ABSTRACT
This chapter explores the concept and monitoring of Shariah compliance and Shariah non-compliance risk management in Islamic banking institutions and provides future research directions. It highlights the contrasts between the concept of risk-sharing and the shifting paradigm of risk-sharing in modern Islamic instruments. The chapter discusses the three lines of defence in Islamic banking perspective, to the ideal religious compliance monitoring in Islamic banks. It also explores the role of Shariah scholars and their function, and the interpretation and implementation of religious compliance risk management in every aspect of banking operations. The chapter explains that Islamic banks have been replicating their non-Islamic counterparts' products and services. In addition, the issues of governance and religious compliance in Islamic banks in relation to Shariah scholars' roles and function has played an important role in the complexity of the interpretation and implementation of religious compliance principles in all aspects of banking operation.
