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FinCEN files: Big banks let $2t 'dirty money' move globally

newsblur - Mon, 2020-09-21 10:48
IslamicFinance shared this story from KT Mobile. It is the latest in a string of leaks over the years that have exposed secret deals, money laundering and financial crime.

The FinCEN files show that the world's biggest banks have allowed criminals to move "dirty money" around the globe. In total, these reports flagged more than $2 trillion in transactions, according to BuzzFeed News.

The BBC reported that Russian oligarchs used banks to avoid sanctions and moved their money into the West.

It is the latest in a string of leaks over the past five years that have exposed secret deals, money laundering and financial crime, a BBC report said.

The FinCEN files are more than 2,500 documents, most of which were files that banks sent to the US authorities between 2000 and 2017.

These documents are some of the international banking system's most closely guarded secrets. Banks use them to report suspicious behaviour but they are not proof of wrongdoing or crime.

They were leaked to Buzzfeed News and shared with a group that brings together investigative journalists from around the world, which distributed them to 108 news organisations in 88 countries, including the BBC's Panorama programme.

FinCEN is the US Financial Crimes Investigation Network. Concerns about transactions made in US dollars need to be sent to FinCEN, even if they took place outside the US.

Suspicious activity reports, or SARs, are an example of how those concerns are recorded. A bank must fill in one of these reports if it is worried one of its clients might be up to no good. The report is sent to the authorities, BBC said.

It has been revealed through these documents that a bank allowed fraudsters to move millions of dollars even after it learned from US investigators that the scheme was a scam.

JP Morgan allowed a company to move more than $1 billion through a London account without knowing who owned it. The bank later discovered the company might be owned by a mobster on the FBI's 10 Most Wanted list.

There is also evidence that one of Russian President Vladimir Putin's closest associates used a bank in London to avoid sanctions meant to stop him.

Accoridng to BBC, the UK is called a "higher risk jurisdiction" like Cyprus, according to the intelligence Division of FinCEN. That's because of the number of UK registered companies that appear in the SARs. Over 3,000 UK companies are named in the FinCEN files - more than any other country.

There have been a number of big leaks of financial information in recent years, including 2017 Paradise Papers. The 2016 Panama Papers - Leaked documents from the law firm Mossack Fonseca showed more about how wealthy people are using offshore tax regimes, the BBC said.

According to BuzzFeed News, some entities have been flagged numerous times in the FinCEN Files. Mayzus Financial Services, an online payment processing company that served clients involved in a bitcoin ring, sets the record, appearing as a subject of 36 SARs.

More than 250 SARs reference people with addresses in the US, and more than 120 with addresses in Russia. The UK, China, Germany, Canada, and Ukraine were also common locations for people, each appearing in at least 20 reports, it said.

Munir Lallmahamood, CEO de la Century Banking, interrogé par l'ICAC pour transactions frauduleuses - Zinfos Moris

newsblur - Mon, 2020-09-21 08:11
IslamicFinance shared this story from ""Takaful Insurance Company" OR "Banque Al Wava Mauritanienne Islamique" OR "SMAI Islamique" OR "Taamin Assurances Islamiques" OR "Century Banking Corporation" OR "Jaiz Bank" OR "Lotus Capital" OR "Banque Islamique du Sénégal" OR "SALAMA Senegal"" - Googl. Munir Lallmahamood, CEO de la Century Banking, interrogé par l'ICAC pour transactions frauduleuses  Zinfos Moris

Aligning Money and Mission at Banks: What Nonprofits and Foundations Can Do

newsblur - Sat, 2020-09-12 09:47
IslamicFinance shared this story from Non Profit News | Nonprofit Quarterly.Bank Vaults under Hotels in Toronto, Ontario,” Jason Baker

In a time when the eyes of Americans—white Americans especially—have been opened to the country’s vast racial inequalities, those of us who have been working for social justice are learning more about what we need to do while many others are just now learning about systemic causes of inequality. Although many in our society (and in corporate offices) claim to want to achieve lasting change, all must understand what this would mean for the banking system, and how each of us can contribute to that process.

As mission-driven institutions, nonprofit organizations and foundations can learn about what their money is doing when they aren’t spending it and it is sitting in the bank. How can we ensure our money is working for our missions, and not against them?

The Impact of Banks on Racial Inequality

Banking has fueled racial inequity and social harm in many ways and for a long time. Before the Fair Housing Act passed in 1968, banks regularly contributed to racial segregation and wealth inequality in the US by refusing to make loans to Black Americans or in neighborhoods that were predominantly Black. The legacy of this “redlining” persists to this day.

On top of that, far too many banks have continued to engage in discriminatory banking practices. In the 2000s, Black and Latinx Americans who were able to purchase homes and gain some wealth were disproportionately targeted for high-cost predatory loans. When the crash came, the nation’s already enormous racial wealth gap grew even larger. The history of redlining and predatory lending is a primary reason why white Americans on average have 14 times the wealth of Black Americans today.

