AAOIFI CPSS cheat sheet

Prohibition set: riba (interest), gharar (excessive uncertainty), maysir (gambling), and haram subject matter invalidate a contract.

Murabaha: cost plus disclosed markup; the bank must own the asset and bear ownership risk before selling to the customer.

Mudaraba: capital provider (rabb al-mal) bears monetary loss; the mudarib loses effort unless it breached duty, negligence, or misconduct.

Musharaka: profits split by agreed ratio; losses shared strictly in proportion to capital contributed.

Ijarah: usufruct transferred for rent; the lessor retains ownership and bears major maintenance and ownership-related risks.

Sukuk holders must bear genuine asset risk; a guarantee of principal by the originator is generally impermissible.

Riba al-fadl: excess or delay in exchanging same-genus ribawi items (gold, silver, currency, staple food) is prohibited.

Takaful is structured on tabarru' (donation) into a fund plus a wakala or mudaraba fee, not on a commutative sale of risk.

Zakah on business assets is 2.5% on zakatable wealth held for one lunar year (hawl) above the nisab.

Murabaha receivables are measured at amortised cost; deferred profit is recognised over the instalment period using the effective profit method.

Mudaraba: the rabb al-mal recognises its share of profit when the mudarib's right to it is established (typically on liquidation or declared distribution).

Musharaka: each partner recognises its share of profit or loss in the period the result is determined; losses reduce the investment carrying amount.

Ijarah: lessor recognises rental income on a straight-line basis over the lease term; lessee recognises rent expense and a liability for deferred rentals.

Salam: capital advanced is recorded as a salam asset; the purchased commodity is measured at cost when received.

Istisna': revenue is recognised by percentage of completion when reliable measurement exists; otherwise at completion.

Zakah and charity items are disclosed separately and are not presented as expenses in the income statement.

Investment accounts are presented as equity-type funds (mudaraba) or liabilities (mudaraba with guaranteed return waived) per the applicable standard.

Sukuk are classified by the underlying contract; asset-backed sukuk are on-balance-sheet financing while asset-based sukuk may be off-balance-sheet.

Every IFI must appoint a Shari'ah Supervisory Board (SSB) with at least three members competent in fiqh al-muamalat.

The SSB issues fatwas and rulings binding on the IFI; management must implement them or disclose non-compliance.

The internal Shari'ah review function performs ex-post compliance testing and reports to the SSB and audit committee.

Shari'ah audit is a distinct assurance function separate from internal Shari'ah review and from financial audit.

The SSB report is included in the annual financial statements, stating whether operations complied with Shari'ah rules.

IFI governance requires an audit committee, a risk management function, and a compliance function independent of business lines.

Conflicts of interest rules require disclosure of SSB members' remunerations and any related-party dealings.

The IFI must have a Shari'ah compliance framework covering product approval, execution, and periodic review.

Unlawful income (e.g., from prohibited sources) must be purified by donation to charity, not retained as profit.

Core ethical principles: honesty (sidq), trustworthiness (amanah), fairness (adl), and transparency.

Employees must avoid conflicts of interest and disclose any personal interest in a transaction.

Confidentiality: client information may not be disclosed except as required by law or with consent.

Prohibition on bribery (rishwah), undue gifts, and any inducement that compromises impartiality.

Insider information must not be used for personal or third-party trading advantage.

Marketing must be accurate and must not misrepresent Shari'ah compliance or product risk.

Whistleblowing: employees should report suspected violations through defined internal channels without retaliation.

Professional competence: staff must maintain knowledge of Shari'ah rules and applicable regulations relevant to their role.

Fair treatment of clients includes clear disclosure of fees, profit rates, and risks before contracting.