1) Licensed Financial Institutions that carry on all or part of their activities and business 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 themselves or on behalf of others or in partnership with third parties, provided such business and activities are in compliance with the provisions of Islamic Shari’ah. The Board of Directors shall issue regulations specifying the activities, conditions, rules, and operating standards for these institutions, in a manner commensurate 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 business and activities initiated on behalf of their customers and not for themselves, be exempted from:

1. a. Provisions of item (1) of Article (93) of this decretal law.
2. 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 member Emirate of the Union.

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

2) The Internal Shari’ah Supervisory 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 Supervisory Committee shall be presented to the Higher Shari’ah Authority for approval, prior to presentation to the general assembly and issuance of decision approving their appointment.

3) Members of the Internal Shari’ah Supervisory 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 scope of work, 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 Supervisory Committee, or disagreement between the Internal Shari’ah Committee and the Board of Directors of the concerned financial institution, over the compliance or non-compliance 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 commensurate with the business and activities of the concerned institution, to undertake internal Shari’ah audit and monitor compliance of the concerned institution with the fatawa and opinions of the Internal Shari’ah Supervisory 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 business, activities and contracts which they review or audit from a Shari’ah perspective. The said division or section shall be headed by a Shari’ah controller appointed by the Board of Directors of the concerned institution.

1) The Internal Shari’ah Supervisory Committee shall prepare an annual report to be presented to the general assembly of the Licensed Financial Institution, which conducts on all or part of its activities and businesses in accordance with the provisions of Islamic Shari’ah. The report shall take the form specified by the Higher Shari’ah Authority, and shall indicate the extent the management of the concerned institution is compliant with the provisions of Islamic Shari’ah, in all activities, business it conducts, the products it offers, contracts it enters into, and the documentation it uses. The said report shall include the following:

1. a. A statement on the extent of independence of the Internal Shari’ah Supervisory Committee when discharging its mandates.
2. b. A statement on compliance with the provisions of Islamic Shari’ah during the financial year ending in regards to 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.
3. 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 fatawa and opinions of the Internal Shari’ah Supervisory Committee.
4. d. A statement on any other breaches of Shari’ah provisions and the controls established by the Higher Shari’ah Authority.

2) The Internal Shari’ah Supervisory 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 conducts all or part of its business and activities in accordance with the provisions of 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 conducts on all or part of its business and activities in accordance with the provisions of Islamic Shari’ah, has conducted business that is not compliant with such provisions, as per fatawa and opinions of the Internal Shari’ah Supervisory Committee, and the fatawa 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 Supervisory 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.