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Article 4: Composition of the Shariah Governance Framework
No: 41042498
Date(g): 12/2/2020 | Date(h): 18/6/1441
Status: In-Force
The bank shall establish a Shariah governance framework with emphasis on the key functions and elements that ensure effective implementation of this framework and according to the following:
1.
The Shariah governance framework shall consist of a set of policies and procedures that describe the structure, roles, responsibilities, and tasks of the relevant departments as well as the communication arrangements among them.
2.
These policies and procedures shall define the mechanism that a bank must follow to meet the requirements of this framework, including how committee meetings shall be conducted, how decisions are made and recorded, and how reports shall be prepared and submitted.
3.
The bank shall establish formal reporting channels among the key units/departments to ensure effective and timely reporting. In this regard, the committee shall report to the board of directors.
4.
The bank must establish a control mechanism to ensure that the objectives and operations of its Islamic banking activities are in compliance with Shariah principles and rules at all times.
5.
The composition of the Shariah governance framework shall be supported by pillars that include effective tasks and responsibilities carried out by the board and the management, independence of the committee, and qualification of its members in addition to the effectiveness of the internal control functions which are Shariah compliance, Shariah non-compliance risk management, and Shariah internal audit.
6.
Continuous assessment of the bank’s compliance with the Shariah principles and rules shall be carried out.
7.
The bank shall manage the potential Shariah non-compliance risk resulting from Islamic banking which includes identifying the inherent risk and establishing controls to mitigate such risk.
8.
A regular and periodic Shariah internal audit shall be conducted to verify the level of compliance of Islamic banking activities and operations with the Shariah principles and rules.
9.
The bank shall establish a unit/department responsible for conducting research and studies on Shariah, coordinating between the management and the committee, and disseminating Shariah decisions to stakeholders within the bank in addition to acting as secretariat to the committee.
