The Securities and Exchange Commission of Pakistan (SECP) has taken a significant step towards enhancing transparency and compliance in Islamic finance transactions by publishing a consultation paper.
The paper seeks feedback from stakeholders on the implementation of a new strategy for adopting the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah, accounting, auditing, and governance standards.
The proposed strategy aims to streamline the adoption process by introducing a phased approach to implementing all AAOIFI standards. Recognizing the industry's maturity level and practical challenges in adopting all standards simultaneously, the strategy proposes a staggered implementation to ensure effective compliance.
Currently, only seven Shariah standards have been adopted, with ten more in the process of adoption. However, the existing approach, which selects standards based on necessity, may result in an inadequate framework. The new strategy emphasizes comprehensiveness, integration, interaction, feedback, and preparedness for global and domestic Islamic finance growth.
Under the proposed strategy, all AAOIFI standards will be adopted as non-binding guidelines initially, with institutions encouraged to voluntarily adopt them during Islamic financial transactions. Following a period of general sensitization, compliance will shift to a "comply or explain" approach, with penal action for non-compliance after a stipulated period.
The final phase mandates full compliance with notified standards, with gradual implementation aimed at better equipping the industry for smooth compliance. It is anticipated that this new strategy will elevate the quality of Islamic financial services offered in regulated sectors and enhance stakeholder confidence by promoting transparency and compliance.
Stakeholders are invited to review the consultation paper available online and provide feedback via email at [email protected]. The SECP also plans to conduct roundtable sessions to facilitate meaningful public consultation.