role of sharia compliance in islamic finance institutions - by anwar soubra - icompetences ifc2012
TRANSCRIPT
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Monday 7 January 20131 Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Role of Sharia Compliance in IFI
Monday 7 January 20132 Anwar Misbah Soubra
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Two Bodies
Monday 7 January 20133
Sharia Supervisory Board (SSB).
Sharia Compliance Department.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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1. Sharia Supervisory Board
Monday 7 January 20134
The basic objective of the Sharia Board
is to supervise and direct the activities
of the Bank and to confirm itscommitment to abide by the Islamic
Sharia rules and regulations in all its
activities.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Appointment of SSB
Monday 7 January 20135
The Bank should have a Sharia Board
appointed by its shareholders, based on
a recommendation from the Board of Directors.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Responsibility
Monday 7 January 20136
Is restricted to provide an independent opinion,
based on the review of the operations at the
Islamic Bank, and report to shareholders that all
activities are in compliance with Islamic Shari’arules and principles;
The Bank’s management is responsible for
ensuring that the financial institution conducts its business in accordance with Islamic Shari’a rules
and principles.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Review
Monday 7 January 20137
Documents;
Agreement;
Contracts;
Transactions;
Investment Proposals;
Financing structures;
All activities.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Communication with SSB
Monday 7 January 20138
Recurring scheduled meetings.
Unscheduled meetings.
Remote communication by phone & e-mails.
Personal contacts and visits if in same
country.
Availability as needed by business.Anwar Misbah Soubra
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Draw back
Monday 7 January 20139
Over commitment with multi IFIs,
local and foreign.
Difficulty of communication.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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2. Internal Sharia Audit
Monday 7 January 201310
To ascertain and confirm that the
activities of the financial institution are
in compliance with, and do not violateShari’a rules and regulations.
Examine the scope of Shar ia
compliance in the activities of theIslamic Institution.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Definition
Monday 7 January 201311
The Sharia Audit has a lingual meaning
to “guard” and “maintain”, and the
auditor is the guardian. In this respect,Sharia audit has a primary role in
superv i s ing and ensur ing the
commitment of Islamic Banks to theseSharia rules and regulations.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Set Up of IFI
Monday 7 January 2013Anwar Misbah Soubra12
Branches.
Geographic spread.
Corporate Finance.
Consumer Finance.
Credit Cards.
Comprehensive ShariaDepartment.
Centralized location.
Investment Department.
Treasury Operations.
Structured financing &
Investment.
Single Sharia departmentmanager.
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Comprehensive Sharia Compliance
Department
Monday 7 January 2013Anwar Misbah Soubra13
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Skills of Sharia Officers
Monday 7 January 2013Anwar Misbah Soubra14
High Level Sharia Knowledge
Banking Education & Experience
Business Administration Education: Accounting,Finance, Financial Analysis.
English Language.
Communication Skills & Report Writing.
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Examination on behalf of SSB
Monday 7 January 201315
Contracts, Agreements,
Products,
Transactions, Articles of incorporation,
Financial statements, Reports,
Internal audit reports, Central Bank Inspection reports, and Other related Banking activities documents.
Anwar Misbah Soubra
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Sharia Compliance Stages
Monday 7 January 201316
Pre-execution = Sharia Review + Sharia
Structuring.
During process = Q & A + Supervision +On job Training.
Post execution = Sharia Audit.
IT Process.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Professional Competency
Monday 7 January 201317
Independence.
Academic background.
Supervision of the audit process.
Ethical standards.
Audit skills.
Knowledge of Sharia. Continuous learning and training.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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In Principle
Monday 7 January 201318
Internal Sharia Auditor should not be an
executive position because this will
entail conflict of interest . Reference to AAOIFI.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Functions
Monday 7 January 201319
Prepare policies and detailed audit
procedures.
Prepare an audit plan annually that reflectsunderstanding of the activities, products,
and locations, and implementation of
Islamic Sharia rules and regulations. Operate with close coordination with SSB.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Importance
Monday 7 January 201320
Supervise and follow up on the Islamic Bankoperations and commitment to Shari’a rules andoperations.
• Weakness of awareness or knowledge of Islamic
Banks’ staff of the Sharia rules and standards.• The invention of new financial and investment
tools that require continuous follow up.• Transcends feelings of assurance and confidence to
clients that the bank is applying and abiding byShari’a guide lines.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Pre-execution audit
Monday 7 January 201321
Discuss the projects and feasibility studies from aShari’a compliance perspective.
Review the contracts and agreements underpreparation to be signed by contractual parties.
Shari’a compliance review of the suggestedfinancial structures considered to finance theprojects or transactions.
Prepare the proper standards to deal and cooperate
with conventional banks. Prepare the audit schedules to review the bank’s
operations.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Continuous on-going audit
Monday 7 January 201322
Ensure the approval of the Shari’a Board, if needed, on thefinancial transaction before execution starts.
Give the Shari’a opinion on the matters referred to the auditunit.
Provide remarks and comments on the contractdocumentation and execution of the financial transactionwith follow up to implement first hand amendments andcorrections.
Provide prompt review of Shari’a related issues as they ariseduring execution and take the necessary measures.
Ensure proper communication and understanding to avoidany error and deviation from the original objectives.
Anwar Misbah Soubra
7/29/2019 Role of Sharia Compliance in Islamic Finance Institutions - By Anwar Soubra - iCompetences IFC2012
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Post execution audit
Monday 7 January 201323
Follow up on the implementation of the previouslygiven comments during the execution of the
transaction.
Request the relevant management to participate andensure the correction of the un-rectified errors yet.
Review the financial transaction file after completing
execution of the transaction.
Review the accounting audit report. Review reports of external audit institutions.
Prepare and present a Shari’a Audit Report to the
Shari’a Board on quarterly basis.Anwar Misbah Soubra