Beruflich Dokumente
Kultur Dokumente
Shariah
BOARD RISK
BOARD OF BOARD AUDIT
MANAGEMENT
COMMITTEE DIRECTORS COMMITTEE
SHARIAH COMMITTEE
MANAGEMENT
Shariah Risk
Shariah Review Shariah Research Shariah Audit
Management Control
Function Function Function Function
IFIs Shariah Governance Structure
Shariah Governance Framework
The Framework provides guidelines for all IFIs to properly
structure, develop and practice Shariah compliance activities.
Shariah Shariah
Research Audit
Conduct in-depth Function Function Provide independent
Shariah research assessment & objective
prior to submission assurance designed to
to the Shariah value add & improve
Committee IFIs Shariah compliance
IFIs Shariah Governance Structure
Consult the SC before approving all policies relating to Shariah matters and must
ensure that such policies are implemented effectively;
SHARIAH COMMITTEE
Oversee Shariah related matters
Management
Shariah Shariah Shariah
Review Research Audit
Shariah Committee (SC) position in the SGF can be seen as higher than
management and nearly at par with the Board of Directors (BOD).
Responsibilities & accountabilities of SC
NEGATIVE LIST:
SC member should not have any relationship with the following persons that could
interfere with the exercise of independent judgment:
spouse, children or siblings who were employed by the IFIs or any related
companies as chief executive officer or non-independent board members.
substantial shareholder of or a partner or an executive officer or a director
of any for-profit business organization that the IFI or any of its subsidiaries
have received significant payments from the organization
SHARIAH COMMITTEE
Management
Shariah Risk
Shariah Shariah
Management
Control Research Review
Management: other supporting units
2. Shariah research
Shariah Risk
Shariah Shariah
Management
Control Research Review
Management: Role
1. Observe and implement Shariah rulings and decisions made by SAC & SC.
7. Actions to be taken when aware that certain operations do not comply with
Shariah or against the advice of its SC or the rulings of the SAC.
Pitfall No. 1:
Is the BOD ready to function as oversight body of
Shariah Governance?
The Shariah Governance Framework makes it clear that the Board is
responsible to ensure oversight of Shariah compliance for IFIs.
The Board is already heavily burdened to provide oversight on many regulatory
requirements as a financial institution e.g. prudential regulation, risk
management, corporate governance etc.
The Board is also highly expected to provide leadership and full accountability
to the shareholders, regulators and other stakeholders.
The members of the Board i.e. the Directors, however, are not well versed on
Shariah.
The Board expected the Shariah Committee to assist not only to advise but to
supervise the Shariah compliance.
Is it not a requirement for the Board to appoint the Chairman of the Shariah
Committee (or any qualified Shariah scholar) to be a member of the Board to
effectively assisting them?
Functional Gap on the role of the Board
The functional gap in the role of the Board and the Board Audit
Committee opening up huge responsibilities and accountabilities beyond
their imaginationis it true?
Pitfall No. 2:
The Management & Shariah Non-Compliance Risk
So far Shariah advisors are not carrying out thorough However, a comprehensive and well-guided audit of
and comprehensive internal Shariah review or audit the Shariah legal contracts, documentations and
on the operations of IFIs due to their restricted scope operations so far has not been properly conducted
of work. (ex-post compliance).
The accumulation and evaluation of evidence to determine and report on the degree of
correspondence between information and criteria for Shariah compliance purposes.
Broad Shariah auditors perform audits on both information (financial information/standard e.g. profit
definition distribution) and subjective information (Shariah opinion/fatwa/standard) to ensure Shariah
compliance.
Shariah audit of the IFIs that involved Shariah matters (e.g. profit distribution policy).
Shariah audit of the operational aspects of the IFIs (e.g. policy on penalty charge for late payment).
General Shariah audit of the products compliance according to the established Shariah criteria recognised by
the bank and the regulatory authorities.
scope
Shariah auditors need to understand the business of the IFIs including the nature of contracts used
for different types of Islamic financial services.
This auditing process can be undertaken internally by the internal auditors with the help of Shariah
Effective officers.
Implementa Externally, it can be undertaken by Bank Negara Malaysia (BNM), or/and a dedicated independent
tion institution to be established either by the industry or by BNM.
Homework: