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Article (10) Internal Shari'ah Control Division or Section

STA-LFI-GOV-2020 Effective from 21/4/2020
  1. 10.1 This division or section supports the ISSC in its duties. It is comprised of the number of employees of the size that is commensurate with the size and nature of the IFI operations. The ISSC shall supervise the work of this division or section from the technical perspective.
     
  2. 10.2 The IFI should appoint a head for internal Shari'ah control division or section, who shall report to the Board.
    The head for internal Shari'ah control division or section must:
    1. be a Muslim,
       
    2. have a university degree in Islamic Shari'ah, or relevant specializations,
       
    3. have a professional certificate in Shari'ah and Islamic Banking Control from one of the organizations that supports Islamic Finance like the Accounting and Auditing Organization for IFIs (AAOIFI) and the General Council for Islamic Banks And Financial Institutions (CIBAFI),
       
    4. have an experience of 10 years (at least), as a minimum, in the field of Shari'ah Supervision,
       
    5. not have been sentenced by a court in crimes related to honor or honesty, or was convicted of offences and sentenced to imprisonment,
       
    6. have strong command of English and reasonable command of Arabic.

     
  3. 10.3 The internal Shari'ah control division or section should not issue fatwas or resolutions. Instead, the internal Shari'ah control division should refer back to ISSC in all matters that it considers and all tasks it carries out, unless there were fatwas or resolutions issued for the matters before.
     
  4. 10.4 In matters related to promotions, bonus, performance assessment, and removal, the internal Shari'ah control division or section head and staff shall not report to the senior management, but to the Board or its committees in consultation with the ISSC.
     
  5. 10.5 Internal Shari'ah control division or section staff shall not assume any executive powers or responsibilities related to the businesses and activities that may be monitored by themselves.
     
  6. 10.6 The internal Shari'ah control division or section shall assume the following functions:
     
    1. ISSC Secretariat Function: undertakes the following:
      • - preparing, and organizing the meetings of the ISSC,
      • - preparing and drafting the minutes of the meetings,
      • - communicating the resolutions to the internal Shari'ah control division and internal Shari'ah audit division in addition to other divisions and sections of the IFI,
      • - following up with resolution implementation as per the follow-up list required by ISSC,
      • - filing fatwas and resolutions, and
      • - follow-up administrative matters related to ISSC.

       
    2. Shari'ah Consultations Function: provides consultation based on the ISSC's fatwas and resolutions in regards to:
      • - contracts and documents and other aspects related to the IFI's financial products and services, including products manual, policies, internal procedures,
      • - IFI's Shari'ah related inquiries and issues,
      • - Promotional / advertising materials and publications,
      • - Customers complaints (related to the compliance with Islamic Shari'ah), and
      • - other Shari'ah issues faced by the IFI especially the ones related to structuring and products.
         

      The IFI must ensure that persons tasked with this function must have high Shari'ah expertise and qualifications, and must be familiar with Islamic financial products, IT systems, and internal procedures.


       
    3. Shari'ah Research & Development Function: undertakes the following:
      • - conducting researches for related Shari'ah and procedural issues requested by ISSC,
      • - contributing, with other relevant sections in the IFI, to the development of products and formulation of policies, procedures, contracts, and
      • - other areas of development in IFIs .

       
    4. Shari'ah Compliance Function: is responsible to continuously monitor compliance of IFI's businesses and activities with resolutions, fatwas, regulations, standards, which are issued by the HSA.
       
      • - The Shari'ah compliance function must not be outsourced to external entities.
         
      • - The Shari'ah compliance report must be submitted to the ISSC to look at the technical Shari'ah related matters prior to submitting the same to the chief executive officer. The Shari'ah compliance must have a right of direct access to the Board.
         
      • - The work of the Shari'ah compliance function must be integrated within the overall compliance function of the IFI. It must have a dotted reporting line to the head of compliance of the IFI to submit reports regarding the compliance with Islamic Shari'ah.
         
    5. Shari'ah Training Function: conducts training for IFI's staff on those aspects of their duties related to IFI's compliance with Islamic Shari'ah.
      This function also provides adequate trainings for the staff on what they need to be equipped with information and skills, depending on nature of work of each employee, to ascertain that the IFI complies with Islamic Shari'ah at all times.