ISLAMIC FINANCIAL SERVICES ACT 2013

LAWS OF MALAYSIA ONLINE VERSION OF UPDATED TEXT OF REPRINT Act 759 ISLAMIC FINANCIAL SERVICES ACT 2013 As at 2 January 2025 This text is ONLY AN UPDATED TEXT of the Islamic Financial Services Act 2013 by the Attorney General’s Chambers. Unless and until reprinted pursuant to the powers of the Commissioner of Law Revision under subsection 14(1) of the Revision of Laws Act 1968 [Act 1], this text is NOT AN AUTHENTIC TEXT. 2 ISLAMIC FINANCIAL SERVICES ACT 2013 Date of Royal Assent … … … ... 18 March 2013 Date of publication in the Gazette … … … … 22 March 2013 Latest amendment made by P.U. (A) 462/2024 which came into operation on … … … … 2 January 2025 3 LAWS OF MALAYSIA Act 759 ISLAMIC FINANCIAL SERVICES ACT 2013 ARRANGEMENT OF SECTIONS P ART I PRELIMINARY Section 1. Short title and commencement 2. Interpretation 3. Prescription by Minister of additional business or activity 4. Prescription by Bank of additional agreement, dealing, transaction or person 5. Classification of, and construction of references to, takaful business PART II REGULATORY OBJECTI VES AND POWERS AND FUNCTI ONS OF BANK 6. Regulatory objectives 7. Powers and functions of Bank PART III AUTHORI ZATI ON Division 1 Authorized business 8. Authorized business to be carried on by authorized person 9. Application for authorization 10. Grant of licence by Minister 11. Approval by Bank 4 Laws of Malaysia ACT 759 Section 12. Requirements on minimum capital funds or surplus of assets over liabilities 13. Additional conditions of licence or approval 14. Persons approved under Financial Services Act 2013 to carry on Islamic financial business Division 2 Restriction on dealings of authorized persons 15. Authorized person to carry on authorized business only 16. Licensed takaful operator to carry on family takaful or general takaful business Division 3 Representative office 17. Requirements for representative office Division 4 Revocation, surrender or cessation of business or operations 18. Grounds for revocation of authorization 19. Surrender of licence or notification on cessation of business or operations 20. Effect of revocation, surrender, notification on cessation of business or operations, and expiry Division 5 General matters 21. Form of establishment 22. Establishment or relocation of office of authorized persons 23. Fees 24. Publication of names of authorized persons 25. Holding out as authorized person 26. Acting on behalf of unlicensed person Islamic Financial Service 5 PART IV SHARIAH REQUI REMENTS Division 1 Shariah compliance Section 27. Interpretation 28. Duty of institution to ensure compliance with Shariah 29. Power of Bank to specify standards on Shariah matters Division 2 Shariah governance 30. Establishment of Shariah committee 31. Appointment of Shariah committee member 32. Duties of Shariah committee and its members 33. Cessation as member of Shariah committee 34. Notice of cessation as member of Shariah committee 35. Information to be provided to Shariah committee 36. Qualified privilege and duty of confidentiality Division 3 Audit on Shariah compliance 37. Appointment of person by institution to conduct audit on Shariah compliance 38. A p p o i n t m e n t o f p e r s o n b y B a n k t o c o n d u c t a u d i t o n Sh a r i a h compliance PART V PAYMENT SYSTEMS Division 1 Designation of payment systems and Islamic payment instruments 39. Designation and revocation of designation of payment systems 6 Laws of Malaysia ACT 759 Section 40. Operator of designated payment system 41. Designation of Islamic payment instruments Division 2 Requirements for operation of payment systems and issuance of designated Islamic payment instruments 42. Application of this Act on payment systems 43. Power of Bank to specify standards for payment systems 44. Direction to participants of designated payment system 45. Operational arrangements 46. Power of Bank to inspect Division 3 Finality of payment and netting arrangement 47. Interpretation 48. Power of Bank to issue certificate of finality 49. Revocation of certificate of finality 50. Application of this Division 51. Transfer order made after appointment of insolvency administrator 52. Finality of payment and netting arrangement 53. Preservation of rights 54. Non-recognition of insolvency order by foreign court 55. Requirement to notify in event of insolvency, etc. PART VI PRUDENTIAL REQUI REMENTS 56. Interpretation Division 1 Standards on prudential matters 57. Power of Bank to specify standards on prudential matters 58. Institution, director and officer to comply with standards Islamic Financial Service Section 59. Single counterparty exposure limit for licensed person 60. Restrictions on payment of dividend by licensed person 61. Maintenance of assets in Malaysia by licensed person Division 2 Corporate governance 62. Interpretation 63. Chairman, directors and chief executive officer of institution 64. Requirements to be chairman, director, chief executive officer or senior officer 65. Functions and duties of board of directors 66. Duties of directors 67. Duty to disclose interests in material transaction or material arrangement 68. Disqualifications 69. Fit and proper requirements 70. Cessation from office 71. Notice of cessation from office Division 3 Transparency requirements 72. Interpretation 73. Maintenance of accounting records and information 74. Compliance with approved accounting standards 75. Publication of financial statements Division 4 Auditors 76. Appointment of auditor by institution 77. Appointment of auditor by Bank 78. Duties of auditor 79. Notice of cessation as auditor 7 8 Laws of Malaysia ACT 759 Section 80. Information to be provided to auditor 81. Reporting obligations of auditor 82. Qualified privilege and duty of confidentiality Division 5 Appointed actuaries 83. Appointment of actuary by licensed takaful operator 84. Appointment of actuary by Bank 85. Duties of appointed actuary 