Contents

Foreword

Acknowledgments

About the Author

Introduction

Chapter 1: Fundamental Concept of Sharī`ah and Sharī`ah Non-Compliance Risk

1.0. Introduction

1.1. Concept of Sharī`ah

1.2. Compliance in the Islamic Financial Institutions: An Overview

1.3. Concept of Risk

1.4. The Concept of Sharī`ah Non-Compliance Risk

1.5. Review of the Concept of Sharī`ah Non-Compliance Risk

1.6. Features of Sharī`ah Non-Compliance Risk

1.7. Sharī`ah Non-Compliance Risk Events

1.8. The Sharī`ah Basis for Sharī`ah Compliance

Chapter 2: Sharī`ah Compliance in IFSA 2013 and Classification of Sharī`ah Non-Compliance Risk

2.0. Introduction

2.1. Provisions Unique to Islamic Banks in IFSA

2.2. Sharī`ah Compliance in IFSA 2013

2.3. Classification of Sharī`ah Non-Compliance Risk

Chapter 3: The Major Risk Elements of Sharī`ah Non-Compliance Risk and Its Causes in Islamic Finance Operations

3.0. Introduction

3.1. The Major Risk Elements of Sharī`ah Non-Compliance Risk

3.2. The Causes of Sharī`ah Non-Compliance Risk in Islamic Finance Operations

Chapter 4: Tools and Techniques to Identify Incongruence in Sharī`ah Compliance

4.0. Introduction

4.1. Tools

4.2. Techniques

Chapter 5: Understanding the Sharī`ah Requirements for Mitigating the Sharī`ah Non-Compliance Risk in Islamic Finance

5.0. Introduction

5.1. The Fundamental Islamic Principles in Islamic Contracts

5.2. The Fundamental Islamic Financial Transactions Used in Islamic Finance

Chapter 6: Lines of Defences for Sharī`ah Non-Compliance Risk Management

6.0. Introduction

6.1. The First Line of Defence: Product Owner

6.2. The Second Line of Defence: Management of the IFI

6.3. The Third Line of Defence: Sharī`ah Risk Management

6.4. The Fourth Line of Defence: Sharī`ah Management

6.5. The Fifth Line of Defence: Sharī`ah Committee/Board

6.6. The Sixth Line of Defence: Board of Directors

6.7. The Seventh Line of Defence: Sharī`ah Advisory Council (SAC), Bank Negara Malaysia (BNM)/Authorities

6.8. The Eighth Line of Defence: Sharī`ah Review

6.9. The Ninth Line of Defence: Sharī`ah Audit

6.10. The Tenth Line of Defence: Public

Chapter 7: Sharī`ah Non-Compliance Reporting

7.0. Introduction

7.1. Objective

7.2. Applicability

7.3. Legal Provisions

7.4. Reporting Requirements

7.5. Reported as Potential Sharī`ah Non-Compliance Event

7.6. Submission of Reports on Actual Sharī`ah Non-Compliance Events

7.7. Timeline for Actual Sharī`ah Non-Compliance Reporting

7.8. Potential Sharī`ah Non-Compliance Event

7.9. Timeline for Potential Sharī`ah Non-Compliance Reporting

7.10. No Sharī`ah Non-Compliance Event Is Detected

7.11. Process Flow for Authentication or Confirmation of Sharī`ah Non-Compliance in the IFIS

Chapter 8: Legal Documentations in Islamic Finance

8.0. Introduction

8.1. Introduction to Legal Documentation

8.2. Law Related to Islamic Banking

8.3. General Principles in Legal Documentation

8.4. Legal Documentation: Definition and Sharī`ah Concern

8.5. Incorporation of Sharī`ah Requirements into Legal Documentation

8.6. The Main Functions of the Legal Documentation

8.7. Areas in Legal Documentation under Consideration and Review

8.8. Potential Area of Sharī`ah Non-Compliance Risk

Chapter 9: Drafting Legal Documents

9.0. Introduction

9.1. Structure of the Legal Agreement/Contract

9.2. Tips for Drafting Text and Additional Clauses

9.3. Legalistic Style

Chapter 10: Useful Information and Samples of Legal Documentation

10.0. Introduction

10.1. Sample of an Agreement (Musharakah Agreement in Sukuk Issuance)

10.2. Sample of an Offer Letter

10.3. Sample of Legal Document Structure

10.4. Master Agency Agreement (AIBIM)

10.5. Corporate Wakalah Placement Agreement (AIBIM)

10.6. Corporate Murabahah Master Agreement

10.7. List of the Top Common Audit Shortcomings in Sharī`ah Non-Compliance

Appendix: The Impact of Non-Sharī`ah-Compliance Risk on the IFI, and Checklist

List of Abbreviations

Glossary

Bibliography

Index