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Islamic Finance and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)

Author

Listed:
  • Mr. Nadim Kyriakos-Saad
  • Manuel Vasquez
  • Mr. Chady A El Khoury
  • Arz El Murr

Abstract

The money laundering (ML) and terrorist financing (TF) risks associated with conventional finance are generally well identified and understood by the relevant national authorities. There is, however, no common understanding of ML/TF risks associated with Islamic finance. Some are likely to be the same as in conventional finance, but there may also be different risks. This is notably due to: (i) the complexity of some Islamic finance products; and (ii) the nature of the relationship between the institutions and their clients. The limited capacity and experience in the supervision of Islamic finance, especially in jurisdictions that face higher ML/TF risk factors represents an additional vulnerability. The Financial Action Task Force (FATF) standards are implemented without any form of tailoring to the specificities of Islamic finance. The FATF, the Islamic finance standard-setters, and the national regulators should seek a greater understanding of the specific ML/TF risks that may arise in Islamic finance and develop an appropriate response.

Suggested Citation

  • Mr. Nadim Kyriakos-Saad & Manuel Vasquez & Mr. Chady A El Khoury & Arz El Murr, 2016. "Islamic Finance and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)," IMF Working Papers 2016/042, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/042
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    References listed on IDEAS

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    1. Mumtaz Hussain & Asghar Shahmoradi & Rima Turk, 2016. "An Overview of Islamic Finance," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
    2. Ms. Concha Verdugo Yepes, 2011. "Compliance with the AM+L4776L/CFT International Standard: Lessons from a Cross-Country Analysis," IMF Working Papers 2011/177, International Monetary Fund.
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    Cited by:

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