end - use restrictions. fourth, in this world where we have all become increasingly cautious and careful about possible risks arising from money - laundering and terroristfinancing, islamic financial institutions enjoy a head start in mitigating these risks. unlike conventional banks which rely on documentary evidence and usually have impersonal, arms - length, passive relationships with the majority of their clients, islamic banks have more stringent know - your - customer requirements. the reason for this difference is quite commonsensical. conventional banks rely on a fixed pre - determined return framework and are, therefore less concerned about the character and credibility of their clients. they are often, more preoccupied with the underlying securities and assets. on the other hand, islamic banks are engaged in a quasi - partnership profit - loss sharing framework and therefore have to know their clients, their businesses, as well as, their sources and uses of funding in order to satisfy themselves about the authenticity and legitimacy of their counterparties. thus, they would be in a much better position to detect, prevent and disengage quickly from suspicious transactions compared to conventional banks. in addition to normal audits, islamic banks have to conduct shari ’ ah review of their transactions for ensuring shari ’ ah compliance. this review will catch any funds mobilized or used for haram ( prohibited ) activities. this unique feature of islamic finance as possible prevention of money – laundering has not yet been widely disseminated and its potential not fully recognized. the financial services authority of the uk, whom i consider an extremely conservative and competent regulatory agency, after considering all the pros and cons, has finally embraced islamic banking and issued the first ever licence to the islamic bank of britain which is now operational. further, they have authorized islamic investment funds which are a welcome move. in germany, one of the state governments has raised funds by issuing an islamic suck. in the uae, a number of long term infrastructure projects were financed by islamic financial institutions as the relative advantages of islamic modes of finance outweighed the costs in comparison to the conventional modes. naturally, if there is so much rapid growth, a question that should arise in everybody ’ s mind is : what is happening on the legal, regulatory, accounting and auditing and governance fronts of islamic finance? are these keeping pace with this growth and are we making sure that the supporting infrastructure are in place to avoid any pitfalls or hazards in the future? this is quite a legitimate concern and i would like to share with you

information gaps by expanding workers ’ networks, providing legitimate information, and identifying new job opportunities. but finally, the pressure that community - based organizations exert on financial regulators must continue. access to credit is an enduring challenge, and the obstacles and problems – all the “ broken windows ” you see on the block – must be reported and explained. they must be understood by the federal policymakers who are responsible for enforcing our country ’ s laws and regulations in the realm of access to credit ; by the federal policymakers who engage in the conduct of monetary policy ; and by the federal policymakers whose actions contribute to the shaping of the landscape for financial services in this country. your voices – whether you are reporting, documenting, monitoring, analyzing, proposing, or even protesting – must be heard. your voices are crucial to alerting policymakers to the significant developments and emerging trends in the nation ’ s communities that must be confronted – and confronted in a swift and decisive way – if we are to make prosperity a national agenda that touches every american. thank you. bis central bankers ’ speeches