AAOIFI issues the final standard on “Code of ethics for Islamic finance professionals” for industry adoption

The Governance and Ethics Board (AGEB / the board) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) approved the issuance of the final standard on the “Code of ethics for Islamic finance professionals”.

This marks the completion of the first of the four key documents AAOIFI has planned to develop as part of its comprehensive Ethics project which commenced in January 2017. The other three related documents include a governance standard on the implementation of the code to facilitate the Islamic Financial Institutions (IFIs) in developing a robust ethics infrastructure for institutionalisation of ethics; a handbook comprising of real-world and/or hypothetical case studies to help the Islamic finance professionals strengthen their understanding of ethics and develop their ability to successfully navigate themselves out of ethical difficulties or dilemmas; and an ethics code but specifically targeting the financial institutions offering Islamic finance products and services.

The newly issued code of ethics supersedes the two standards on ethics previously issued by AAOIFI in 1999 and 2001, respectively. The purpose of developing a new code is to provide the Islamic finance professionals with a better and more comprehensive understanding of the concept of ethics; structure it in a simple and easy-to-understand format; and most importantly, accomodate the industry needs, expectations, and requirements. For the same, face-to-face interviews were conducted in multiple jurisdictions with diverse stakeholders involving members of various boards (directors and scholars), senior management, and staff members of IFIs, as well as the industry regulators. Online questionnaire and public hearings were also conducted at various stages in the standard’s development process to ensure maximum outreach and participation.

AGEB discussed and deliberated upon the comments received during the public hearings, revised the exposure draft accordingly, and approved the issuance of the same as a final standard during its 13th meeting held on 01 October 2019.

Consequently, Mr. Omar Mustafa Ansari, Secretary General, AAOIFI, remarked that the “Code of ethics for Islamic finance professionals is one of the key standards of AAOIFI which aims at harmonizing the form with the spirit of Islamic finance and protect the industry from operational risks, in particular, the Shari’ah non-compliance and reputational risks. In that regard, we strongly recommend the IFIs to officially adopt the code as a first step and to also provision periodic ethics training to the employees at all levels. We specifically acknowledge and appreciate the Central Bank of Bahrain for making ethics training mandatory for Islamic finance professionals and look forward to other regulators for taking similar ground-breaking initiatives.”

The code is effective on Islamic finance professionals and others (stated in Para 2 of the code) for the periods beginning on or after 01 January 2021 and can be accessed through the following link: http://bit.ly/2RpfQVt