Islamic Finance - Adhering to Shari'ah Guidelines
Shari'ah compliance refers to abiding by all Shari'ah principles since in the context of Islamic finance, these principles serve as a norm. Products and services covered by the indicative syllabus content The definition of Shari'ah compliance The salient characteristics of Shari'ah compliance The stakeholders in Shari'ah compliance The relationship between Shari'ah compliance and regulation Book One diploma in Islamic business law Shari'ah compliance 40 umbrella of Islamic finance requires that all facets of a financial product or service strictly follow the guidelines of the Shari'ah. This means that compliance extends beyond the product's or service's structure and design to include the terms and conditions, legal documentation, accounting treatment, SOPs, IT components, and even marketing materials related to the product or service. Each of these needs to follow the guidelines established by Shari'ah principles in order to be considered Shari'ah-compliant. Products are regarded to be noncompliant when they contradict or diverge from Shari'ah standards. Any non-compliance issues will typically be addressed, and if necessary, appropriate action will be taken to bring the products into compliance. Non-compliant actions may cause the revocation of an IFI's license in some jurisdictions, such as Malaysia under the Islamic Banking Act 1983 (Section 4). Since IFIs must abide by their articles of organization, which typically mention their obligation to conform with Shari'ah principles, this is a logical result for any licensing process, even when it is not explicitly addressed in other jurisdictions. It should be noted that, outside Malaysia, no other jurisdictions have a specific law or act that addresses Islamic banking. Conducting Islamic finance activities requires compliance, which is a requirement of Shari'ah. An essential tool for facilitating Shari'ah compliance and making Shari'ah compliance observable and comparable across jurisdictions is the availability of Shari'ah standards.
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