Is money borrowed from an illicit source considered a debt upon the borrower, and is he obliged to repay it, knowing its source is illicit?

The debt must be repaid to its owner, even if his earning was unlawful, such as usury. The evidence for this is the Prophet Muhammad's (peace be upon him) dealings with the Jews, despite their engagement in usury, and what Jabir did with the Jew to whom his father owed a debt.

Stolen or usurped money is an exception; it must be returned to its original owner, not to the thief or usurper, because it is the very property of the wronged person.

However, if the money was acquired through a permissible interpretation (ta'wil sa'igh) or its status is unknown, then it is permissible to take it.

If one knows that a person has stolen money, betrayed a trust, or usurped money, it is not permissible for him to take that money from him as a gift, through sale, or as payment for a debt, because it is the very property of the wronged person.

If a man is known to have unlawful elements in his wealth, then dealing with him should be avoided as an act of piety. If most of his wealth is unlawful, there is a dispute among scholars regarding it. As for a Muslim whose affairs are concealed (mastur), there is no doubt in dealing with him.