Development Financial Institutions Act 2002 · Updated to 6 Oct 2023 · Part III · Restrictions on Business
33D. Duty to ensure compliance with Shariah
Feedback & supportA prescribed institution shall at all times ensure that its business, affairs and activities are in compliance with Shariah.
prescribed institution
“prescribed institution” means a development financial institution which is prescribed by the Minister under subsection 2(1);
For the purposes of subsection (1), a compliance with any advice or ruling of the Shariah Advisory Council in respect of any particular business, affair or activity shall be deemed to be a compliance with Shariah in respect of that business, affair or activity.
Shariah Advisory Council
“Shariah Advisory Council” means the Shariah Advisory Council established under the Central Bank of Malaysia Act 2009;
Where a prescribed institution becomes aware that it is carrying on any of its business, affair or activity in a manner which is not in compliance with Shariah or the advice of its Shariah committee or the advice or ruling of the Shariah Advisory Council, the prescribed institution shall—
business
“business” means any activity carried on for the purpose of gain or profit and includes all property derived from, or used in, or for the purpose of, carrying on such activity and all rights and liabilities arising from such activity;
immediately notify the Bank and its Shariah committee of the fact;
immediately cease from carrying on such business, affair or activity and from taking on any other similar business, affair or activity; and
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within thirty days of becoming aware of such non-compliance or such further period as may be specified by the Bank, submit to the Bank a plan on the rectification of the non-compliance.
The Bank may carry out an assessment as it thinks necessary to determine whether the prescribed institution has rectified the non-compliance referred to in subsection (3).
Bank
“Bank” means the Central Bank of Malaysia established under the *Central Bank of Malaysia Act 2009;
Any prescribed institution that contravenes subsection (1)
or (3) commits an offence and shall on conviction be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.
Power of the Bank to specify standards on Shariah matters
specify
“specify” means specify in writing by way of standards or any other forms;
*33E. (1) The Bank may, in accordance with the advice or ruling of the Shariah Advisory Council, specify standards—
standards
“standards” includes any obligation or requirement as specified by the Bank under this Act and such standards may contain any interpretative, incidental, supplemental, consequential and transitional provisions; *NOTE—The Companies Act 1965 has been repealed by the Companies Act 2016 which comes into operation on 31 January 2017–see subsection 620(1)…
on Shariah matters in respect of the carrying on of business, affair or activity by a prescribed institution which requires the ascertainment of Islamic law by the Shariah Advisory
Council; and
to give effect to the advice or rulings of the Shariah
Advisory Council.
In addition, the Bank may also specify standards relating to any of the following matters which do not require the ascertainment of
Islamic law:
Shariah governance including—
*NOTE—General savings–see subsections 111(2) and (3) of the Development Financial Institutions
(Amendment) Act 2015 [Act A1502] which comes into operation on 31 January 2016 and Savings in respect of prescribed institution carrying on Islamic financial business–see subsection 112(2) of the
Development Financial Institutions (Amendment) Act 2015 [Act A1502] which comes into operation on 31 January 2016.
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functions and duties of the board of directors, senior officers and members of the Shariah committee of a prescribed institution in relation to compliance with
Shariah;
fit and proper requirements or disqualifications of a member of a Shariah committee; and
internal Shariah compliance functions; and
any other matter in relation to the business, affair and activity of a prescribed institution for the purposes of compliance with Shariah.
Every prescribed institution, its director, Chief Executive
director
“director” includes any person who occupies the position of a director, and includes a person in accordance with whose directions and instructions the directors or officers are accustomed to act and an Development Financial Institutions 19 alternate or substitute director, and without prejudice to the foregoing, in the case of— (a) a co-operative society, means a member of the board, or other governing body, of the co-operative society; (b) a statutory body, means a member of the board, committee, council or other governing body of the statutory body; (c) a partnership, means a partner; (d) a sole proprietorship, means the sole proprietor; and (e) any other body, association or group of persons, whether corporate or unincorporate, means a person having the direction and control of the management of its business or affairs;
Officer, senior officer or member of a Shariah committee shall at all times comply with the standards specified by the Bank under subsections (1) and (2) which are applicable to such person.
officer
“officer”, in relation to an institution, means any of its employees and includes its Chief Executive Officer;
Every prescribed institution shall at all times—
ensure that its internal policies and procedures on Shariah governance are consistent with the standards specified by the Bank under this section; and
whether or not standards have been specified by the Bank under this section, manage its business, affairs and activities in a manner which is not contrary to Shariah.
Every director, officer or a member of a Shariah committee of a prescribed institution shall at all times comply with the internal policies and procedures adopted by such institution to implement the standards specified by the Bank under subsection (1) or (2).
member
“member”, in relation to an institution which is— (a) a corporation, means a shareholder; and (b) a partnership, means a partner;
Any person who fails to comply with any standards specified under subsection (1), commits an offence and shall on conviction be liable to imprisonment for a term not exceeding eight years or to a fine not exceeding twenty-five million ringgit or to both.
person
“person” includes an individual, any corporation, statutory body, local authority, society, trade union, co-operative society, partnership and any other body, organization, association or group of persons, whether corporate or unincorporate;
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development
“development” includes the commencement of any new industrial, agricultural, commercial or other economic venture or the expansion or improvement of any such existing venture;