The document discusses the role of the Shariah Advisory Council (SAC) under the Islamic Financial Services Act 2013 (IFSA) in Malaysia. Key points: 1) The IFSA strengthened Shariah governance for Islamic financial institutions, requiring them to ensure full Shariah compliance. 2) The SAC advises Bank Negara Malaysia (BNM) on Shariah matters and issues rulings that are binding on Islamic banks and courts. 3) Islamic banks must refer matters to the SAC and comply with Shariah standards it specifies based on SAC advice. The SAC's rulings take precedence over rulings from an internal Shariah body of an Islamic bank.

1. ROLE OF
SYARIAH
ADVISORY
COUNCIL (SAC)

2. The Bank and Islamic financial
institutions to consult Shariah Advisory
Council
Section 55
 (1) The Bank shall consult the Shariah Advisory
Council on any matter—
(a) relating to Islamic financial business;
and
(b) for the purpose of carrying out its
functions or conducting its business or
affairs under this Act or any other written
law in accordance with the Shariah,
which requires the ascertainment of
Islamic law by the Shariah Advisory
Council.

3.  (2) Any Islamic financial institution in respect of
its Islamic financial business, may—
(a) refer for a ruling; or
(b) seek the advice,
of the Shariah Advisory Council on the
operations of its business in order to ascertain
that it does not involve any element which is
inconsistent with the Shariah.

4. EXPLANATION TO SECTION
55
• Role of SAC in consulting Bank and any
Islamic financial institution in any matter
related to Islamic financial business and
for the purpose of carrying out its function
under this Act or any other written law that
is in accordance with Syariah law that
require ascertainment of Islamic law by
SAC.

5. Reference to Shariah Advisory Council
for ruling from court or arbitrator
Section 56
 (1) Where in any proceedings relating to Islamic
financial business before any court or arbitrator any
question arises concerning a Shariah matter, the court
or the arbitrator, as the case may be, shall—
(a) take into consideration any published
rulings of the Shariah Advisory Council; or
(b) refer such question to the Shariah Advisory
Council for its ruling.
 (2) Any request for advice or a ruling of the Shariah
Advisory Council under this Act or any other law shall
be submitted to the secretariat.

6. EXPLANATION TO SECTION
56
When there is a case relating to Islamic
financial business and any question
arises pertaining to Syariah matter, the
court or arbitrator shall take into
consideration any published ruling of
SAC, or refer such question to SAC for
a ruling. Any request for advice or ruling
shall be submitted to secretariat.

7. Effect of Shariah rulings
Section 57
 Any ruling made by the Shariah Advisory
Council pursuant to a reference made under
this Part shall be binding on the Islamic
financial institutions under section 55 and
the court or arbitrator making a reference
under section 56.

8. EXPLANATION TO SECTION
57
Stating about the effect of Syariah
rulings that any ruling by SAC under
this Part shall be binding on the
Islamic Financial Institution.

9. Shariah Advisory Council ruling
prevails
Section 58
 Where the ruling given by a Shariah body
or committee constituted in Malaysia by an
Islamic financial institution is different from
the ruling given by the Shariah Advisory
Council, the ruling of the Shariah Advisory
Council shall prevail.

10. EXPLANATION TO SECTION 58
When there is inconsistency of
ruling between any of Syariah
Body or committee of Islamic
financial institution with SAC, SAC
shall prevail.

11.  BACKGROUND
 On 30 June 2013, the Financial Services Act 2013 (“FSA”)
and the Islamic Financial Services Act 2013 (“IFSA”)
(collectively referred to as “Acts”) have come into effect by
substituting and repealing the Banking and Financial
Institutions Act 1989, the Insurance Act 1996, the Payment
Systems Act 2003, the Exchange Control Act 1953, the
Islamic Banking Act 1983 and the Takaful Act 1984.
Highlights of the Financial Services Act
2013 and the Islamic Financial Services Act
2013

12.  A key difference between the FSA and the IFSA is the
introduction of a new Part IV of the IFSA to strengthen
Shariah governance whereby Islamic financial institutions
shall ensure end to end sharia compliance with regards their
policies, procedures and operations.
 Powers of Bank Negara Malaysia
 Under the Acts, BNM is empowered to assume control over
the whole or part of business, affairs or property of the
financial institution, to manage it or appoint any person to
manage it on behalf of BNM and to designate a bridge
institution when certain circumstances arise.

13. ROLE OF SYARIAH ADVISORY COUNCIL (SAC)
UNDER IFSA 2013
 SAC/SAB is a body set up by the Islamic bank’s authorities to
ensure the operations and activities of the bank are Shariah
compliant.
 The Islamic Financial Services Act 2013 (IFSA) which came
into effect from 30 June 2013.
 It is a step for Islamic financial institutions to ensure Shariah
compliance in the Islamic Finance practice.
 A close monitoring and supervision by the regulators,
namely Bank Negara Malaysia and Securities Commission
Malaysia.

14.  Section 30 of IFSA 2013
It requires an institution to apply directly to the Central
Bank for the establishment of Shariah Committee. This
will enable the Central Bank to have direct information
as to the members of the Shariah Committee in an
Islamic financial institution, which at the same time, to
ensure a proper supervision towards the activities
conducted.

15.  Section 29 of IFSA 2013
(1) The Bank may, in accordance with the advice or ruling of
the Shariah Advisory Council, specify standards—
(a) on Shariah matters in respect of the carrying on of business,
affair or activity by an institution which requires the
ascertainment of Islamic law by the Shariah Advisory
Council; and
(b) to give effect to the advice or rulings of the Shariah
Advisory Council.
 This Section 29 stipulates that Islamic financial institutions
under the Act required to comply with Shariah standards
issued by the regulator in accordance with the advice of the
Shariah Advisory Council, Bank Negara Malaysia.