Racism remains endemic to the banking industry. We see this in the media’s many stories about how banks treat both employees and customers—with Black Americans, American Indians, and other people of color facing higher account fees, blocked access to mortgages, and less favorable terms when they do obtain loans. More broadly, banks continue to fund activities counter to many of our missions, financing fossil fuel firms, prisons, detention centers, and payday lenders. With so much money sitting in bank accounts in one way or another, most organizations and individuals are unknowingly funding these activities with their deposits. (According to 2020 World Bank data, 2017 US financial system deposits in the US amount to 80.8 percent of gross domestic product.)

Moreover, the governance and corporate practices of many banks also contribute to income and race inequality. A third of bank tellers are on public assistance, while the CEOs of the largest banks receive tens of millions per year. On average, CEOs at the nation’s largest 20 banks took home 173 times what their median-wage worker earned in 2018. The US House Financial Services Committee’s analysis of bank diversity data found that “Blacks and [Latinxs] comprise four percent or less of banks’ executive and senior level employees and six percent or less of their first/mid-level leadership employees.” Banks’ focus on quarterly stock earnings for their shareholders and compensation for executives leads to astonishing practices like the widespread opening of fake accounts at Wells Fargo.

Now Is the Time to Change the Banking System

It’s clear from just these few examples that the banking system, like so many of our systems, needs radical change. Fortunately, we are in a moment when such change might be possible. The global pandemic, in conjunction with decades of hard organizing by so many people working to fight systemic racism, has created an opening. Spurred in part by the murder of George Floyd and the shock of the pandemic and resulting economic shutdown, a growing number of Americans have begun to see the systems behind wealth inequality and structural racism rather than simply ascribing inequality to individuals’ actions or “merit.”

Some banks, like other corporations, have made commitments in recent months to combat racism, fight climate change, and divest from prisons and detention centers. But to migrate from individual statements, commitments, and programs to broader systemic change, banks must adhere to new standards for the long haul. These standards must have equity at the core. Only in this way can we hope to build a culture that is no longer based on the fear, scarcity, and false meritocracy that enabled the development of systems that fostered vast inequities of pay and opportunity.

At Beneficial State Foundation, to improve practices in the banking sector, we have focused on building Equitable Bank Standards that clearly define both mission-aligned and harmful practices of banks. This enables individuals and organizations to know whether their deposit dollars are working in support of or against their values and missions. These standards also serve to provide to banks making these changes in good faith a clear roadmap to transition to a new era of banking—banking that is equitable, anti-racist, and nourishes our communities and planet.

These banking standards (close to 200 in total) fall into five categories:

  1. Governance in the Public Interest: Banks must align their financial success with the balanced success of all stakeholders (customers, colleagues, communities, shareholders, planet), especially those who’ve been excluded from the banking system.
  2. Equitable Lending and Investments: Banks must direct the majority of capital toward commercial loans, consumer loan portfolios, borrowers, and investments that support a regenerative economy that is fully inclusive, racially and gender just, and environmentally restorative. Banks must meet the credit needs of communities served and explicitly strive for loans and investments that do no harm.
  3. Equitable Products and Services: Banks must apply a mission screen to create positive social and environmental impact at the core of every product or service. They must use an equity lens when designing pricing, terms, disclosures, and trainings, as well as sales and marketing strategies. Bank products must be accessible and priced fairly no matter one’s income or wealth.
  4. Equitable Corporate Practices: Banks must integrate social and environmental principles and guidelines into all corporate practices, including human resources, procurement, partnerships, and branch operations.
  5. Advocacy for a Just Financial System: Banks must exercise their duty to serve the public interest by advocating for the public good. They must ensure that regulation protects both customers with the least bargaining power and the environment. Banks must not advocate for deregulation, and they must be transparent about their advocacy.

Beneficial State Foundation is not alone in this system-building work. We collaborate with other mission-driven banks, as well as with associations like the Global Alliance for Banking on Values, the Community Development Bankers Association, and the United Nations Environment Programme Finance Initiative, all of whom are working to build a new cadre of banks focused on positive social and environmental impact while simultaneously avoiding harm. Together these organizations represent more than 200 banks and have over $50 trillion in assets.

What Can Nonprofits and Foundations Do?

As mission-driven organizations, nonprofits and foundations can ensure that our deposit dollars are working in support of our causes and values. Here are some specific actions to consider.

