CIBAFI Submitted Comments to the AAOIFI on Governance Standard No. 9: “Shariah Compliance Function”
Manama, Kingdom of Bahrain Aligned with its role as advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has provided its comments to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on its Exposure Draft (ED) of Governance Standard No. 9: “Shariah Compliance Function”
The Exposure Draft has been issued on 10th October 2017 and was open for public consultation until 10th November 2017.
In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial services industry (IFSI) stakeholders to comment on the standard. CIBAFI has provided collective feedback of its member banks from over 32 jurisdictions, comprising the following key points.
Firstly, the ED attempts to define the internal Shariah compliance system within Islamic financial institutions (IFIs) which include banks, Takaful operators, capital market institutions and other similar institutions. Although the standard claims to be applicable to all IFIs, CIBAFI have noted that much of the text pertains to institutions of larger sizes, which are able to sustain a number of internal units. It is therefore likely to be more applicable to banks and Takaful operators than to capital market firms and other similar institutions (or indeed Islamic microfinance institutions). It would be helpful if the Standard could give guidance on how it could be applied in smaller institutions, for example by combining or outsourcing functions.
Secondly, CIBAFI has noted that, although this is a Standard for the Shariah compliance function, the ED at some points strays into other matters, for example the Secretariat of the Shariah Supervisory Board (SSB) (paras 53-56), which properly belongs in a Standard for the SSB, and more general matters of culture and human resources policy (paras 11-12 and 31-35). CIBAFI suggested that these material can be incorporated in other standards in the future and meanwhile, be removed from the current Standard, to focus strictly on the Shariah compliance function.
Thirdly, the ED states that the Shariah Compliance Department (SCD) is principally a part of management and accountable to senior management. The issue of reporting lines led to a great deal of comment from CIBAFI members, who were keen that the standard should preserve the operational independence of the SCD. The SCD needs to have day to day administrative reporting to senior management, but it also needs direct access to the Shariah Supervisory Board (SSB).
Full comments to the AAOIFI are available on CIBAFI website http://www.cibafi.org/controlpanel/Documents/Library/Pdf/CIBAFICommentsontheAAOIFIEDonStandardNo.9_.pdf
In addition to policy and regulatory advocacy, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive professional development programmes.
NOTE TO EDITOR:
About the General Council for Islamic Banks and Financial Institutions (CIBAFI)
CIBAFI is an international organization established in 2001 and Headquartered in the Kingdom of Bahrain. CIBAFI is affiliated with the Organization of Islamic Cooperation (OIC). CIBAFI represents the Islamic financial services industry globally, defending and promoting its role, consolidating co-operation among its members, and with other institutions with similar interests and objectives. With over 120 members from 32 jurisdictions, representing market players, international intergovernmental organizations and professional firms, and industry associations.
For more information about CIBAFI, please visit www.CIBAFI.org Tel: +973 17357300 Email: email@example.com