Bai` al-Sarf - Operational Requirements

Transcription

1. Bai ` al-Sarf (Currency Exchange) PART C 8 of 16 OPERATIONAL REQUIREMENTS 21. Governance and oversight S 21.1 While the broad governance and oversight principles are applicable to bai` alsarf contract, an IFI must observe specific requirements on governance arrangements as outlined in this policy document to address inherent risks associated with bai` al-sarf. S 21.2 An IFI must have sufficient understanding of its risk profile and ensure the availability of personnel with the appropriate knowledge and skills to offer bai` al-sarf. Board of Directors S 21.3 The Board of Directors of an IFI (the Board) must establish a sound governance structure to facilitate effective oversight on the management and implementation of bai` al-sarf. The adequacy of the governance structure shall commensurate with the nature, complexity and risk profile of bai` al-sarf. S S 21.4 The Board has overall accountability and responsibility for Shariah governance and Shariah compliance of an IFI. As such, the Board must– (a) approve the business and risk strategies of an IFI with regard to the application of bai` al-sarf; (b) approve and oversee the implementation of policies governing the application of bai` al-sarf which includes risk management aspects; (c) ensure that the internal policies and procedures remain relevant and effective in managing the overall operational conduct and risk profile of the bai` al-sarf; (d) ensure that appropriate internal controls, systems and infrastructure are in place to implement bai` al-sarf in accordance with Shariah; (e) ensure that sufficient resources are in place, and that the IFI has adequate and competent personnel with sufficient knowledge on the concept, application and risks associated with bai` al-sarf; and (f) ensure that independent reviews are conducted regularly to assess compliance with the policy documents issued by the Bank and internal policies established by the IFI. Shariah Committee 21.5 The Shariah Committee has the responsibility to advise an IFI in ensuring its business, affairs and activities involving bai` al-sarf transactions comply with Shariah. As such, the Shariah Committee must– (a) endorse the application of Shariah requirements in the relevant policies and procedures governing bai` al-sarf; (b) review, deliberate and endorse the terms and conditions stipulated in the legal documentations and other documents4 are in compliance with Shariah; (c) advise and provide clarification on relevant Shariah rulings, decisions or policy documents on Shariah matters issued by the Bank, and if relevant, any other authorities; and 4 Such as information published on promotional materials, product manuals or other publications. Issued on: 11 April 2018
2. Bai ` al-Sarf (Currency Exchange) (d) S G S S endorse any rectification measures that are needed to ensure that a transaction involving bai` al-sarf complies with Shariah requirements. Senior management 21.6 The senior management has the responsibility to ensure that the business and operations of an IFI complies with Shariah requirements. As such, the senior management must– (a) establish policies, procedures and processes with regard to proper management of bai` al-sarf; (b) develop internal controls and risk management policies and procedures in line with the business and risk strategies approved by the Board; (c) implement relevant internal systems, infrastructure and mechanisms to identify, measure, control and monitor risks associated with bai` alsarf; (d) identify, assign and train key personnel with the appropriate skills and ensure that the roles and responsibilities are properly delegated to the relevant functions to undertake bai` al-sarf; (e) undertake regular review and monitor compliance with the approved internal policies; and (f) ensure timely disclosure of relevant information with regard to bai’ alsarf to the Board and the Shariah Committee. 22. G 9 of 16 Structuring Purpose 22.1 An IFI may adopt bai` al-sarf in a product or service to achieve a specific financial outcome such as for the purpose of foreign exchange investment, cash withdrawal in foreign currency and repayment of foreign currency financing. 22.2 Examples of the purpose and application of bai` al-sarf are provided in Appendix 4 for reference by IFIs. Contracting parties 22.3 An IFI shall clearly identify the contracting parties as the seller or the buyer in a bai` al-sarf contract, which must include any appointment of agent, and the respective roles and responsibilities of the contracting parties. 22.4 In the case where an agent acts on behalf of an IFI in executing a bai` al-sarf transaction, the IFI must– (a) ensure that the agent complies with the requirements of this policy document; and (b) ensure that the agent has the requisite capacity and capability to perform its duties and obligations in bai` al-sarf. Offer and acceptance S 22.5 An IFI shall ensure that each offer and acceptance of bai` al-sarf 5, is clearly evidenced by appropriate documentation6 or record7. 5 For example, in the case of foreign currency swap products, offer and acceptance of bai` al-sarf Issued on: 11 April 2018
