Survey of Legal, Supervisory and Policy Requirements for Implementing Compliance Risk Management in Islamic Banking

Aghaie, Sirvan; Aghaie, Golzar; Parsafar, Azam

doi:10.22034/jifb.2023.166992

Survey of Legal, Supervisory and Policy Requirements for Implementing Compliance Risk Management in Islamic Banking

Document Type : Original Article

Authors

sirvan aghaie ¹

golzar aghaie ²

azam parsafar ³

¹ PhD in financial economics, expert in economic issues (responsible author)

² PhD student in public administration (Islamic Azad University, Science and Research Branch of Tehran), Central Bank expert

³ Expert of the General Department of Risk and Compliance of the Agricultural Bank

https://doi.org/10.22034/jifb.2023.166992

Abstract

The ability to identify and assess Sharia compliance risk is an important issue in providing a framework for Sharia compliance risk management. Emphasizing this issue, the emergence of Islamic banking in the world, and continuous efforts to develop standards have been prioritized in Islamic banking. In fact, as it will be explained in this study, there are many issues that need to be addressed regarding the compliance risk in our country’s banking industry. Sharia compliance risk is classified according to the levels of that risk, its constituent factors, and its strategic and tactical management. Sharia compliance risk management, similar to other forms of risk management, has a lifecycle. This study was conducted through a review of Islamic texts, supervisory regulations, and existing scientific papers concerning Sharia risk management. The purpose of this article is to examine the risk of Sharia compliance, to establish the basis of its definition, to describe its characteristics and implications, and to examine how it should be managed in the banking system, with the current situation of the country. Finally, in order risk to prevent the risk of non-compliance with legal and supervisory requirements in line with risk compliance management, the researchers present a systemic framework. For risk assessment, the risk management matrix (likelihood, effect, vulnerability) is applied.

Keywords

Legal requirements

Compliance risk

Sharia risk

Islamic banking