Kuala Lumpur: Malaysia continues to dominate the world in Islamic Finance industry and is constantly striving to improve the regulations of the industry. To allow Islamic Finance industry to grow further, Malaysia has introduced a new Islamic Financial Services Act (IFSA) 2012 that will legally enforce the management of shariah non-compliance risk and require Islamic financial institutions to ensure that their aim, operation, business, affairs and activities are shariah-compliant at all times.
“This is perhaps one of the most distinctive features of the IFSA 2012,” said International Islamic Banking Liquidity Management Corp. CEO, Prof. Datuk Dr. Rifaat Ahmed Abdel Karim in a statement.
The act, which is pending Royal Assent, requires that any failure to abide by this statutory requirement has to be immediately notified to the regulator and the shariah committee of the financial institution.
Furthermore, the financial institution is required to immediately cease continuing with the business or activity, which is the cause of the non-compliance, and submit a plan for the rectification of the non-compliance to the regulator within 30 days.
“This strict provision is in line with the principal regulatory objectives of the act, which aims to promote financial stability and compliance with shariah,” Rifaat said in his lecture on “The Significance of Supervision and Regulation in Islamic Finance” at the International Centre for Education in Islamic Finance.
The new act, which is expected to come into force this year, seeks to consolidate the Islamic Banking Act 1983 and the Takaful Act 1984.
“When it comes into force, it will be a landmark law, perhaps the only omnibus Islamic finance legislation in the world,” Rifaat added.
In addition, the act will lay the foundation for a comprehensive regime to promote a robust and resilient Islamic financial system in Malaysia.