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The two regimes make opposite constitutional choices about who guards Shariah compliance.
The two regimes make opposite constitutional choices about who guards Shariah compliance. Onshore, under the Central Bank framework, the model is centralised: a statutory apex authority, the Higher Shariah Authority, sets binding Shariah standards, approves each institution’s Shariah committee, adopts the AAOIFI standards as the binding minimum, and prescribes the permissible takaful structures. In the Abu Dhabi Global Market, the model is decentralised: there is no apex Shariah authority at all. Each firm appoints its own Shari'a Supervisory Board, whose members the firm’s own governing body approves rather than the regulator (Islamic Finance Rulebook, IFR 3.5.1 and 3.5.2). The Financial Services Regulatory Authority adopts particular AAOIFI governance standards by direct rule-reference but does not itself issue Shariah rulings, and it expressly disclaims determining whether a Sukuk is Shariah-compliant (IFR 7.2.1(e)).
Two structural facts frame the comparison. First, the free zones sit outside the Central Bank law: it does not apply within ADGM or to firms its authority regulates (Federal Decree-Law No. 6 of 2025, Article 2), so an ADGM Islamic firm is governed by the ADGM regime, not the onshore one. Second, the direction of travel is opposite at almost every layer, the apex body, the committee, the standard, and the treatment of takaful, and each is developed below. This piece compares the onshore Central Bank regime with the ADGM regime only; the Dubai International Financial Centre regime under the Dubai Financial Services Authority is the third leg of the comparison and was not loaded for this article, so it is reserved rather than addressed.
On sourcing: the ADGM side is drawn from the Islamic Finance Rulebook read in full; the onshore side is drawn from the companion articles in this series, which set out the Central Bank instruments from their primary text, the 2025 decree-law having been confirmed in force.
Onshore, the apex authority is the point of the system. The Higher Shariah Authority sets the Shariah rules and standards for the sector, and its resolutions and fatwas bind the institutions and their internal committees (as set out in the companion article on the Authority). Shariah compliance is, in the end, a matter the state administers through a central body attached to the regulator.
In ADGM there is no such body, and the regulator is deliberately kept out of the Shariah judgment. The FSRA requires each Authorised Person conducting Islamic Financial Business to appoint a Shari'a Supervisory Board (IFR 3.5.1), and it is that board, not the regulator, that rules on Shariah. The FSRA’s own role is residual and negative rather than authoritative: it takes a substance-over-form approach and reserves a power to designate an activity as not Shariah-compliant where it believes the activity involves matters contrary to the aims of Shariah (IFR 2.4.1, Guidance (iv) and (vi)), but it does not affirmatively certify compliance. The clearest expression of the choice is the mandatory Sukuk disclaimer: a Sukuk prospectus must state that the regulator has not determined whether the Securities are Shariah-compliant (IFR 7.2.1(e)). Onshore, the Authority determines exactly that; in ADGM, the regulator declines to.
The committee exists in both systems, but who controls it differs. Onshore, the Internal Shariah Supervision Committee is appointed with the Higher Shariah Authority’s approval, and the Authority has the last word on any Shariah disagreement (companion articles; the committee has a minimum of five members, reducible to three in defined cases, and a takaful committee a minimum of three).
In ADGM the Shari'a Supervisory Board is a creature of the firm. It must have at least three members who are competent for the role and who are not directors or Controllers of the firm, but their appointment, dismissal or change is approved by the firm’s own governing body, not by the regulator (IFR 3.5.2). The FSRA does not pre-approve members; it may, if it requests, require information on their qualifications, skills, experience and independence (IFR 3.5.6), and the firm must keep competency and engagement records for six years (IFR 3.5.4). The contrast is precise: onshore, the committee is licensed from above by the Authority; in ADGM, it is constituted from within by the board, with the regulator holding an information right rather than an approval power.
Both regimes anchor to AAOIFI, and this is where the two-layer distinction has to be kept sharp. The regulatory instrument binds of its own force in each case, the Central Bank framework onshore, the FSMR and the Islamic Finance Rulebook in ADGM. The AAOIFI standard binds only through the instrument’s act of adoption, and the two regimes adopt different AAOIFI outputs by different mechanisms.
Onshore, the Higher Shariah Authority adopted the AAOIFI Shariah Standards as the minimum Shariah requirement, without exception, by its own resolution (companion article on the standards layer). The adoption is wholesale and apex-driven: the substantive Shariah standards themselves are made the floor. In ADGM, the adoption is by direct rule-reference and is targeted at the governance standards rather than the substantive ones: Shariah reviews must follow AAOIFI GSIFI No. 2, the annual Shari'a Supervisory Board report must comply with AAOIFI GSIFI No. 1, and the internal Shariah review must follow AAOIFI GSIFI No. 3 (IFR 3.6.1, 3.6.2 and 3.7.2). AAOIFI’s substantive Shariah Standards enter the ADGM rules more narrowly, for example in the disclosure required for Sukuk issuance (IFR 7.2.1(d)(ii)). So AAOIFI is binding in both regimes, but onshore it is the substantive Shariah floor adopted by an apex resolution, while in ADGM it is chiefly the governance-process standard adopted by specific rule cross-reference, with the substantive Shariah judgment left to each firm’s board. Stating that the two regimes “both follow AAOIFI” without this distinction would flatten a real difference in what is adopted and how far it binds.
