosure of earnings from interest-based activities and its subsequent treatment in the financial statements.
Increase in the outstanding amount of the financed product/service against postponement of installment or rescheduling of outstanding debts.
Cross-selling of alternative conventional products in-case of shortfall in the sale of the Islamic products.
Utilization of conventional accounts which are subject to pre-determined interest charges as a recovery accounts of installment of Islamic finance products.
Auto-payment option on conventional credit cards for recovery of Takaful Premium and Zakat payment.
Acceptance of conventional insurance policies in Murabaha and Ijarah instead of Takaful policies.
From Muslim client’s perspective, failure to comply with Shariah principles is a deliberate violation of the Divine law as revealed in the Quranic injunctions and Sunnah. Thus, clients may feel guilty and sinful due to non-compliance to obligations towards the creator (Allah SWT) and subsequently ends-up the relationship with the bank. That’s why many customers do not believe in Islamic windows.
