The soon to be introduced Islamic Financial Service Act 2012 (IFSA 2012) will make Malaysia one of the few countries in the world where the Islamic regulator is given a mandate to promote Shariah compliance among Islamic financial institutions, said a former senior official of Bank Negara Malaysia (BNM).
“The act will ensure there would be greater certainty and will ensure that the Shariah terms can be enforced as per the terms of the Shariah contract,” said former BNM assistant governor Gopal Sundaram at a forum discussing the advent of the new legislation.
The act, which has been approved by Parliament and now awaiting Royal Assent, will replace the Islamic Banking Act 1983 and the Takaful Act 1984, and incorporates elements from the Payment Systems Act 2003 and Exchange Control Act 1953.
On the conventional side, Parliament has passed the Financial Services Act 2012, which will consolidate the Banking and Financial Institutions Act 1989 (BAFIA) and the Insurance Act 1996.
Speaking at the public lecture organised by the International Centre For Education In Islamic Finance (INCEIF) and law firm Abdullah Chan, he said the new legalisation would provide the legal framework based on Shariah and be able to regulate Shariah-compliant institutions in a manner befitting Shariah requirements.
Gopal, who is also director of Kuwait Finance House Malaysia Bhd, said: “A greater clarity on the legal and prudential requirements underpinned by Shariah principles will enable participants of the Islamic financial system to align their practices and expectations accordingly when undertaking Islamic financial businesses and transactions.” International Islamic Banking Liquidity Management Corp (IILM) chief executive officer Dr Rifaat Ahmed Abdel Karim, who also presented a paper at the same forum, said one of the distinctive features of the IFSA 2012 is that it statutorily enforces management of the Shariah non-compliance risk.
He said it also requires Islamic financial institutions to ensure at all times that their aims, operations, business, affairs and activities are in compliance with Shariah. The act requires that any failure to abide by the statutory requirements has to be immediately notified to BNM as the regulator and the Shariah committee of the financial institutions.
“Any person, including a financial institution or its directors, controllers or officers that contravenes these requirements is considered to have committed a criminal offence,” he said.
source: The Malaysian Reserve