3. Bai ` al-Sarf (Currency Exchange) 10 of 16 Subject matter S 22.6 Where bai` al-sarf involves an exchange of physical currencies, an IFI shall have in place appropriate verification processes to ensure the authenticity and legitimacy of the currency. S S G S Rate of exchange 22.7 In connection with paragraphs 14.6 and 18.3, an IFI shall refer to the reference rate fixed onshore for currencies involving the ringgit to determine the prevailing rate of the currency exchange. Settlement 22.8 In connection with paragraph 14.1, the settlement terms agreed between the IFI and the customer shall include, at minimum, the following: (a) counterparties for the exchange; (b) date of the settlement or delivery of currency; (c) rate of exchange; (d) settlement mechanism; and (e) settlement amount. 22.9 The settlement mechanism for the exchange of currency may include, but not limited to, the following: (a) payment by bankers cheque or currency order; (b) payment by debit card, charge card, credit card or prepaid card; (c) cash payment including online cash transfer to an account; or (d) electronic settlement system. Documentation 22.10 An IFI must ensure that the legal documents on any bai’ al-sarf transaction must specify the agreed terms and conditions for the bai` al-sarf transaction. The IFI must ensure that the legal documentation clearly stipulate, at minimum, the following: (a) purpose of the bai` al-sarf; (b) contracting parties including the appointment of agent, if any; (c) rights and obligations of the contracting parties to the bai` al-sarf; where applicable; (d) description of exchanged currency i.e. the currency and unit of measurement used; (e) rate of exchange agreed for bai` al-sarf; (f) date of offer and acceptance; (g) arrangement with other Shariah contracts or concept 8 , where applicable; and (h) other terms, fees and charges including, brokerage fees, agency fee to be borne by the relevant contracting parties, where applicable. 6 7 8 may occur at each payment dates. Includes other generally acceptable documents in trade and financial transactions as an evidence of the transactions e.g. terms and conditions, confirmation and settlement of trades, enforceable document. Includes records generated from the systems or trading platforms and receipts. Such as wa`d, ijarah al-khadamat etc. Issued on: 11 April 2018
4. Bai ` al-Sarf (Currency Exchange) S 11 of 16 22.11 An IFI shall adequately clarify or translate the use of Arabic terminology, if any, in its documentations to enhance understanding of the contracting parties. Any translation shall be consistent with the rulings of SAC. 23. Risk management G 23.1 The application of bai` al-sarf contract may expose an IFI to various types of risks such as credit, market, liquidity and operational risks. S 23.2 An IFI shall establish a comprehensive and sound risk management framework and internal controls that is supported by adequate policies and procedures, processes and reporting to address risks associated with bai` alsarf, which shall include, at minimum, the following: (a) processes and procedures for the identification, measurement, monitoring and control of risks; (b) appropriate risk mitigation measures; (c) setting out, where applicable, risk exposure limits such as counterparty settlement risk and foreign currency risk in line with the IFI’s risk appetite; and (d) reporting requirements9 to the Board, Shariah Committee and senior management. S 23.3 An IFI shall maintain all records relating to bai` al-sarf transactions. The IFI shall ensure that these internal records must be updated regularly and are available for inspection by the Bank or external auditors as and when required. S 23.4 An IFI must establish a systematic process to regularly review and update its policies and procedures, processes and internal limits to ensure consistency with its risk appetite, taking into account significant changes in business strategies that would increase its risk exposures. 24. Business and market practices S S General principle 24.1 An IFI shall take into consideration customer’s interests in developing policies and procedures to ensure that a bai` al-sarf transaction is conducted in a fair, transparent, responsible and professional manner. Fair dealings 24.2 An IFI must ensure that its internal policies and procedures on business and market conduct for the bai` al-sarf transaction reflects transparency and fair dealings to all contracting parties. At minimum, the IFI shall include the following in its internal policies and procedures: (a) information provided must be accurate and clear; (b) fees and charges related to the services offered under paragraph 17.1 must be disclosed, if any; and (c) reasonable care must be undertaken prior to providing advice and recommendations, if any. 9 Which may include the frequency and scope of reporting Issued on: 11 April 2018
5. Bai ` al-Sarf (Currency Exchange) S 12 of 16 Disclosure of information 24.3 An IFI shall provide clear and adequate information to the customer prior to entering into the bai` al-sarf transaction. For this purpose, the IFI shall disclose the following information to facilitate the customer’s understanding of bai` al-sarf: (a) purpose of bai` al-sarf; (b) terms of settlement/delivery; (c) salient terms and conditions of bai` al-sarf, such as: (i) rights and obligations of the contracting parties; (ii) fees and charges, if applicable; and (iii) where relevant, arrangement with other Shariah contracts; and (d) termination and completion events of the bai` al-sarf contract. 25. Submission requirement S 25.1 An IFI that offers product or services that applies bai` al-sarf is required to submit an implementation plan to comply with this policy document to Jabatan Perbankan Islam dan Takaful of Bank Negara Malaysia no later than 11 July 2018. S 25.2 The Board and the Shariah Committee must respectively approve and endorse the IFI’s implementation plan to ensure full compliance with this policy document by 1 April 2019. S 25.3 In relation to paragraph 25.2, the IFI shall, at minimum,– (a) review and confirm existing policies, procedures and internal limits are in place; (b) where applicable, undertake enhancements to the existing system to address risks associated with the bai` al-sarf contract; and (c) establish appropriate monitoring and reporting mechanisms to ensure compliance with the requirements. S 25.4 The IFI must immediately notify Jabatan Perbankan Islam dan Takaful of Bank Negara Malaysia of any matter that will affect or impede full compliance of the requirements of this document by the effective date. Issued on: 11 April 2018