At present six commercial banks provide Islamic banking service in Bangladesh. These include Islami Bank Bangladesh Limited (IBBL), Shah Jalal Islami Bank Ltd (SJIBL), Al Arafah Bank Ltd (AABL), Social Investment Bank Ltd (SIBL) and Oriental Bank Ltd (OBL). Some other banks are also providing Islamic banking services only at selected branches.
IBBL, which ranks among the top three banks in South Asia, has 60% of its shares owned by Saudi institutions and individuals. UAE, Kuwait and Qatar are also share holders of this bank which is associated with Al Razee Bank of Saudi Arabia. IBBL started functioning in Bangladesh in 1975 at the initiative of Al Fuyad, the then Saudi ambassador in Dhaka. IBBL has since become the back bone of financial resources of almost all the Islamic militant groups of the country including JEI.
Islamic Bank Foundation (IBF), a JEI floated organization oversees all the projects of IBBL. Mir Qasim Ali, Member of JEI Executive Committee heads the IBF.
Profits generated and the interest/ commission accrued on foreign donations goes to the IBF account. The IBBL provides JEI an opportunity to launder money from abroad and also channel un-audited funds to various militant Islamic groups in the country.
After the synchronized country wide bomb blasts (Aug 17, 2005) by the militant Islamic group, Jamiat-ul-Mujahideen Bangladesh (JMB), the role of IBBL in promoting religious militancy came to the forefront. The Home Ministry formed a committee to investigate terror financing following a Bangladesh Bank report mentioning cases of dubious transactions in IBBL.
Subsequent to the arrest of JMB chief Abdur Rahman and seizure of some banking documents, the investigation team found lapses in banking norms and suspicious transactions with IBBL branches in Sylhet, Gazipur and Savar where violations of regulations specified in Anti-Money Laundering Act came to notice. IBBL was forced to suspend the managers of these three branches.
Also under scanner were some transactions of the Kuwait based international NGO Revival of Islamic Heritage Society (RIHS) in different branches of IBBL. Its account in IBBL Uttara branch was closed in 2006 on orders of the Bangladesh’s apex Bank. This followed intelligence reports to the government that the account was used to funding terror. In Nov 2005, the RIHS released a sum of Tk 2 Crore from this account prior to the advent of suicide bombers in the country. The intelligence sleuths also found that 2 RIHS officials channelised US $ 700,000 from IBBL to local and foreign terrorist groups.
The Saudi based Islamic NGO, Al Harmain Islamic Foundation, is known to operate its accounts through Al Arafah Islamic Bank in Dhaka. It remained associated with Al Qaeda funding and had set up its office in Dhaka.
The main source of funding of this NGO had been from the royal family of Saudi Arabia. Following the recent bomb blasts in Saudi Arabia and dismantling of its network by the Saudi Govt, the outfit came under extensive scrutiny. Saudi Govt has requested the Bangladesh authorities to ban Al Harmain Islamic Foundation and confiscate its bank accounts and properties. Bangladesh Bank has found that huge funds were transferred from Al Harmain’s Rangpur and Cox’s Bazaar branches through telephonic instructions to persons who immediately withdrew the amount.
Another Islamic bank, SJIBL, has been carrying out Shariah based Islamic banking in Bangladesh for quite some time. It has recently developed linkages in India.
SJIBL is reportedly funding the export business of an Indian firm which has its office in Kolkata. The company is known export of several items including automobile tyres to Bangladesh. Recently the executive Vice President of SJIBL, Shawkat Ali was apprehended and expelled from Kolkata in August 2006 for his involvement in undesirable and suspicious activities. SJIBL is suspected to be engaged in routing funds through Hawala transactions to reach Kolkata and from there to other destinations in India. Main patrons of SJIBL are known to be from the Middle East.
IBBL, AAIB, SJIB and other Islamic banks have been running their operations under the command and overall supervision of Shura Council comprising Islamic clerics despite the regulator’s direction that all Islamic banks should function under authorization of a Governing Board to be nominated by it. In Feb 2006, under persistent pressure from the JEI which was then a partner of the ruling alliance, Bangladesh Bank revised its order and finalized some guidelines for Islamic banking making the provision for Shura Council optional. Currently there are no separate guidelines for Islamic banking in the country.
Of late, the IMF has been putting pressure on the Bangladesh authorities to frame laws on Anti – Money Laundering and Combating the Financing of Terror (AML/CFT) as well as stepping up surveillance. In 2006, the BNP-JEI Govt had decided to privatize one of the major state owned banks, Rupali Bank estimated to be worth $ 2 bn. The Saudi prince Bandar was poised to take over control of Rupali Bank. But, the Caretaker Govt of Bangladesh cancelled the deal in March 2008 for the latter’s non-compliance with the agreement over payment. With the cancellation of the deal the possibility of Saudi funds being channelised in a more direct and unregulated manner to promote Islamic terrorism in the Indian subcontinent has been thwarted.