For nonprofits and foundations:

  1. Ask your bank key questions about its lending and practices. Consider the standards and examples above, as well as your organization’s mission and programs.
  2. If your bank’s answers aren’t satisfactory—
    • Demand that it commits to changing its practices.
    • Stop promoting the bank’s brand with any sponsorship dollars your organization receives.
    • Move your money to a more mission-aligned bank (see the associations mentioned above or feel free to reach out to us at Beneficial State Foundation for ideas for an aligned bank in your local area).
  3. If you’re passionate and down for the cause of banking systems change, you can join us in advocacy. Beneficial State Foundation is advocating for laws, regulations, and policies that manage and enforce equitable banking. We also engage in public campaigns to encourage aligned commitments and actions from banks. There are plenty of opportunities to engage in this work via social media as well.
Additional Ideas for Foundations

Here are a few more opportunities for foundations to consider acting on to make our banking system more equitable and more aligned with collective well-being:

  1. Provide credit enhancements to help banks provide more loans to Black people, Indigenous people, and people of color (BIPOC), along with other critical and innovative forms of mission-based lending.
  2. Become an investor in mission-driven and BIPOC-owned banks and their products through program-related investments and mission-related investments.
  3. Provide replacement grants to nonprofits who choose to decline sponsorships from banks that are not aligned with their values.
Concluding Thoughts

As more people recognize the need to challenge structural racism, patriarchy, economic inequality, and other forms of oppression, there’s an unusual opportunity in front of us to advance systemic change in the financial industry. And the changes we make—whether we move our money or get our current banks to change their practices—can be large and lasting.

When your bank invests in a way that is aligned with your mission, that means your idle cash is making a positive contribution without you having to take any specific action. Alas, the contrary is true as well: If your bank invests in a way that is counter to your mission, that means your idle cash can be counteracting the good work that you do.

With the nonprofit sector accounting for over $3 trillion in assets, aligning our money with our values could make a huge difference in our sector’s ability to address longstanding inequity. Given the many challenges we face, we need to think creatively and act to leverage as many of our assets as we can to achieve our mission goals.

Arabesque: A Review of Their Islamic Funds

newsblur - Sat, 2020-09-12 09:38
IslamicFinance shared this story from Islamic Finance Guru. Arabesque: An Islamic Fund That Bucks the Trend

One of our pet peeves with Islamic stocks and shares investing right now is the lack of any real thesis or strategy-driven funds.

What we mean by that is that most Islamic funds just invest in a selection of large European and US companies that are sharia-compliant with the focus more on trying to get as diverse a coverage of the market rather than following a particular strategy.

In this article, we take a look at Arabesque – a potential disruptor of financial investment solutions. We will take a look at some of their products and see if they are indeed halal. Then we will outline who would be best suited to their products as well as drawing a final conclusion.

Who are Arabesque?

Arabesque is a UK based fund manager. Their basic premise is that they combine cutting-edge artificial intelligence and algorithms with a powerful ethical screening tool.

The thesis behind their funds is to eliminate the errors that human biases bring to decision-making and to make decisions at a rapid, large scale using algorithmic trading. The ethical component is also important for them as over the long-term ethical investments have consistently been shown to outperform others.

Within their portfolio of funds that they manage, they also have a sharia-compliant fund.

How does Arabesque work?

Arabesque consists of academics coming from a diverse array of fields including physics, computer science, artificial intelligence, and engineering. These brainy guys then leverage deep learning, natural language processing, reinforcement learning, Bayesian inference, agent-based modelling, high performance computing and other disciplines[1]. A lot of cutting-edge technology.

So, what exactly is the AI engine?

It is basically a huge computational graph that is carrying out millions of operations and tasks from data collection and feature engineering, to modelling and ensemble learning[2].  This is to gather as much knowledge as possible in order to maximise the efficiency of the algorithms that help it make intelligent investment recommendations.

Then there’s Arabesque S-Ray – a global data providing solution developed to assess the performance and sustainability of over 7000 of the world’s largest corporations.

Through machine learning, big data and over 2501 environmental, social and governance metrics (ESG), its help investors to make more sustainable decisions. It also live-captures news signals from over 30,000 sources from over 170 countries and quantifies this information to form part of the analytics.

Are Arabesque Halal?

Arabesque S-Ray has unique ways of assessing companies.

First, they judge companies against the UN Global Compact principles and give an ESG Score.

Next, they judge companies on their climate-friendly credentials and give a Temperature Score.

Finally, they have a Preferences Filter which lets you filter and check the company’s involvement with alcohol, tobacco, gambling, fossil fuels, adult entertainment, defence, GMO, Nuclear, pork, stem cells, weapons etc[3]. It looks at revenue streams and will flag a company involved in any of these selected filters when its annual revenue stream activity exceeds 5%.

That is important from a sharia-compliance perspective as 5% from haram revenue sources is the limit set by sharia-screening standards.


Arabeque’s Halal Fund: Arabesque Q3.17 Systematic.

