Dealing with a company that buys and sells currencies
Question

                I would like to ask about an investment company on the internet – is dealing with it halaal or haraam? This company is a long-term investment company which is basically a “middleman” company in the field of global currency trading. It offers account management services, managing the money of investors and investing it in the FOREX (foreign exchange market). It is a kind of investment fund, like the investment funds that exist in some countries to invest money in the stock exchange; it collects investors’ money in this fund then a group of specialists invest it in the foreign exchange market (FOREX). Of course there is a group of specialists who are managing clients’ money (account management system) and it pays weekly interest to the investors between 8 and 12 %, i.e., variable interest. The company does not deal with alcohol, gambling or haraam things, and it has a minimum amount required for an individual to subscribe to it. I hope that you can tell us whether dealing with it is halaal or haraam, because it is very widespread and many people are dealing with it.
Praise be to Allah.
    Firstly: 

    The Muslim should beware and be very cautious about dealing 
    with foreign companies, especially when he is dealing with them from a 
    distance, because he does not know about the people he is dealing with or 
    about their business activities. He may be deceived and cheated, or he may 
    be dealing with people who do not care about applying the rulings of 
    sharee’ah to their dealings, and they may be concealing the true nature of 
    their dealings in order to attract Muslim wealth so that they can invest it 
    according to what they think is good and not according to what is permitted 
    by Islam. 

    Secondly: 

    Dealing in currencies is a permissible kind of trade, but 
    that permissibility is conditional upon the exchange being made on the spot 
    in the same meeting as the deal is done. 

    It was narrated that ‘Ubaadah ibn al-Saamit (may Allaah be 
    pleased with him) said: The Messenger of Allaah  (peace and blessings of 
    Allaah be upon him) said: “Gold for gold, silver for silver, wheat for 
    wheat, barley for barley, dates for dates, salt for salt, like for like, 
    same for same, hand to hand. If any of these types are different, then sell 
    however you like, so long as it is hand to hand.” Narrated by Muslim 
    (1587). 

    Currencies come under the same ruling as gold and silver with 
    regard to zakaah and with regard to the stipulation that the transaction be 
    done hand-to-hand when selling them. The hadeeth clearly states that the 
    hand-to-hand transaction is essential when selling gold for gold and silver 
    for silver. Based on that, it is not permissible to sell one currency for 
    another unless the exchange is made on the spot in the same meeting as the 
    deal is done. 

    Shaykh ‘Abd al-‘Azeez ibn Baaz (may Allaah have mercy on him) 
    said: 

    One currency should not be sold for another unless it is done 
    hand to hand, like for like. If one currency is sold for another, such as 
    riyals for dollars, or pounds sterling for another currency, it is 
    permissible to sell them hand to hand, without any delay, even if the 
    amounts differ. Islamically acceptable means are available and are 
    sufficient – praise be to Allaah – and the people have no need of riba, but 
    the shaytaan calls them to that and makes quick earnings by means of riba 
    attractive to them. 

    Majmoo’ Fataawa al-Shaykh Ibn Baaz 
    (7/294, 295). 

    Shaykh ‘Abd-Allaah al-Jibreen (may Allaah preserve him) 
    said: 

    There is nothing wrong with dealing in currencies, which 
    means selling one currency for another, but that is subject to the condition 
    that the exchange be made before parting, whether one pays actual currency 
    and receives something that takes the place of currency, such as certified 
    cheques, in return, and whether the two parties are acting on their own 
    behalf or on behalf of someone else. If the custom is not to do it in this 
    manner, then it is not permissible and the one who does that is sinning 
    thereby and lacking in faith. 

    Fataawa Islamiyyah (2/364). 

    Exchanging currencies hand to hand over the phone or via 
    internet when the two parties are far away from one another is impossible. 
    Hence the contemporary scholars stated that it is permissible to sell 
    currencies by phone or internet if there is something that takes the place 
    of hand-to-hand exchange, which is immediate transfer of funds from the 
    account of the seller to the account of the buyer, or if the buyer’s agent 
    takes possession of certified cheques made out to the other party. This is 
    the view of the Islamic Fiqh Council. There follows the text of their 
    statement: 

    The Islamic Fiqh Council, which convened during its sixth 
    conference in Jeddah in the Kingdom of Saudi Arabia between 17-23 Sha’baan 
    1410 AH (14-20 March 1990), after studying the research presented to the 
    Council concerning the issue of Hand to hand exchange: forms thereof, 
    especially newly invented forms, and rulings thereon, and after listening to 
    the discussions that took place on this topic, determined the following: 

    Firstly:

    As the exchange of wealth may be done physically in a 
    hand-to-hand transaction, or by measure or weight in the case of food, or by 
    transfer of the purchased goods to the possession of the purchaser, it may 
    also be achieved in other ways, by giving it up and putting it at the 
    disposal of the purchaser, even if the exchange does not take place 
    physically. The way in which the exchange takes place may vary according to 
    the situation and customs with regard to receiving the value.  

