Al Tadqiq Al Sharie

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AL-TADQIQ AL-SHARI’E

1.
First line of defence describes the controls an organisation has in place to deal with the day-to-day business activities and operations. Controls are designed into systems and processes and assuming that the design is sound to appropriately mitigate risk, compliance with process should ensure an adequate control environment. There should be adequate managerial and supervisory controls in place to ensure compliance and to highlight control breakdown, inadequacy of process and unexpected events. In IFI’s environments, the product design is championed by the Product Department with assistance or in consultation from the Shariah Department which also provides Shariah research function in relation to Shariah concept to be applied. Product Department will thoroughly conduct research on development of products and the proposed Shariah concepts to be used as well as identifying potential risk related to the proposed product. Product proposal will be tabled in the Shariah Committee meeting for concurrence / approval. The process in developing the product by the Product Department is considered as a 1st line of defence, while the Shariah Department is as a 2nd line of defence i.e. ensuring the Shariah concept is applied correctly and the product features are in Shariah compliance before tabling to the Shariah Committee for approval. The 1st line of defence is responsible by staff in Business & Support, risk officers in business and head operation risk. The 1st line of defence function is identify, assess, control and manage risks, apply tools and this line also execute risk monitoring activities according to established timeframes.

Second line of defence is re-enforced by the advisory and monitoring functions of risk management, legal and compliance. Risk management defines and prescribes the financial and operational risk assessment processes for the business; maintain the risk registers and undertakes regular reviews of these risks in...
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