Financial Abuse By Religious Figures

Financial Abuse By Religious Figures

Financial abuse is a common type of abuse among Islamic leaders and organizations. It is easy to initiate a religious nonprofit organization or crowd-funding charity event, yet difficult to prove fraud. Specifically, the “zakat-eligible” concept is abused by organizations exaggerating the qualifications of zakat fund uses. Further, once we give our money to an Islamic organization, it is difficult to track where that money has gone, because inquiring can be deemed taboo or even ungodly!

Islamic organizations and some “religious scholars” use four tactics to obtain funds that are actually used for personal gain:

  1. Avoiding a written contract or written accounting of funds.
  2. Asking for a confidential transaction.
  3. Pleading with “urgency.”
  4. Pleading in an overly emotive manner, often eliciting the usage of religious terminology.

Ideally, any reliable Islamic institution should publicly release an annual report of its expenses, revenue and expenditures. If an institution does not publish this annual report, this is a red flag. Financial abuse has more potential of legal recourse than other forms of religious abuse, due to its tangible nature. Nevertheless, without a written contract or clear terms, (eg, is the transaction a loan or donation?) even legal recourse can be difficult. Accordingly, one should know the signs of potential financial abuses by looking out for signs of any lack of transparency.

Lastly, be aware that legally, private organizations, including 501(c)(3)s, are not required to disclose the details of their expenses and spending. It is true that 501(c)(3)s are required to submit certain annual forms (which are public record) to the IRS, those forms are self-reported and are not detailed enough to determine if funds are responsibly and honestly used. As such, fraud is extremely difficult to detect based on those submissions. For these reasons, it is best to stay vigilant and take the means to avoid the harm because recourse is extremely challenging.