Skip to main content
Entire section Custom print Text Only Rich Text Print

Article (9) Internal Shari'ah Controls

STA-LFI-GOV-2020 Effective from 21/4/2020
  1. 9.1 The IFI must establish effective internal Shari'ah controls comprising of three lines of defense approach that are independent from each other, which includes:

    - the first line of defense, represented by the business line, which should set clear policies, procedures, and controls, approved by ISSC, and execute the business activities in a manner compliant with Islamic Shari'ah at all times,
    - the second line of defense, represented by the internal Shari'ah control division or department, which undertakes the functions prescribed in the Article 10, and it should not be organizationally part of any business division or reporting to it,
    - the third line of defense represented by internal Shari'ah audit division or department, which undertakes Shari'ah audit and monitors compliance, and it should not be organizationally part of any business division or reporting to it.

  2. 9.2 The IFI must provide sufficient financial and human resources that suit the size and nature of IFI's activities so that internal Shari'ah control section and internal Shari'ah audit section can carry their work effectively and efficiently, in consultation with the ISSC.
     
  3. 9.3 The internal Shari'ah control division or section and internal Shari'ah audit division or section perform two different tasks, and must stay separate from each other in terms of reporting and human resources in accordance with the three lines of defense approach.