1- The United Arab Emirates (the “UAE”) has a comprehensive Sharia’ governance framework issued by the Central Bank of the UAE (the “Central Bank”). The framework provides in detail for the Sharia’ governance bodies and requirements related to Islamic financial institutions and Islamic windows. Branches of foreign financial institutions that provide Sharia’ compliant products should either adhere to the relevant Sharia’ standards or provide for equivalent arrangements which are subject to the approval of the Central Bank.

2- The Sharia’ governance framework in the UAE complies with the requirements of the Accounting and Auditing Organisation for Islamic Financial Institutions (“AAOIFI”) which is a Sharia’ standard-setting organization and is also compliant with the joint revised exposure draft “Sharia’ Governance Framework For Institutions Offering Islamic Financial Services” issued by AAOIFI and the Islamic Financial Services Board which represents a joint effort towards harmonisation of Sharia’ standards in this regard.

3- The Central Bank is the concerned regulatory authority in relation to governance of licensed financial institutions (Article 104 the Federal Law No. 14 of 2018 Regarding the Central Bank and organization of Financial Institutions and Activities) and has accordingly issued several regulations related to Sharia’ governance in the UAE.

4- This article highlights the main aspects of Sharia’ governance framework in the UAE as follows:

a) Higher Sharia’ Authority (“HSA”): is an Authority established by and affiliated to the Central Bank.

The HSA has certain authorities pursuant to Article 17 of the Federal Law No. 14 of 2018. Among these, the HSA shall:

  • determine the rules, standards and general principles applicable to Sharia’-compliant businesses and licensed financial activities. 
  • undertake supervision and oversight of the internal Sharia’ supervisory committees of Islamic licensed financial institutions.
  • According to Article (82) of the Federal Law No. 14 of 2018, the Central Bank shall consult with the Higher Sharia’ Authority where it is established that a financial institution which conducts business in whole or in part in accordance with the principles of Sharia’ has violated the opinions of the internal sharia’ supervisory committee of that institution and the opinions of the Higher Sharia’ Authority. After such consultation, the Central Bank shall inform the relevant institution and require rectification of the violation within 30 days otherwise the Central Bank shall take appropriate corrective measures and corrective actions.

b) Standard issued by the Central Bank regarding Sharia’ Governance for Islamic Financial Institutions dated 21/04/2020:

  • The objective of the standard is to “set the minimum requirements for Islamic Financial Institutions to ensure their compliance with Sharia’ in all their objectives, activities, operations and code of conduct”.
  • The minimum governance requirements are listed under Article 5.4 of the standard. According to this Article, an Islamic financial institution:
  • must state the responsibility of the board of directors in relation to compliance with Sharia’, the oversight over the Islamic Financial Institution and the establishment of adequate Sharia’ governance framework.
  • should Identify the responsibility of the senior management in relation to compliance with Sharia’ and for the provision of adequate resources for implementation of Sharia’ governance requirements to ensure that business is conducted in compliance with Sharia’.

c- The Responsibility of the board of directors and the senior management (which require the board of directors and senior management of Islamic financial institutions to monitor and ensure that offered financial product and/or services are fully compliant with Sharia’ principles and governance) is also provided for under:

  • Article of the Consumer Protection Standard issued by the Central Bank.
  • Article of the Consumer protection Regulation. issued by the Central Bank.
  • The Corporate Governance Standards for Banks (Regulation 83/2019) issued by the Central Bank.

d- Further, according to the standard issued by the Central Bank regarding Sharia’ Governance for Islamic Financial Institutions dated 21/04/2020, Islamic financial institutions must:

  • appoint qualified internal Sharia’ supervisory committee in accordance with the standard (this emphasises the requirement under Article under Article 79 of the Federal Law No. 14 of 2018).
  • establish internal sharia’ control division or section.
  • establish internal Sharia’ audit division or section.
  • publish of the resolutions of internal sharia’ supervisory committee on essential matters such as standard products, services, fees, and other basic mechanisms governing operations of the Islamic financial institution.
  • provide training and awareness programs to all levels of the Islamic financial institution in relation to compliance with Sharia’.

5- Islamic Windows:

The Central Bank issued a standard on “Regulatory Requirements for Financial Institutions Housing an Islamic Window” dated 18/10/2020 with the objective of establishing a minimum set of requirements and governance framework to ensure that the activities of Islamic windows are Sharia’ compliant. The standard also applies to “group relationships of the relevant financial institution, including subsidiaries, affiliates or international branches”.

An important requirement of the standard relates to asset and liability management. Article 6 of said standard requires segregation between Sharia’ compliant assets and non-Sharia’ compliant assets. This is the responsibility of the senior management of the financial institution housing an Islamic window. in this respect it is prohibited:

  • to have an internal procedure or policy that encourages conversion of Sharia compliant assets into non -Sharia’ compliant assets.
  • to transfer Sharia’ compliant assets of Islamic window to the conventional business.


  1. The UAE has a comprehensive Sharia’ governance framework which satisfies the requirements of relevant Sharia’ standards-setting bodies.
  2. The effort by global Sharia’ standards-setting bodies towards harmonisation of Sharia governance standards is an important development in this regard.