Role and Status of the Shariah Advisory Council in Enhancing the Islamic Financial System in Malaysia

The principles of muamalat emphasized on the strength of corporate governance structure, transparency, disclosure of information and strict compliance of Islamic principles. Based on the basic principles of muamalat, banking and takaful products were introduced consistent with the rulings of Syarak. Shariah governance framework is organizational arrangement of an Islamic Financial Institutionand Takaful in ensuring the effectiveness of the monitoring towards Shariah compliance environment.Complete adherence to the Shariah compliance will enhance the confidence of public and investors towards the credibility of Islamic finance operation. Thus, Section 30(1) Islamic Financial Service Act 2013 Section 124 (3) Banking and Financial Institution Act 1984 and Part VII Central Bank Act 2009, provides that it is compulsory for every institution which operates Islamic financial system and takaful companies to establish their own Shariah Committee. This study adopted the research methodology of qualitative approach and content analysis. The aim of this article was to analyze complete court cases in order to identify the role of the Shariah Advisory Council and its status in the Malaysian legal framework. Towards the end, the article suggested few recommendations to upgrade the Islamic financial system as well as the status of Shariah Advisory Council in Malaysia.