86. Cessation as appointed actuary 87. Notice of cessation as appointed actuary 88. Information to be provided to appointed actuary 89. Qualified privilege and duty of confidentiality Division 6 Takaful funds and shareholders’ fund 90. Establishment and maintenance of takaful funds 91. Takaful funds to be separate from shareholders’ fund 92. Requirements relating to takaful funds 93. Requirements relating to shareholders’ fund in respect of takaful funds 94. Withdrawal from takaful funds 95. Deficiency of takaful funds 96. Assumption of risk Division 7 Subsidiaries 97. Establishment or acquisition of subsidiaries and acquisition or holding of material interest in corporation Islamic Financial Service 9 PART VII OWNERSHIP, CONTROL AND TRANSFER OF BUSINESS Section 98. Application and non-application Division 1 Interest in shares of licensed person 99. Acquisition of interest in shares requiring approval 100. Control over licensed person prohibited in some cases 101. Disposal of interest in shares requiring approval 102. Application procedures for section 99, 100 or 101 103. Power of Bank to specify standards on shareholder suitability 104. Maximum permissible holdings 105. Notification on acquisition or disposal of interest in shares of licensed person Division 2 Action by Bank in event of breach 106. Order against defaulting persons 107. Additional provisions relating to order under subparagraph 106(2)(a)(v) Division 3 Interest in shares of approved person 108. Interpretation 109. Acquisition of interest in shares of approved person Division 4 Transfer of business, reconstruction or amalgamation of licensed person 110. Interpretation 111. Approval required for reconstruction or amalgamation of licensed person 112. Approval required for business transfer scheme 10 Laws of Malaysia ACT 759 Section 113. Notification of business transfer scheme 114. Application to High Court for confirmation of business transfer scheme 115. Bank to be party to proceedings 116. Orders sought by transferor and transferee 117. Publication of court order under section 114 118. Reimbursement of Bank’s expenses 119. Prohibition of payment out of takaful fund PART VIII FINANCIAL GROUPS 120. Purpose of this Part 121. Disapplication of sections 122 and 123 to licensed persons, and licensed persons and financial holding companies under Financial Services Act 2013 122. Application to be financial holding company 123. Power of Bank to require submission of application 124. Approval of application as financial holding company under section 122 or 123 125. Bank may approve more than one financial holding company 126. Business of financial holding company 127. Prudential requirements on financial holding company and subsidiaries 128. Power to issue directions to financial holding company and subsidiaries 129. General provisions dealing with directions 130. Consequences for failing to comply with directions 131. Additional provisions relating to paragraph 128(3)(e) 132. Power to remove director or chief executive officer of financial holding company Islamic Financial Service 11 PART IX BUSINESS CONDUCT AND CONSUMER PROTECTION Division 1 Interpretation Section 133. Interpretation Division 2 Business conduct, complaints, disputes, etc. 134. Application 135. Standards on business conduct 136. Prohibited business conduct 137. Approved takaful broker, approved Islamic financial adviser and approved issuer of designated Islamic payment instrument to establish customer account 138. Financial ombudsman scheme Division 3 Takaful issues 139. Obtaining takaful outside Malaysia 140. Provisions relating to takaful certificates 141. Pre-contractual disclosure and representations, and remedies for misrepresentations 142. Payment of takaful benefits under family takaful certificate and personal accident takaful certificate Division 4 Information and secrecy 143. Interpretation 144. Restriction on inquiring specifically into affairs of particular customer 145. Secrecy 146. Permitted disclosures 12 Laws of Malaysia ACT 759 Division 5 Restrictions relating to consumer protection Section 147. Application of this Division 148. Islamic deposit 149. Restriction on accepting Islamic deposits 150. Advertisements for Islamic deposits 151. Restriction on use of certain words PART X ISLAMIC MONEY MARKET AND ISLAMIC FOREIGN EXCHANGE MARKET 152. Power of Bank to specify standards or issue codes 153. Prohibited conduct in Islamic money market and Islamic foreign exchange market 154. Arrangement with relevant supervisory authority PART XI SUBMISSION OF DOCUMENT OR INFORMATION 155. Submission of document or information to Bank 156. Submission of statistical information, etc. 157. Secrecy requirements under sections 155 and 156 not to apply PART XII EXAMINATION 158. Examination of authorized person, etc. 159. Duty to provide access to, and produce documents, information, etc. 160. Examination of other persons 161. Appearance before Bank 162. Examination or assessment by auditor or actuary, etc. 163. Confidential information 164. Examination by relevant overseas supervisory authority 165. Disclosure of information by Bank to relevant overseas supervisory authority Islamic Financial Service PART XIII DIRECTIONS OF COMPLIANCE Section 166. Interpretation 167. Circumstances for exercising power to issue directions 168. Power to issue directions to institution 169. General provisions dealing with directions 170. Consequences of failing to comply with directions 171. Additional provisions relating to paragraph 168(2)(b) PART XIV INTERVENTION AND REMEDIAL ACTION 172. Application of this Part to member institution Division 1 Removal of director, chief executive officer or senior officer 173. Interpretation 174. Power to remove director, chief executive officer or senior officer 175. Provisions relating to removal Division 2 Power to take intervention and remedial action Subdivision 1–Circumstances for exercising intervention and remedia