CTRL 9.3.12 Islamic financial institutions to carry out internal Shari’a reviews

(1) An Islamic financial institution must from time to time carry out an internal Shari’a review to assess the extent to which the institution complies with Shari’a and with the fatwas, rulings and guidelines issued by its Shari’a supervisory board.
(2) The interval between reviews must be determined by the institution’s Sharia supervisory board, taking into account the nature, scale and complexity of the institution’s business.
(3) The objective of such a review is to ensure that the governing body and senior management of the institution carry out their responsibilities in relation to Shari’a (as determined by the firm’s Shari’a supervisory board).
(4) The review must be carried out, in accordance with the AAOIFI standards relating to Shari’a governance, by:
(a) the institution as part of its internal audit function; or
(b) an independent entity that is competent to do so.
Guidance
1 For the purposes of assessing the competency of personnel or entities that carry out the internal Shari’a review, the institution should consult the AAOIFI Standards on Governance (GSIFI No. 3) and Appendix 4 of IFSB 10: Guiding Principles on Shari’a Governance Systems for Institutions offering Islamic Financial Services.
2 IFSB 3 states that fatwas, rulings, pronouncements and resolutions issued by the Shari’a supervisory board should be strictly adhered to. A person should not be assigned to carry out an internal Shari’a review unless the person:
• is adequately trained in Shari’a compliance
• has a competent grasp of the review process.
(5) The results of each review (including any instance of non-compliance) must be documented, and the institution must ensure that any non-compliance is rectified, so far as possible.
(6) The function or entity that carried out the review or reviews during a period must report on its findings in time for the next meeting of the Shari’a supervisory board. If the function or entity did not conduct any review during the period preceding a meeting, it must notify the board of the fact.

 

Derived from QFCRA RM/2020-4 (as from 1st July 2021)