---
title: "What is Shariah non-compliance risk? | IslamicOpenFinance™"
description: "The operational risk that an institution fails to comply with Shariah rules and principles in its products and services."
url: https://islamicopenfinance.com/glossary/shariah-non-compliance-risk/
lang: en-GB
source: "IslamicOpenFinance"
---

[Glossary](https://islamicopenfinance.com/glossary/) / [Shariah governance](https://islamicopenfinance.com/glossary/#governance)

Shariah governance

# Shariah non-compliance risk

The operational risk that an institution fails to comply with Shariah rules and principles in its products and services.

Shariah non-compliance risk is an operational risk resulting from an institution's failure to comply with the rules and principles of Shariah in its products and services, as IFSB-31 defines it. It can lead to income having to be given to charity, contracts being treated as invalid and reputational damage. Regulators expect it to be identified, measured and managed like other operational risks, and Bank Negara Malaysia requires a Shariah risk management function.

## Sources

- [IFSB-31 Guiding Principles for Effective Supervision of Shariah Governance, 2025: Definitions, Shariah non-compliance risk](https://www.ifsb.org/wp-content/uploads/2025/07/IFSB-31-Guiding-Principles-for-Effective-Supervision-of-Shariah-Governance.pdf)

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

## Related terms

[**Operational risk** The risk of loss from failed processes, systems, people or external events; for Islamic institutions it includes Shariah non-compliance risk.](https://islamicopenfinance.com/glossary/operational-risk/) [**Purification of income** Giving away, usually to charity, income from a non-compliant source or a Shariah breach, so the institution does not benefit.](https://islamicopenfinance.com/glossary/purification/) [**Shariah review** A regular compliance function that assesses whether an institution's operations follow Shariah requirements.](https://islamicopenfinance.com/glossary/shariah-review/) [**Shariah audit** An independent assessment of internal controls, risk management and overall Shariah compliance, usually by internal audit.](https://islamicopenfinance.com/glossary/shariah-audit/)

**Shariah governance**

1. [Shariah supervisory board](https://islamicopenfinance.com/glossary/shariah-board/)
2. [Fatwa](https://islamicopenfinance.com/glossary/fatwa/)
3. [Shariah governance system](https://islamicopenfinance.com/glossary/shariah-governance-system/)
4. [Shariah review](https://islamicopenfinance.com/glossary/shariah-review/)
5. [Shariah audit](https://islamicopenfinance.com/glossary/shariah-audit/)
6. [Purification of income](https://islamicopenfinance.com/glossary/purification/)
7. [Central Shariah board](https://islamicopenfinance.com/glossary/central-shariah-board/)
8. [Shariah compliance function](https://islamicopenfinance.com/glossary/shariah-compliance-function/)

[All 221 terms](https://islamicopenfinance.com/glossary/)