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Tawarruq: Operational Requirements

Bakir Hassan
By Bakir Hassan
7 years ago
Tawarruq: Operational Requirements

Ard, Islam, Shariah , Takaful , Tawarruq


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  1. Tawarruq : Operational Requirements (Selected issues) 28 March 2016 Jabatan Perbankan Islam dan Takaful (JPIT) 1
  2. Overview Tawarruq Policy objectives :    Provide reference on the Shariah rulings on tawarruq; Set out key operational requirements governing implementation of tawarruq; & Promote end-to-end compliance with Shariah, sound banking practices and sound business conduct. Policy structure: Shariah Requirements Definition & nature Operational Requirements I. Governance & oversight Establish comprehensive governance & oversight framework Essential features II. Structuring Structuring supported by adequate infrastructure, internal policies & document Optional practices III. Risk management Sound & integrated risk management system to manage risk throughout life-cycle Dissolution of contract IV. Business & market conduct Disclosures to assist informed decision making & fair dealings requirements Tawarruq with other contracts/ arrangements V. Financial disclosure Adequate disclosures to assist stakeholders’ understanding & assessment Jabatan Perbankan Islam dan Takaful (JPIT) 2
  3. Execution of tawarruq with dual agency Proper execution & recording Treatment as qard  Normal close of business/operation including public holidays etc.  Unexpected disruptions to operation e.g. system breakdown, force majeure etc.  Reasonable processing period no later than 3 working days from the date funds received i.e. T+2 Execution  Clear segregation of roles & duties performed under dual-agency e.g. designating separate personnel to perform each role or implementing appropriate system that will independently execute dual agency roles e.g. short messaging systems (sms) or telephone calls Selling price & profit computation Reporting/ Disclosure  Absolute selling price has to specified  Profit computation to begin after tawarruq has been executed  Prior to execution, profit in terms of hibah can be provided  Amount held as amanah or qard has to be disclosed separately prior to execution of tawarruq Jabatan Perbankan Islam dan Takaful (JPIT) 3
  4. Tawarruq with hamish jiddiyah Proper execution & recording Reporting/ Disclosure Selling price & profit computation Market conduct  Amount of hamish jiddiyah has to be disclosed separately prior to execution of tawarruq  Selling price and hamish jiddiyah has to be specified separately  Hamish jiddiyah can only be considered as part payment of selling price or profit after execution of tawarruq  Hamish jiddiyah cannot be promoted as “advanced profit” or payment of profit if tawarruq has not been executed Jabatan Perbankan Islam dan Takaful (JPIT) 4
  5. Selection of approved asset trade / asset exchange Ensure end-to-end Shariah compliance Selection criteria Monitoring  subject to comprehensive risk assessment and arrangement does not impair IFI’s ability to monitor and control its activities and adhere to Shariah and regulatory requirements  financial soundness of asset trader / asset exchange including financial performance, volume of trades and number of customers  operational capability including adequate systems, trading capacity, delivery capacity, asset, quality specification  availability of Shariah compliance oversight function. If such function is not available, SC has to endorse  establish controls to ensure service delivery in a manner expected in accordance with Shariah and regulatory requirements e.g. risk of delivery, performance reliability and processing capacity  maintain continuous and effective engagement with asset trader/asset exchange to ensure on-going ability to meet requirements of Shariah and regulators. Jabatan Perbankan Islam dan Takaful (JPIT) 5
  6. END OF PRESENTATION Jabatan Perbankan Islam dan Takaful (JPIT) 6