Islamic Banking Regulation 2011

3 MALDIVES MONETARY AUTHORITY MALE, MALDIVES ISLAMIC BANKING REGULATION 2011 PART ONE PRELIMINARY

1. (1) This Regulation may be cited as the "Islamic Banking Regulation 2011". (2) This Regulation shall come into force on the date of its publication.
2. In this Regulation, unless the context otherwise requires: (a) "Islamic Banking Regulation 2011" means this Regulation; (b) "Authority" means the Maldives Monetary Authority; (c) This Regulation shall apply to all Islamic financial institutions in the Maldives. (d) This Regulation shall come into force on the 6th day of July 2011.

SECOND PART DEFINITIONS 3. It is prohibited for any person, other than the Authority, to establish or operate an Islamic financial institution in the Maldives. 4. The following definitions apply: (a) "Islamic Financial Institution" means an institution that operates in accordance with Shariah principles;

5. THIRD PART SUPERVISION Under Law No. 24/2010 (The Maldives Central Bank Law), the Authority is empowered to supervise all Islamic financial institutions in the Maldives. Accordingly, the Authority shall supervise Islamic financial institutions in accordance with the principles and guidelines set forth in this Regulation. The Authority may supervise Islamic financial institutions through on-site inspections or off-site monitoring. In such cases, the Authority shall supervise Islamic financial institutions in a manner that ensures the safety and soundness of the institution.

Supervision. 6 The Authority shall supervise Islamic financial institutions for the purpose of ensuring that they comply with the provisions of Law No. 10/96 (The Maldives Companies Act). Furthermore, for foreign-owned or foreign-controlled institutions, the Authority shall supervise them in accordance with the provisions of the Companies Act.

Supervision of Institutions. 7 (a) General Principles Islamic financial institutions shall maintain adequate internal controls. In this regard, Islamic financial institutions shall establish separate internal audit departments within the institution. Furthermore, the internal audit department shall report to the Board of Directors or the Audit Committee. The internal audit department shall also report to the external auditors. The internal audit department shall be independent of the business units it audits. Furthermore, the internal audit department shall report to the Board of Directors or the Audit Committee.

(b) Islamic financial institutions shall submit an application and a business plan to the Authority. Furthermore, the application and business plan shall include the following information:

Requirements for Licensing. 8 (a) (1) The name of the institution; (2) The address of the institution; (3) The authorized capital and paid-up capital; (4) The nature of the business and the products and services to be offered; (5) The organizational structure, including the Board of Directors, Senior Management, and the Shariah Supervisory Committee, and the qualifications and experience of the proposed directors and senior management; (6) The internal controls, including the risk management framework, compliance function, and anti-money laundering and counter-terrorism financing measures; and the annual budget and financial projections; (7) For foreign-owned or foreign-controlled institutions, the Authority may require additional information regarding the ownership structure and the regulatory framework of the home country. Furthermore, the Authority may require a letter of credit or a guarantee from a reputable bank.

(8) For Islamic financial institutions, the Authority may require additional information regarding the Shariah compliance framework, the Shariah Supervisory Committee, and the qualifications of the Shariah scholars. Furthermore, the Authority may require a letter of credit or a guarantee from a reputable bank.

(9) The Authority may require any other information it deems necessary.

(b) The Authority shall issue a license to the applicant if it is satisfied that the applicant meets the requirements of this Regulation. (c) The license shall be subject to the terms and conditions set by the Authority. (d) The license shall be valid for one year from the date of issuance.

License of Islamic Financial Institutions. 9 Islamic financial institutions shall display their license prominently at their principal place of business.

License Renewal. 10 General Principles The application for license renewal shall be submitted by the institution to the Authority. The application shall include the following information: (a) The name of the institution; (b) The address of the institution; (c) The authorized capital and paid-up capital; (d) The nature of the business and the products and services offered; (e) The organizational structure, including the Board of Directors, Senior Management, and the Shariah Supervisory Committee, and the qualifications and experience of the directors and senior management; (f) The internal controls, including the risk management framework, compliance function, and anti-money laundering and counter-terrorism financing measures; and the annual budget and financial projections; (g) The financial statements for the past year; (h) The audit report for the past year; (i) The Shariah compliance report for the past year; (j) Any other information the Authority may require.

FOURTH PART ISLAMIC FINANCIAL INSTITUTIONS Islamic financial institutions shall not engage in the following activities:

Prohibited Activities. 11 Islamic Financial Institutions (a) Dealing in interest (Riba); (b) Investing in interest-based products; (c) Dealing in Gharar (uncertainty) or Maysir (gambling); (d) Investing in businesses that are prohibited by Shariah; (e) Dealing in bonds and credit cards; (f) Dealing in derivatives and other financial instruments that involve interest or uncertainty; (g) Dealing in insurance products that involve interest or uncertainty; (h) Dealing in any other activity that is prohibited by Shariah; (i) Dealing in any other activity that is prohibited by the Authority; (j) Dealing in any other activity that is prohibited by law.

The Authority may exempt any Islamic financial institution from the prohibition on dealing in any activity if it is satisfied that the activity is permissible under Shariah.

