Syari'ah Compliance Risk

Chapter 8 discusses syari'ah‐compliance risk in high detail, considering many Islamic banks carry the mission of manifesting the principles of Islamic syari'ah in the Islamic bank's business practices. In this chapter, the basic principles of the Islamic financial system and economy are discussed, as are the basic philosophy that syari'ah is the principle and spirit in business and the various prohibitions in mu'amalah. The Islamic bank should be syari'ah‐compliant in it business; the chapter discusses how syari'ah‐compliance should be an integral part of policies and management processes at all levels of the Islamic bank, the urgency for the national syari'ah council, and the existence of a syari'ah supervisory board in an Islamic bank, as well as the relationship between the syari'ah supervisory board and the syari'ah‐compliance audit as part of a framework. The final part of this chapter discusses the syari'ah‐compliance risk identification process and how to build risk management and mitigation for syari'ah‐compliance in an Islamic bank.