Introduction to Shariah Review 

Shariah review is an examination of the extent of an IFI’s compliance, in all its activities, with the Shariah. This examination includes contracts, agreements, policies, products, transactions, memorandum and articles of association, financial statements, reports (especially internal audits and central bank inspection), and circulars. GSIFI 2 is to ensure that the activities conducted by an IFI do not contravene the Shariah rules and principles as stipulated in the fatwas, rulings, and guidelines.

Responsibility for Compliance with the Shariah

• The management is responsible for compliance with Shariah’s rules and principles.
• It is the management’s responsibility to provide to the SSB all information relating to the IFI’s compliance with the Shariah.
• SSB is responsible for forming and expressing an opinion on the extent of an IFI’s compliance with the Shariah.

Shariah Review Procedures

Step 1: Planning review procedures

• Planning should be completed in an effective and efficient manner.
• The plan shall be properly documented including the sample selection criteria and sizes, taking into consideration the complexity, and frequency of transactions.
• The plan shall include the Understanding of the activities, products, and management’s awareness and attitude towards compliance with the Shariah is essential.

Step 2: Executing review procedures and preparation and review of working papers

• Obtaining an understanding of the management’s awareness, commitment, and compliance control procedures for adherence to the Shariah;
• Reviewing of contracts, agreements, etc.;
• Reascertaining, whether transactions entered into during the year, were for products authorized by the SSB;
• Reviewing other information and reports such as circulars, minutes, operating and financial reports, policies, and procedures, etc.;
• Consultation/co-ordination with advisors such as external auditors; and
• Discussing findings with an IFI’s management.

Step 3: Documenting conclusions and report

• The SSB shall document their conclusions and prepare their report to the shareholders based on the work done and discussions held.
• The SSB report shall be read at the annual general meeting of the IFI. A detailed report, when warranted, shall also be issued to an IFI’s management.

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