    Secondly:

    Among the non-physical forms of receiving the value that are 
    permissible are the following: 

    1.Transferring money into the 
    agent’s account in the following ways:

    a.When it is deposited into the 
    agent’s account, directly or via wire transfer

    b.When the agent makes 
    arrangements between himself and the bank to receive the money in the case 
    of buying one currency for another, so that the money will automatically be 
    transferred to the agent’s account

    c.When the bank – on the 
    instructions of the agent – deducts money from one account to another 
    account of his in a different currency, whether it is in the same bank or a 
    different one, in the interests of the beneficiary or another agent. The 
    banks should pay attention to ensuring that these arrangements are in 
    accordance with the principles of Islamic banking.

    The delay in transferring the money before the beneficiary is 
    actually able to take possession of it may be overlooked for the usual 
    amount of time that such transfers take in the banking system, but it is not 
    permissible for the beneficiary to dispose of the currency during this grace 
    period, until after the money has been transferred and actually received. 

    2.Receiving a cheque, provided it 
    is covered and withdrawable in the currency written on it when it has been 
    received and deposited into the account.

    Majallat al-Majma’ (issue no. 6, 
    1/453), Qiraaraat wa Tawsiyaat Majma’ al-Fiqh al-Islami (p. 113, 
    114). 

    Scholars who specialize in contemporary financial dealings 
    have pointed out that selling currencies via the internet is not a 
    transaction in which hand-to-hand exchange can take place, so it is haraam 
    according to sharee’ah. 

    Moreover, there is another reason for forbidding the 
    transaction asked about here, which is that the company gives investors 
    profits of between 8 and 12% on a weekly basis, and this renders the 
    investment contract invalid, because what is required in the case of an 
    investment contract is that profits should be distributed by percentage 
    among the partners, so each partner should get a specific share of the 
    profits, such as one half or one quarter and so on; taking a fixed 
    percentage based on the capital invested is not permissible. 

    To sum up: 

    Selling currencies via this method is not permissible for two 
    reasons: 

    1-Selling currencies via the 
    internet is not a transaction in which hand-to-hand exchange can take place

    2-The investment contract 
    stipulates that the profits should be shared among the partners as a 
    percentage, and it is not permissible for that percentage to be calculated 
    only on the basis of the capital invested.

    We should point out that it is not permissible to borrow from 
    these middlemen or agents in what is called the “margin system”, which is 
    where you required to deposit part of the value of the loan you give them 
    with them so that they can deal on the stock exchange – and especially with 
    currencies – and these agents make deals worth many times more than what you 
    gave them, and any losses will be deducted from the money you have deposited 
    with them. 

    You should know that dealing with the margin system is haraam 
    according to sharee’ah and it is not permissible for anyone to deal with it. 
    Many people – even non-Muslims – have warned against it because of the bad 
    effects it has on financial dealings in the stock exchange. One of the main 
    causes of the collapse of the New York Stock Exchange on “Black Monday” was 
    dealings with the margin system, because of commands to sell that were 
    programmed into brokers’ computers, telling them to sell in the event that 
    prices dropped to a certain level. When the prices actually fell, the 
    commands to sell were triggered automatically, which led to an unprecedented 
    flooding of the market when there was no demand, and this is what led to the 
    collapse. In Kuwait and elsewhere, many economists called for an abolition 
    of this system. 

    What concerns us here is the ruling of Allaah on this system 
    and others, which is haraam for several reasons, including the fact that it 
    is a riba-based loan in the form of a permissible transaction, and that 
    buying currencies is not done hand-to-hand in accordance with sharee’ah, and 
    that it involves risk which makes it a form of gambling. 

    Our advice to you is to refrain from dealing with these 
    remote strangers, because the Muslim does not know what they are doing with 
    his money. And beware of falling into haraam things. 

    And Allaah knows best.