24-Aug-The Malaysian law that exposes Shariah scholars to jail terms for rule breaches will ensure tighter compliance, in a market where the regulator has already made progress in unifying standards.
Under the Islamic Financial Services Act 2013, which took effect June 30, scholars may be jailed for up to eight years or fined as much as 25mn ringgit ($7.6mn) if they fail to comply with central bank rules. It is the first time Shariah advisers have been expressly made accountable'
Malaysia set up a dedicated system in the 1990s to avoid disputes over the financing methods that comply with the Shariah. Goldman Sachs Group was criticised by some advisers in 2011 for not ensuring its debut sukuk, approved by Ireland’s central bank, would be traded at par value as mandated by Islamic law. Some lenders are appointing scholars who don’t have a thorough understanding of financial products due to a shortage of experts
“It’s a very good move to stress the accountability of Shariah boards,” “A doctor who goes against the fundamental rules of medicine is accountable. The same goes for Shariah scholars.”
“What the liability that’s presented by the Act does is to actually put more emphasis on training or retraining of experts,”
Goldman Sachs set up a sukuk programme based on a so-called commodity Murabaha structure, or a cost plus mark-up transaction, that was approved for listing on the Irish Stock Exchange by the Central Bank of Ireland in October 2011. Goldman declined to provide any more details on the debt, it said in an e-mailed response to Bloomberg.
The new Malaysian regulation would raise the standard of advice and level of services dispensed by religious experts, according to a member of the Malaysian central bank’s Shariah Advisory Council.
“People will be more aware of their duties and responsibilities,”
This means that before they sign off on certain things, they will think twice.
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