The treatment of takaful is the sharpest divergence. Onshore, the structure is prescribed: takaful business must follow the business models the Higher Shariah Authority determines, written into the company’s constitution, and the operative regulation fixes the participants’ fund, the Wakala or Wakala-and-Mudaraba basis, the surplus-sharing rules and the mandatory Qard Hasan (companion articles on the takaful fund and its governance). The onshore regulator tells a takaful operator what shape its business must take.
In ADGM the regulator does the opposite. It states that it has not thought it appropriate to limit the permissible structures and contracts of takaful operators, and is willing to consider modifications to apply the most appropriate prudential regime to a given operator (IFR 8, Guidance (ii)). Its rules regulate disclosure rather than structure: where takaful is sold to a retail client, the disclosure must cover the nature of the contracts between the takaful fund and the operator, the method of calculating the operator’s fees or profit share, the basis on which surpluses are shared, and the circumstances in which additional contributions may be required (IFR 8.2.1). The two-tier fund is described, a Participants’ Investment Fund and a Participants’ Risk Fund fed by Tabarru contributions (IFR 2.4.1, Guidance (xv)), but as a description of how takaful works rather than a mandated template, and the prudential requirements sit in the insurance rulebook because of their integration with conventional insurance, not in the Islamic rules. Onshore prescribes the takaful model; ADGM leaves it to the operator and its board and regulates what must be disclosed.
The ADGM rulebook also carries a detailed Islamic-banking regime that the onshore Shariah-governance articles in this series have not yet reached, and it is worth surfacing because it is where the free-zone rules are the more developed on the page loaded. A Profit Sharing Investment Account is the Islamic deposit-alternative: funds a firm invests, typically on a Mudaraba basis, where the client bears the investment risk and is not given any capital guarantee (IFR 5.1.1, Guidance; IFR 5.2.1). Because the client bears the risk, the account is not a deposit, and the FSRA warns that attaching deposit-like features such as a capital guarantee or a cheque book will cause it to be treated as one (IFR 5.1.1, Guidance (i)).
The distinctive prudential concept is Displaced Commercial Risk. Where a firm manages unrestricted accounts, it may face commercial pressure to pay investors a competitive return higher than the accounts actually earned, absorbing the shortfall from its own funds; the rulebook requires a capital charge against that risk, set at thirty-five per cent of the sum of the credit and market risk requirements for the assets funded by unrestricted account holders (IFR 5.4.4 and 5.4.5), alongside profit-equalisation and investment-risk reserves. This is a fully worked Islamic-banking prudential regime. The onshore framework regulates Islamic banking too, but that detail sits in the Central Bank’s prudential standards, which this series has not yet loaded; so this is a comparison where the ADGM side is on the page and the onshore side is flagged for a dedicated reading rather than asserted.
Keeping the two layers distinct, the picture is symmetrical in form and opposite in content. In each regime the regulatory instrument binds: the Central Bank framework onshore, the FSMR and Islamic Finance Rulebook in ADGM. In each regime AAOIFI is adopted, but onshore it is the substantive Shariah floor set by an apex authority, while in ADGM it is mainly the governance-process standard set by rule-reference, with the substantive Shariah call devolved to each firm’s board. The regulatory instrument is binding in both; the Shariah standard binds in both but is a different standard, adopted to a different depth.
For a group that operates both onshore and in ADGM, the consequence is that Shariah governance cannot be run as a single system with one template. There are two committee regimes, one licensed by the Authority and one constituted by the board; two standard-adoption mechanisms; two takaful approaches, one prescribed and one open; and, critically, a product blessed by an ADGM firm’s Shari'a Supervisory Board carries no onshore imprimatur, because the ADGM regulator does not determine Shariah compliance and the onshore Authority binds only within its own perimeter. That a structure is Shariah-compliant in ADGM is not, without more, a statement about its status onshore, and the reverse holds; the divergence should be named at the design stage rather than discovered later.
What is settled, at the stated tiers, is the shape of each regime. In ADGM, on the rulebook read for this article: no apex Shariah authority; a firm-appointed, board-approved Shari'a Supervisory Board of at least three members (IFR 3.5); AAOIFI governance standards adopted by rule-reference (IFR 3.6 to 3.7); takaful structure left open and regulated by disclosure (IFR 8); and a worked profit-sharing-account and displaced-commercial-risk regime (IFR 5). Onshore, from the companion articles: an apex Higher Shariah Authority whose rulings bind, an Authority-approved committee, AAOIFI Shariah Standards adopted as the binding minimum, and a prescribed takaful structure.
What is open is bounded. The Dubai Financial Services Authority regime, the third leg of the intended comparison, was not loaded and is reserved. The onshore Islamic-banking prudential detail that would match ADGM’s profit-sharing-account regime has not been read in this series.
What is moving sits on both sides. The ADGM rulebook relied on here is a specific version (IFR VER08.020125, dated 2 January 2025 on its face), and its currency should be confirmed against the live FSRA rulebook before reliance, the same instrument-by-instrument discipline the onshore stack demands. Onshore, the Central Bank framework is mid-transition under the 2025 decree-law, with implementing instruments still being reissued. This analysis rests, on the ADGM side, on the Islamic Finance Rulebook as read for this article, and on the onshore side on the Central Bank instruments as set out in the companion articles. Where the position turns on the live FSRA version, on the DFSA regime, or on the onshore prudential detail, those instruments govern and should be read at their primary source.
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