Money laundering, corruption and financial fraud are persistent global threats that undermine economic integrity. While secular legal systems dominate efforts to tackle financial crime, Islamic jurisprudence offers a powerful complementary perspective grounded in ethics, community accountability and religious obligation. Traditional mechanisms include "hisba" (accountability), often applied by Muslim-majority countries alongside international anti-money laundering (AML) frameworks.
Islamic texts condemn the core behaviors underpinning financial crimes. Though modern terms like “money laundering” don’t appear in early texts, Quranic and Hadith sources establish clear prohibitions against theft, fraud, deception and corruption. In the Holy Quran, there are verses such as 2:188 and 4:29 which outlaw the unjust consumption of wealth and bribery. Verse 2:282 mandates transparency and documentation in financial dealings, essential principles incompatible with money laundering.
Additionally, Prophetic Traditions such as Hadiths have indicated clearly “He who cheats is not one of us” (Muslim, Tirmidhi), emphasizing that deceit violates Islamic identity and moral order. Moreover, jurisprudential principles, or Fiqh, have underscored the concept of "mal haram" (forbidden wealth), which forbids the illegitimate acquisition of funds. Islamic law also outlaws complicity in wrongdoing (Quran 5:2), placing moral responsibility on those who assist in laundering or disguising illicit money. These theological foundations ensure financial integrity is not merely a legal obligation but a spiritual one, reinforcing ethical behavior through divine accountability.
Islamic tradition includes institutional mechanisms like hisba, a form of societal accountability grounded in the Quranic duty of “enjoining good and forbidding wrong” (3:104). Historically, the "muhtasib" (market inspector) oversaw fairness and legality in commercial transactions, embodying a preventive oversight. In this role, the muhtasib effectively conducted ethical vigilance beyond state institutions, focusing on individuals and communities. Hisba is parallel to modern compliance. Modern Islamic financial institutions are revitalizing the principles of hisba through Sharia supervisory boards, community education and robust ethical auditing, thereby fostering voluntary compliance and social vigilance against financial misconduct.
Islamic financial institutions (IFIs) inherently incorporate anti-money laundering safeguards as part of their Sharia compliance through various mechanisms, such as due diligence. Enhanced Know-Your-Customer (KYC) protocols and rigorous source-of-funds verification are also part of the finance standards in Islamic banking, ensuring that only "halal" (permissible) funds are used.
From there, Islamic banks have Shariah Boards, which act as oversight bodies, mirroring hisba and ensuring operations remain aligned with Islamic values. AML practices derive their legitimacy not only from law but also from religious obligations. Muslim scholars and organizations like the Islamic Fiqh Academy provide theological backing through the issuance of fatwas explicitly condemning money laundering as haram, citing its deception, societal harm and facilitation of broader corruption.
Muslim-majority countries are also active participants in global AML efforts, working within structures like the Financial Action Task Force (FATF) and regional bodies. Qatar, Türkiye and Saudi Arabia, for instance, are full members of FATF and similar organizations. Most Muslim countries have ratified the 1999 Terrorism Financing Convention and the 2000 U.N. Convention Against Transnational Organized Crime. These alignments show that Islamic principles and international legal standards are not mutually exclusive but reinforcing.
Despite the progress made, several implementation gaps persist. Technical capacity remains a challenge as some jurisdictions lack skilled regulators or advanced monitoring infrastructure. Fragile financial intelligence units hinder the detection and enforcement of economic crimes. Conflict-affected regions struggle with the consistent application of AML laws. Overall, there are signs of improvement through international collaboration, legal reforms and growing private-sector compliance, but there is scope to do more.
Integrating theological, technological, and legal frameworks to better align Sharia-based principles with global AML standards is necessary for enhancing compliance and public trust in Muslim contexts. To facilitate this, the Islamic banking sector should strengthen cross-sector collaboration with religious scholars, regulators and financial institutions. Each must work together to translate theological prohibitions into enforceable norms.
There is also a need to strengthen institutional capacity in Muslim-majority countries by investing in technical training and infrastructure to implement AML controls effectively. Promoting financial literacy and ethical awareness through hisba-inspired education campaigns would leverage community engagement. Highlighting best practices of model frameworks and encouraging global awards will also contribute to shifting existing practices and improving alignment with international standards.
Islam not only condemns financial crimes, but it also equips societies with ethical, spiritual and institutional tools to prevent them. Islamic ethics and legal traditions, in turn, offer potent, culturally resonant tools for combating financial crimes. When integrated with modern legal regimes, these tools can form a comprehensive global front against illicit finance.
