Bai` al-Sarf - Overview

Transcription

1. Bai ` al-Sarf (Currency Exchange) PART A 1 of 16 OVERVIEW 1. Introduction 1.1 Compliance with Shariah requirements is a prerequisite for ensuring the legitimacy and integrity of Islamic financial products and services. It is essential for an Islamic financial institution (IFI) to establish a sound operational framework and adequate infrastructure to ensure that its conduct is consistent with Shariah. 1.2 The Shariah contract-based regulatory policy is intended to promote consistency of Shariah contract applications in Islamic financial products and services. This policy is envisaged to strengthen legal certainty and Shariah compliance practices by IFIs. 1.3 This policy document aims to– (a) provide reference on the Shariah rulings applicable to bai` al-sarf; (b) set out key operational requirements for the implementation of bai` alsarf; and (c) promote end-to-end compliance with Shariah requirements, which further promote sound banking practices and safeguard consumer interests. 1.4 This policy document sets out the following: (a) salient features and essential conditions of bai` al-sarf in Part B; and (b) regulatory and supervisory expectations for the operational requirements on governance and oversight, structuring, risk management as well as business and market conduct in Part C. 2. Applicability 2.1 This policy document is applicable to all IFIs as defined in paragraph 5.2 that offer products and services using bai` al-sarf contract which involves exchange of currency notes or coins that are legal tender and excludes gold or silver. 2.2 Where an IFI adopts bai` al-sarf for the purpose of money services business, in respect of these types of transactions – (a) only the Shariah requirements in Part B and paragraph 25 of this policy document are applicable; and (b) the operational requirements as provided in the policy document on Requirements for the Conduct of Money Services Business by Banking Institutions issued by the Bank continues to apply. 3. Legal provisions 3.1 The requirements in Part B of this policy document are specified pursuant to– (a) section 29(1) of the Islamic Financial Services Act 2013 (IFSA); and (b) section 33E(1) of the Development Financial Institutions Act 2002 (DFIA). Issued on: 11 April 2018
2. Bai ` al-Sarf (Currency Exchange) 2 of 16 3.2 The requirements in Part C of this policy document are specified pursuant to– (a) sections 29(2), 57, 135(1) and 155 of the IFSA; and (b) sections 33E(2), 41, 42C(1) and 116 of the DFIA. 3.3 The guidance in this policy document is issued pursuant to section 277 of the IFSA and section 126 of the DFIA. 4. Effective date 4.1 This policy document comes into effect on 1 April 2019 except for paragraph 25 which takes effect immediately upon issuance of this policy document. 4.2 The Bank is committed to ensure that its policies remain relevant and continue to meet the intended objectives and outcome. Accordingly, the Bank will review this policy document within 5 years from the date of issuance or the Bank’s last review, and where necessary, amend or replace this policy document. 5. Interpretation 5.1 The terms and expressions used in this policy document must have the same meanings as assigned under the Financial Services Act 2013 (FSA), IFSA,and DFIA, as the case may be, unless otherwise defined in this policy document. 5.2 For the purpose of this policy document– “S” denotes a standard, an obligation, a requirement, specification, direction, condition and any interpretative, supplemental and transitional provisions that must be complied with. Non-compliance may result in enforcement actions; “G” denotes guidance which may consist of statements or information, intended to promote common understanding and advice or recommendations that are encouraged to be adopted; “Islamic financial institution” or “IFI” refers to a– (a) licensed Islamic bank; (b) licensed takaful operator and professional retakaful operator; (c) licensed bank and licensed investment bank approved under section 15(1)(a) of the FSA to carry on Islamic banking business; and (d) prescribed institution approved under section 33B(1) of the DFIA to carry on Islamic financial business. “currency” refers to currency notes or coins that are legal tender in any country, territory or place; “money services business” refers to money-changing business and/or remittance business as defined under the Money Services Business Act 2011, extended by Islamic financial institutions. Issued on: 11 April 2018
3. Bai ` al-Sarf (Currency Exchange) 3 of 16 5.3 A glossary of terms used in this policy document is set out in Appendix 2. 6. Related legal instruments and policy documents 6.1 This policy document must be read together with other relevant legal instruments and policy documents that have been issued by the Bank including– (a) Notice 1 of the Foreign Exchange Administration rules; (b) Requirements for the Conduct of Money Services Business by Banking Institutions; (c) Shariah Governance; (d) Corporate Governance; and (e) Risk Governance. Issued on: 11 April 2018