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Shari'ah Non-compliance Risk Management and Legal Documentations in Islamic Finance

Book Description

A comprehensive guide to one of the key risk management issues in the expanding field of Islamic finance

For Islamic financial institutions, Sharia non-compliance is a growing and key risk that must be carefully managed. This book offers a thorough look at non-compliance risk and explains the legal documentation necessary to ensure compliance for professionals in the Islamic finance industry. In addition, the book offers helpful guidance and understanding for the legal departments of Islamic financial institutions, as well as lawyers, legal firms, Shariah advisors, Shariah officers, and students studying Islamic finance. The book covers fundamental concepts, major risk elements, tools and techniques for identifying non-compliance, legal documentation, and the impact of non-compliance, among other vital topics.

  • Offers comprehensive coverage of the growing field of non-compliance risk management in Islamic finance

  • Includes in-depth coverage of legal documentation

  • Written by an expert on the topic who teaches at INCEIF, The Global University for Islamic Finance and IIUM, International Islamic University of Malaysia in Malaysia

  • Table of Contents

    1. Cover
    2. Contents
    3. Title
    4. Copyright
    5. Foreword
    6. Acknowledgments
    7. About the Author
    8. Introduction
    9. Chapter 1: Fundamental Concept of Sharī`ah and Sharī`ah Non-Compliance Risk
      1. 1.0. Introduction
      2. 1.1. Concept of Sharī`ah
      3. 1.2. Compliance in the Islamic Financial Institutions: An Overview
      4. 1.3. Concept of Risk
      5. 1.4. The Concept of Sharī`ah Non-Compliance Risk
      6. 1.5. Review of the Concept of Sharī`ah Non-Compliance Risk
      7. 1.6. Features of Sharī`ah Non-Compliance Risk
      8. 1.7. Sharī`ah Non-Compliance Risk Events
      9. 1.8. The Sharī`ah Basis for Sharī`ah Compliance
    10. Chapter 2: Sharī`ah Compliance in IFSA 2013 and Classification of Sharī`ah Non-Compliance Risk
      1. 2.0. Introduction
      2. 2.1. Provisions Unique to Islamic Banks in IFSA
      3. 2.2. Sharī`ah Compliance in IFSA 2013
      4. 2.3. Classification of Sharī`ah Non-Compliance Risk
    11. Chapter 3: The Major Risk Elements of Sharī`ah Non-Compliance Risk and Its Causes in Islamic Finance Operations
      1. 3.0. Introduction
      2. 3.1. The Major Risk Elements of Sharī`ah Non-Compliance Risk
      3. 3.2. The Causes of Sharī`ah Non-Compliance Risk in Islamic Finance Operations
    12. Chapter 4: Tools and Techniques to Identify Incongruence in Sharī`ah Compliance
      1. 4.0. Introduction
      2. 4.1. Tools
      3. 4.2. Techniques
    13. Chapter 5: Understanding the Sharī`ah Requirements for Mitigating the Sharī`ah Non-Compliance Risk in Islamic Finance
      1. 5.0. Introduction
      2. 5.1. The Fundamental Islamic Principles in Islamic Contracts
      3. 5.2. The Fundamental Islamic Financial Transactions Used in Islamic Finance
    14. Chapter 6: Lines of Defences for Sharī`ah Non-Compliance Risk Management
      1. 6.0. Introduction
      2. 6.1. The First Line of Defence: Product Owner
      3. 6.2. The Second Line of Defence: Management of the IFI
      4. 6.3. The Third Line of Defence: Sharī`ah Risk Management
      5. 6.4. The Fourth Line of Defence: Sharī`ah Management
      6. 6.5. The Fifth Line of Defence: Sharī`ah Committee/Board
      7. 6.6. The Sixth Line of Defence: Board of Directors
      8. 6.7. The Seventh Line of Defence: Sharī`ah Advisory Council (SAC), Bank Negara Malaysia (BNM)/Authorities
      9. 6.8. The Eighth Line of Defence: Sharī`ah Review
      10. 6.9. The Ninth Line of Defence: Sharī`ah Audit
      11. 6.10. The Tenth Line of Defence: Public
    15. Chapter 7: Sharī`ah Non-Compliance Reporting
      1. 7.0. Introduction
      2. 7.1. Objective
      3. 7.2. Applicability
      4. 7.3. Legal Provisions
      5. 7.4. Reporting Requirements
      6. 7.5. Reported as Potential Sharī`ah Non-Compliance Event
      7. 7.6. Submission of Reports on Actual Sharī`ah Non-Compliance Events
      8. 7.7. Timeline for Actual Sharī`ah Non-Compliance Reporting
      9. 7.8. Potential Sharī`ah Non-Compliance Event
      10. 7.9. Timeline for Potential Sharī`ah Non-Compliance Reporting
      11. 7.10. No Sharī`ah Non-Compliance Event Is Detected
      12. 7.11. Process Flow for Authentication or Confirmation of Sharī`ah Non-Compliance in the IFIS
    16. Chapter 8: Legal Documentations in Islamic Finance
      1. 8.0. Introduction
      2. 8.1. Introduction to Legal Documentation
      3. 8.2. Law Related to Islamic Banking
      4. 8.3. General Principles in Legal Documentation
      5. 8.4. Legal Documentation: Definition and Sharī`ah Concern
      6. 8.5. Incorporation of Sharī`ah Requirements into Legal Documentation
      7. 8.6. The Main Functions of the Legal Documentation
      8. 8.7. Areas in Legal Documentation under Consideration and Review
      9. 8.8. Potential Area of Sharī`ah Non-Compliance Risk
    17. Chapter 9: Drafting Legal Documents
      1. 9.0. Introduction
      2. 9.1. Structure of the Legal Agreement/Contract
      3. 9.2. Tips for Drafting Text and Additional Clauses
      4. 9.3. Legalistic Style
    18. Chapter 10: Useful Information and Samples of Legal Documentation
      1. 10.0. Introduction
      2. 10.1. Sample of an Agreement (Musharakah Agreement in Sukuk Issuance)
      3. 10.2. Sample of an Offer Letter
      4. 10.3. Sample of Legal Document Structure
      5. 10.4. Master Agency Agreement (AIBIM)
      6. 10.5. Corporate Wakalah Placement Agreement (AIBIM)
      7. 10.6. Corporate Murabahah Master Agreement
      8. 10.7. List of the Top Common Audit Shortcomings in Sharī`ah Non-Compliance
    19. Appendix: The Impact of Non-Sharī`ah-Compliance Risk on the IFI, and Checklist
    20. List of Abbreviations
    21. Glossary
    22. Bibliography
    23. Index