FIFTH PART SHARIAH SUPERVISORY COMMITTEE Every Islamic financial institution or Islamic financial institution licensee shall establish a Shariah Supervisory Committee. The Shariah Supervisory Committee shall consist of at least three members. The Shariah Supervisory Committee shall be appointed by the Board of Directors of the Islamic financial institution.

Establishment of Shariah Supervisory Committee. 13 (a) The members of the Shariah Supervisory Committee shall be persons who are knowledgeable in Islamic finance and Shariah. The members of the Shariah Supervisory Committee shall be appointed by the Board of Directors of the Islamic financial institution. The appointment shall be made within 30 days of the establishment of the Shariah Supervisory Committee. The appointment shall be notified to the Authority.

(b) The members of the Shariah Supervisory Committee shall be persons who are independent of the Islamic financial institution. The members of the Shariah Supervisory Committee shall not be employees of the Islamic financial institution.

Qualifications and Disqualifications. 14 The Shariah Supervisory Committee shall consist of persons who are knowledgeable in Islamic finance and Shariah. The members of the Shariah Supervisory Committee shall be persons who are independent of the Islamic financial institution. The members of the Shariah Supervisory Committee shall not be employees of the Islamic financial institution.

(a) Persons who have been convicted of a crime involving fraud, dishonesty, or moral turpitude; (b) Persons who have been declared bankrupt; (c) Persons who have been disqualified from acting as a director of a company; (d) The Shariah Supervisory Committee shall consist of persons who are knowledgeable in Islamic finance and Shariah. The members of the Shariah Supervisory Committee shall be persons who are independent of the Islamic financial institution. The members of the Shariah Supervisory Committee shall not be employees of the Islamic financial institution.

Functions and Powers of Shariah Supervisory Committee. 15 The Islamic financial institution shall ensure that its activities are in compliance with Shariah. The Shariah Supervisory Committee shall advise the Islamic financial institution on Shariah matters.

(a) The Shariah Supervisory Committee shall advise the Islamic financial institution on Shariah matters. The Shariah Supervisory Committee shall issue a Shariah compliance certificate. The Shariah compliance certificate shall be issued annually.

(b) The Shariah Supervisory Committee shall advise the Islamic financial institution on the products and services offered. The Shariah Supervisory Committee shall issue a Shariah compliance certificate for each product and service. The Shariah compliance certificate shall be issued before the product or service is launched.

(c) The Shariah Supervisory Committee shall advise the Islamic financial institution on the internal controls. The Shariah Supervisory Committee shall issue a Shariah compliance certificate for the internal controls. The Shariah compliance certificate shall be issued annually.

(d) The Shariah Supervisory Committee shall advise the Islamic financial institution on the risk management framework. The Shariah Supervisory Committee shall issue a Shariah compliance certificate for the risk management framework. The Shariah compliance certificate shall be issued annually.

(1) The Shariah Supervisory Committee shall advise the Islamic financial institution on the anti-money laundering and counter-terrorism financing measures. The Shariah Supervisory Committee shall issue a Shariah compliance certificate for the anti-money laundering and counter-terrorism financing measures. The Shariah compliance certificate shall be issued annually.

(2) The Shariah Supervisory Committee shall advise the Islamic financial institution on the corporate governance. The Shariah Supervisory Committee shall issue a Shariah compliance certificate for the corporate governance. The Shariah compliance certificate shall be issued annually.

(e) The Shariah Supervisory Committee shall advise the Islamic financial institution on any other matter that the Authority may require.

(f) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(g) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(h) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(i) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(j) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(k) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(l) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(m) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(n) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(o) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(p) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(q) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(r) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(s) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(t) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(u) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(v) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(w) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(x) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(y) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

(z) The Shariah Supervisory Committee shall issue a Shariah compliance certificate for any other matter that the Authority may require.

Sixth Part MISCELLANEOUS Every Islamic financial institution shall submit an annual report to the Authority. The annual report shall include the following information: (a) The name of the institution; (b) The address of the institution; (c) The authorized capital and paid-up capital; (d) The nature of the business and the products and services offered; (e) The organizational structure, including the Board of Directors, Senior Management, and the Shariah Supervisory Committee, and the qualifications and experience of the directors and senior management; (f) The internal controls, including the risk management framework, compliance function, and anti-money laundering and counter-terrorism financing measures; and the annual budget and financial projections; (g) The financial statements for the past year; (h) The audit report for the past year; (i) The Shariah compliance report for the past year; (j) Any other information the Authority may require.

Every Islamic financial institution shall submit an annual report to the Authority. The annual report shall include the following information: (a) The name of the institution; (b) The address of the institution; (c) The authorized capital and paid-up capital; (d) The nature of the business and the products and services offered; (e) The organizational structure, including the Board of Directors, Senior Management, and the Shariah Supervisory Committee, and the qualifications and experience of the directors and senior management; (f) The internal controls, including the risk management framework, compliance function, and anti-money laundering and counter-terrorism financing measures; and the annual budget and financial projections; (g) The financial statements for the past year; (h) The audit report for the past year; (i) The Shariah compliance report for the past year; (j) Any other information the Authority may require.