1) Licensed Financial Institutions that carry on all or part of their activities and businesses in accordance with the provisions of Islamic Shari`ah may carry on the Licensed Financial Activities mentioned in article (65) of this decretal law, whether for their account or for the account of or in partnership with third parties, provided such activities and businesses are Shari`ah-compliant. The Board of Directors shall issue regulations specifying the activities, conditions, rules, and operating standards for these institutions, in a manner commensurable with the nature of the license granted to them.

2) Licensed Financial Institutions mentioned in item (1) of this article shall, in respect of their Shari`ah-compliant businesses and activities initiated on behalf of their customers and not for their own account, be exempted from:

• a. Provisions of item (1) of article (93) of this decretal law.
• b. Provisions of item (2) of article (93) of this decretal law, insofar as such exemption does not contradict the provisions of local legislations applicable in the relevant emirate member of the Union.

1) An independent committee named “Internal Shari`ah Supervision Committee” shall be established within each Licensed Financial Institution that carries on all or part of its activities and businesses in accordance with the provisions of Islamic Shari`ah. Membership of this committee shall consist of experienced specialists in Islamic financial and banking transactions jurisprudence. The said committee shall undertake Shari`ah supervision of all businesses, activities, products, services, contracts, documents, and conduct of business charters of the concerned institution and shall approve them and establish their respective Shari`ah requirements, within the framework of the rules, principles and standards set by the Higher Shari`ah Authority, in order to ensure compliance thereof with Shari`ah. Fatwas or opinions issued by the Committee shall be binding.

2) The Internal Shari`ah Supervision Committee shall be appointed by the general assembly of the concerned Licensed Financial Institution, in accordance with the provisions of the referenced Commercial Companies law. Names of members of the Internal Shari`ah Supervision Committee shall be presented to the Higher Shari`ah Authority for approval, prior to presentation thereof to the general assembly and issuance of decision approving their appointment.

3) Members of the Internal Shari`ah Supervision Committee are prohibited from holding any executive position in the institution referred to in item (1) of this article, or provide services to it outside of the scope of the committee’s assigned functions, nor hold shares or have for themselves or for any of their relatives up to the second degree, any interests associated with it.

4) In cases where disagreement arises, over a Shari`ah opinion, between members of the Internal Shari`ah Supervision Committee, or disagreement between the Internal Shari`ah Committee and the Board of Directors of the concerned financial institution, over the compliance or noncompliance of a particular matter with the provisions of Shari`ah, the disagreement shall be referred to the Higher Shari`ah Authority, whose opinion on the matter shall be final.

5) There shall be established, in each institution referred to in item (1) of this article, a division or internal section, of a size commensurable with the businesses and activities of the concerned institution, to undertake internal Shari`ah audit and monitor compliance of the concerned institution with the fatwas and opinions of the Internal Shari`ah Supervision Committee. Such division or section shall report to the Board of Directors of the concerned institution, and its employees shall not have any executive powers or any responsibilities towards the businesses, activities and contracts which they review or audit from a Shari`ah perspective. The said division/ section shall be headed by a Shari`ah controller appointed by the Board of Directors of the concerned institution.

1) The Internal Shari`ah Supervision Committee shall prepare an annual report to be presented to the general assembly of the Licensed Financial Institution, which carries on all or part of its activities and businesses in accordance with Islamic Shari`ah. The report shall take the form specified by the Higher Shari`ah Authority, and shall indicate the extent of compliance of management of the concerned institution, with the provisions of Islamic Shari`ah, in all its activities, businesses, offered products, contracts entered into, and used documentation. The said report shall include the following:

   a. A statement on the extent of independence of the Internal Shari`ah Supervision Committee in discharge of its functions.

   b. A statement on compliance of policies, accounting standards, financial products and services, operations and activities in general, together with the memorandum, articles of association, and financial statements of the relevant institution, with the provisions of Islamic Shari`ah during the ending financial year.

   c. A statement on the compliance of distribution of profits, bearing of losses, costs, and expenses among the shareholders and investment account holders, with the fatwas and opinions of the Internal Shari`ah Supervision Committee.

   d. A statement on any other breaches to Shari`ah provisions and the controls established by the Higher Shari`ah Authority.

2) The Internal Shari`ah Supervision Committee shall provide the Higher Shari`ah Authority with copy of its report, no later than two (2) months from end of the financial year, in order for the Authority to express its remarks prior to the meeting of the general assembly of the concerned institution

Where a Licensed Financial Institution, which exercises all or part of its business and activities in accordance with Islamic Shari`ah, is subject to the supervision of the State Audit Institution, pursuant to the referenced Re-organization of the State Audit Institution law, the function of the audit institution shall be restricted to post- audit, and shall not interfere in the conduct of business or policies of these institutions.

Where it is established that a financial institution, which carries on all or part of its businesses and activities in accordance with the provisions of Islamic Shari`ah, has conducted businesses that are not compliant with such provisions, as per fatwas and opinions of the Internal Shari`ah Supervision Committee, and the fatwas and opinions of the Higher Shari`ah Authority, the Central Bank shall inform the concerned institution accordingly, after consulting with the Higher Shari`ah Authority, and shall ask the institution to reconcile its position, under the supervision of the Internal Shari`ah Supervision Committee, within thirty (30) working days from date of notification. The Central Bank shall take the appropriate corrective measures and corrective actions in case the concerned institution’s inability to reconcile its position.