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.