The name of the fund itself is a reference to Surah Imran (chapter 3) verse 17:

??????????????? ???????????????? ???????????????? ????????????????? ????????????????????? ???????????????

In English: “men who are steadfast, truthful, obedient, spend (in the way of Allah) and implore the forgiveness of Allah before daybreak”[5].

The verse praises those who are righteous and true believers of Allah (swt), those who spend in the way of Allah (refusing to contribute to industries and activities that have been made prohibited by the Qur’an, spending in a way that spread the message of Islam), and those who seek forgiveness at dawn (fajr).

This is probably the coolest name for a halal fund that I have come across so far. I’ve given them the best named halal fund award, now let’s see if they live up to receiving the ‘legitimately halal’ award too.

Arabesque Q3.17 Systematic is a global Shariah compliant fund launched in 2015, adhering to Shariah investment guidelines and utilising the Systematic strategy.

The fund has a portfolio of c1200 global companies that it picks stocks from and which have been screened for liquidity and how well they perform in sustainability based on Arabesque’s S-Ray UNGC (United Nations Global Compact) and ESG (Environmental Social and Governmental) scores.

More factual information is available under this footnote number. [6]

The fund’s objective is to provide investors with returns above the market average over a full market cycle with mid to long term capital appreciation. The portfolio fund consists of 100 equally weighted stocks when fully invested. In addition, Q3.17 Systemic hold cash as well as equity at a 20/80 ratio, so there is also a cash holding required in the fund.

So, who is picking the stocks and where are they basing their decisions on?

AI is picking them. The smart algorithms adhere to a strict rules-based, quantitative approach and incorporate the Islamic shariah guidelines from AAOIFI[7].

Side note: AAOIFI were established in 1991 are based in Bahrain and provide the leading standards of Islamic finance globally. It is supported by central banks, regulatory authorities, financial institutions, accounting and auditing firms and legal firms in over 45 countries.

In addition, Arabesque has another product titled Q3.17 Sustainable Global Equity.

This fund utilises the Sustainable Global Equity Strategy. This fund picks stocks from a portfolio of c3000 global companies that have been screened exactly similar to Q3.17 Systemic and it also adheres to the Islamic guidelines set out by AAOIFI.

The difference is that Q3.17 Sustainable Global Equity is just equity based and with no cash component to the portfolio. When there’s a high risk, the computer algorithm’s ‘risk appetite’ auto-adjusts to defensive stocks, when there’s a lower risk it goes into aggressive stock.

Who are the Q3.17 Funds for?

Arabesque is primarily a fund manager for institutional and high net worth clients. However, they are increasingly keen to tap into the smaller investor market too. You can now make an investment into their platform now via Simply Ethical. (Please do choose “IFG” as the place you heard about them when you sign up).

Existing clients of Arabesque include State Street, Deutsche Bank, the Government Pension Fund of Japan, AP1, and Eagle Investment Services.

  • Automated and dynamic cash allocation.
  • Clear, unbiased approach to investing.
  • Criteria of transparency.
  • Shariah compliance through automated and rules-based algorithms that incorporate AAOIFI guidelines – leading standards of Islamic finance.
  • Leveraging large datasets increasing safety, minimising volatility and drawdown.
  • More than one shariah compliant products with the option to have part-cash and part-asset or to invest in full equity.
  • Customer support and advice available.
  • Primarily focused on institutional investors so the retail aspect is not as built out. So, for example, Wahed has lots of content targeted at the ordinary investor, while Arabesque’s content is more targeted at institutional investors.
  • The investment strategy is a more aggressive strategy than the other Islamic funds out there.
  • The Arabesque funds are not widely available via mainstream brokers at the moment unfortunately.

Overall, Arabesque is a welcome addition to the market, and we hope to see its funds more widely available across the mainstream brokers in coming months and years.


By: Nazaqat Mohammed

Naz is a Muslim, Pakistani-British creative web developer, and digital designer. He graduated from the University of Leicester in 2018 with a Bachelor of Science in Computer Science and has been working in IT consulting since. Lately he has taken a break from his corporate career to focus on his other passions and areas of interest. 

[1] https://www.arabesque.com/ai/about-us/, 27/08/2020.

[2] https://www.arabesque.com/ai/ai-research/, 27/08/2020.

[3] https://sray.arabesque.com/, 27/08/2020.

[4] https://sray.arabesque.com/, 27/08/2020.

[5] https://www.islamicstudies.info/tafheem.php?sura=3&verse=14&to=17, 27/08/2020.

[6] http://www.arabesque.com/docs/systematic/Shariah/Factsheets/USD/EN/Systematic_Q317_USD_EN.pdf, 27/08/2020.

[7] https://aaoifi.com/?lang=en, 27/08/2020.

The post Arabesque: A Review of Their Islamic Funds appeared first on Islamic Finance Guru.

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