Bank Islam Integrated Annual Report 2020

SHARIAH GOVERNANCE We had approved in our meetings, initiatives to strengthen the Shariah governance of the Bank, which include the review of the Shariah Compliance Guideline, Shariah Compliance Policy, Operational Risk Management Guideline and Shariah Compliance Review Guideline that aims, among others, to set out the Shariah governance framework within the Bank as well as to ensure our business operations are in line with Shariah rules and principles. SHARIAH RISK MANAGEMENT We observed that the Bank has been continuously implementing measures in managing its Shariah non-compliance risk. The implementation of Risk Control Self-Assessment (“RCSA”) aims to assess the significance of identified Shariah non- compliance risks and effectiveness of the controls in the respective functional areas. Since the introduction of RCSA, a continuous process of identifying and assessing Shariah non-compliance risks at respective functional areas have been carried out by all Risk Controllers (“RCs”). The RCs are also mandated to drive appropriate controls to mitigate any occurrence of Shariah non-compliances in meeting the business objectives of their respective areas. The semi-annually RCSA result, which connotes Shariah non-compliance risk exposures of the Bank is also tabled in the Management Risk Control Committee and our meetings. In addition to the RCSA, the Bank has established the Shariah Complaint Checklist to guide complaint handlers and product owners in identifying Shariah-related complaints lodged by customers. The checklist will be incorporated in the Bank’s existing documents and processes for the use of complaint handlers and product owners. SHARIAH REVIEW & SHARIAH AUDIT The Shariah Review and Shariah Audit functions play a vital role in achieving the objective of ensuring Shariah compliance by evaluating and assessing activities in the Bank. Shariah reviews are performed by Shariah Compliance Department to validate business activities, new product features, and services offered complies with Shariah rules and principles according to regulatory requirements while Shariah Audit provides independent assurance in order to add value and improve the degree of Shariah compliance in relation to such activities. Both Shariah Review and Shariah Audit plans for the financial year were reviewed by us for their implementation. Their reports were deliberated in our meetings to confirm that the Bank has complied with the rulings issued by the Shariah Advisory Council (“SAC”) of Bank Negara Malaysia, the SAC of Securities Commission (for capital market related matters) as well as our decisions. During the year, the review and audit reports were presented to us covering the following entities/ areas: Shariah Audit Shariah Review 1) Product Management Division 1) Assessment on the Bank’s compliance with BNM Shariah Contract Policy Documents – Bai’ al-Sarf, Wa’d and Rahn. 2) Corporate Banking Division 2) BNM Policy Document on Imposition of Fees and Charges on Financial Products and Services (joint review with Compliance & Monitoring Testing) 3) Commercial Banking Division 3) Bank Islam’s Readiness to Comply with SAC of BNM Ruling on Non-Compunding of Profit 4) Assessment On The Bank’s Compliance With The BNM Policy Documents - Rahn and Shariah Governance 4) Decisions of SSC FY2019 5) Credit Administration Department 5) Corporate Banking BANK ISLAM MALAYS IA BERHAD INTEGRATED ANNUAL REPORT 2020 181