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Britain's enthusiastic support for "sharia banking" raised concerns in Washington that the City of London could become a centre of terrorist funding, leaked documents show.

Financial reforms pushed through by the Labour government allowed Islamic banks to flourish in Britain, amassing assets valued at more than £12 billion.

To comply with Islamic law, their financial products do not pay or charge interest, and the banks cannot invest in alcohol, tobacco or gambling firms. But while government officials have promoted Britain's status as the most Islamic-friendly economy in the Western world, cables obtained by WikiLeaks show that the US feared the banks could be used to channel funds to terrorists.


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