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Potential Shariah Non-compliance Determinant Factors: A Guidance for Shariah Control Function of Islamic Financial Institution in Malaysia

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cris.virtual.departmentUniversiti Sains Islam Malaysia
cris.virtual.departmentUniversiti Sains Islam Malaysia
cris.virtual.orcid0000-0002-1476-1199
cris.virtual.orcid0000-0003-2929-0841
cris.virtualsource.department48ac6131-67ac-44a7-ac1e-987d3baaa569
cris.virtualsource.departmentab490b21-2407-44c7-8271-7abaace09f08
cris.virtualsource.orcid48ac6131-67ac-44a7-ac1e-987d3baaa569
cris.virtualsource.orcidab490b21-2407-44c7-8271-7abaace09f08
dc.contributor.authorAizul Aiman Musaen_US
dc.contributor.authorZurina Shafii
dc.contributor.authorSupiah Salleh
dc.date.accessioned2024-05-30T07:23:57Z
dc.date.available2024-05-30T07:23:57Z
dc.date.issued2022
dc.description.abstractIslamic banking is distinguished from conventional banking by its adherence to the principles of Shariah and it is perceived as a Shariah compliant financial intermediary which carry the image of Islam in providing the financial solution to the public especially for Muslim. Furthermore, as compared to its counterpart, Islamic banking is exposed to an additional risk that is peculiar to its operation which is Shariah non-compliance (SNC) risk. With that said, proper management of SNC risk is vital for Islamic banking since the impact of the risk could not just possibly affecting the financial but also the image its carry. One of the governance aspects in managing the SNC risk is the capability of its officer to identify, assess and report the SNC incident. In this regard, Bank Negara Malaysia (BNM) through its Operational Risk Integrated Online Network (ORION) policy document requires Potential SNC event and Actual SNC event to be reported to BNM. Referring to the latest ORION policy document issued in 2021, BNM has removed the requirement for a Potential SNC to be confirmed by a “qualified Shariah officer” and replaced with the “officer within Shariah control function” which could include officer with and without Shariah study background. Through this amendment, it raised question on the capability of the officer without Shariah study background to assess and subsequently confirm the incident as Potential SNC. This paper shall attempt to analyse the factor which contribute to Shariah non-compliance event in Islamic banking and develop a pragmatic parameter for the officer within Shariah control function as guidance for confirmation of Potential SNC event. This study adopted qualitative and case study approach focusing on one Islamic bank in Malaysia. The suggested parameter of Potential SNC event is based on the study of Shariah reasoning behind the decision of Shariah Committee for the Actual SNC events disclosed in the annual report of Islamic Financial Institution.en_US
dc.identifier.citationNawai, N., Khairi, K. F., Abdul Hamid, S., Nazri, M. A., Ramli, N. A., Abd Aziz, S., Ibrahim, M. A., & Abdul Shukor, S. (Eds.). (2022). e-Proceedings of The 10th Islamic Banking, Accounting and Finance International Conference 2022 (iBAF2022) : “Future-Proofing for Business Excellence Through Islamic Banking, Accounting and Finance.” Universiti Sains Islam Malaysia. https://fem.usim.edu.my/ibaf2022-proceeding/en_US
dc.identifier.epage65
dc.identifier.issneISSN 2948-460X
dc.identifier.spage56
dc.identifier.urihttps://fem.usim.edu.my/ibaf2022-proceeding/
dc.identifier.urihttps://oarep.usim.edu.my/handle/123456789/17448
dc.language.isoen_USen_US
dc.publisherFakulti Ekonomi dan Muamalat, Universiti Sains Islam Malaysiaen_US
dc.relation.conferencee-Proceedings of The 10th Islamic Banking, Accounting and Finance International Conference 2022 (iBAF2022)en_US
dc.subjectPotential Shariah Non-Compliance Event; Shariah Non-Compliance Reporting; Shariah Control Functionen_US
dc.titlePotential Shariah Non-compliance Determinant Factors: A Guidance for Shariah Control Function of Islamic Financial Institution in Malaysiaen_US
dc.typeArticleen_US
dspace.entity.typePublication
oairecerif.author.affiliation#PLACEHOLDER_PARENT_METADATA_VALUE#
oairecerif.author.affiliationUniversiti Sains Islam Malaysia
oairecerif.author.affiliationUniversiti Sains Islam Malaysia

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