Regulatory Framework on Sharia-based Fintech: Current Issues Prof. Dato Dr Azmi Omar President & Chief Executive Officer 4 July 2018 INCEIF 2017 A member of AACSB INCEIF 2018 International Centre for Education in Islamic Finance International (INCEIF) Centre (Company for Education No.718736-K) in Islamic Finance (INCEIF) (Company No.718736-K)
About INCEIF INCEIF 2017 A member of AACSB
OUR MANDATES Supply Human Capital Facilitate development of competent talent & enhance the quality of human capital for the global Islamic Finance industry Centre for IF Research To be a centre for research work, consulting & publication and a reference point for solutions delivery for local and global market ALUMNI Today there are 1,561 agents for change in the world from INCEIF. Some of them are already making meaningful contributions to the advancement of Islamic finance at all levels be it product development, policy framework and implementation; regulation and enforcement; and innovation. 1,561 RESEARCH FACULTY 26 subject matter experts in Islamic Finance (including Adjunct Professors) 95% of our faculty sits on various boards, advisory councils 3
Did you know? The World Economic Forum, the authors of the 4thIndustrial Revolution, estimate the global investment in digital infrastructure requirements from Community Service Providers (CSPs) alone at 300 Billion per year, and growing steadily at 10%. 6
Islamic Fintech promotes ethical responsible finance, and presents an opportunity to lead and influence all forms of finance globally. 5
Introduction A number of leading financial institutions and governments have identified Fintech as being one of the key driver for the growth of the financial services industry going forward. However, Fintech also creates various implications for different aspects of customer engagement the industry risk management regulations product development 6
Shariah based Fintech The concerns Size of Shariah based Fintech is small Shariah concerns Regulatory and supervisory concerns Money-Laundering concerns Initial Coin Offerings (ICO) has the potential to bypass rigorous and well-regulated requirements for funds-raising. Operational risk: such as cybersecurity, fraud and theft, data privacy and legal issues Financial stability and consumer protection 6
Shariah based Fintech issues Ensuring Shariah compliance in the following products: Payment Solutions Remittances Wallets Crowdfunding P2P Lending Currency Exchange Insurtech Artificial Intelligence: Robo advisers Blockchain and Distributed Ledger Technology Cryptocurrencies: mal or token? Smart contracts International Centre Title for Education in Islamic Finance (INCEIF) (Company No.718736-K) 8
Example of Shariah Compliance regulation in Malaysia for equity crowdfunding and P2P lending platforms Appointment of a Sharīʻah advisor (and the disclosure of the name) by the platform operator mandatory when an Islamic capital market product is offered. The role and responsibility of the Sharīʻah advisor is rather comprehensive and includes: Providing Sharīʻah expertise and guidance on all matters, particularly in documentation, structuring and investment instruments; Ensuring that the applicable Sharīʻah rulings, principles and concepts endorsed by the Sharīʻah Advisory Council are complied with; Applying ijtihad (intellectual reasoning) to ensure that all aspects relating to the offering of Islamic capital market product [sic] are in compliance with Sharīʻah, in the absence of any rulings, principles and concepts endorsed by the Sharīʻah Advisory Council; and Where applicable, issue a Sharīʻah pronouncement, which must include (i) the basis and rationale for the pronouncement; (ii) the structure and mechanism of the Islamic capital market product; and (iii) the applicable Sharīʻah rulings, principles and concepts used in the Islamic capital market product. International Centre Title for Education in Islamic Finance (INCEIF) (Company No.718736-K) 9
Thank You. Prof. Dato Dr. Azmi Omar President & Chief Executive Officer +603 7651 4000 azmiomar@inceif.org INCEIF 2017 A member of AACSB