Vol. 30. No. 1.

April Issue (2023)

THE LEGAL SYSTEM FOR THE SUPERVISION OF LIBYAN ISLAMIC

COMMERCIAL BANKS

Adem Mohamed Cafcouf i, Mohd Zaidi Daudii & Mohd Hafiz Jamaludiniii
i (Corresponding author). Postgraduate Student, Department of Syariah and Law, Academy of Islamic
Studies, University of Malaya. adam.kafkouf@gmail.com
ii Senior Lecturer, Department of Syariah and Law, Academy of Islamic Studies, University of Malaya.
zaididaud@um.edu.my
iii Senior Lecturer, Department of Syariah and Law, Academy of Islamic Studies, University of Malaya
Universiti Malaya. hafiz_usul@um.edu.my

Abstract The study aims to identify the legal system for the supervision of Islamic
commercial banks. The problem of the study is the lack of clarity in the legal
system for the control of Islamic commercial banks, and there are many bodies
that exercise control over Islamic commercial banks. The study highlights the
importance of shedding light on the legal system for the supervision of Islamic
commercial banks. The study followed the descriptive analytical approach to
describe and analyze the legal system for the control of Islamic commercial
banks. The study results show that the law in force in regulating the work and
practice of the Islamic banking sector also regulates the traditional banking
sector, and the legislator should have introduced a special law for the work of
Islamic banks, due to the specificity of their nature and Islamic economic
activity, especially after the abolition of dealing with traditional banking
activity inside Libya by Law No. (1) of the year 2013 AD. The result also shows
the legislative authority in Libya has granted the Audit Bureau to carry out its
duties in supervising, following up and evaluating the financial performance of
Islamic commercial banks in accordance with the laws regulating it. Dozens of
years ago with different names and minor modifications to them, and it was not
enough to this extent, as the legislative authority established another body to
monitor the oversight of institutions and agencies in the state and named it the
Anti-Corruption Authority.

Keywords: Legal, Libyan, Islamic, Commercial, Banks.

INTRODUCTION
The importance of Islamic commercial banks is increasing day by day, and they are enjoying
competition in their regulation and legislative, legal and economic development, in order to
keep pace with the global banking sector, and the good regulation of all components of the
bank, especially the important ones, including the control component (external and
internal), this interest was not for nothing, Rather, it came to the vital role that banks
provide to the state itself, and its role based on linking the economic and financial aspects
between the countries of the world, and the importance of Islamic banks being subject to all
kinds of control standards that achieve banking safety and reduce risks, and help in the
financial and monetary stability of the Islamic banking sector. 1 The success of the banking
business of Islamic banks and their distance from the risks facing the sector, it is necessary

1Archer, S., & Karim, R. A. A. 2012. The structure, regulation and supervision of Islamic banks. Journal of Banking
Regulation, 13(3), 228-240.
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for them to activate the continuous supervision by the specialized supervisory bodies, as
they supervise, follow up and inspect the Islamic commercial banks by several bodies and
supervisory bodies, including internal and external, and there is Shariah supervision that
exercises its work and works on that banking transactions are And the services provided
are in accordance with Islamic Sharia, and there is normal or traditional control, and its
work is carried out to be transactions and services in accordance with the correct law and
regulations in force in banks. The bank seeks to occupy a good reputation with those dealing
with it like other financial institutions, and this in turn requires several factors, the most
important of which is a good and integrated legal system.2 The legal basis of the bank is to
apply the provisions of Islamic Sharia and to stipulate the existence of a Shariah supervisory
body, or authorize the legal basis for external supervisory bodies to supervise banks, all in
the direction of the state to preserve these important financial institutions.

PROBLEM STATEMENT
Looking at the legal system regulating the work of the supervisory bodies of Islamic
commercial banks, you will find that it is a multiplicity of several bodies, and it may be said
that this multiplicity is good and contains advantages and in the interest of the bank itself,
but it is not without flaws, which we will highlight together in this chapter. What is the
extent of the relationship between these devices and the coordination between them, or are
they separate? Since the bank is a commercial financial institution to being a legitimate
financial institution, it must be supervised, from a financial and legal point of view, and its
financial and legal status, so these banks must conduct their business in accordance with
the legal foundations and sound banking rules, in a manner that enhances and maintains
the integrity of their financial position and in a manner that Protect your clients. 3 During
the past ten years, Libya witnessed a major qualitative transformation in the legal system
of the banking sector, and major events that occurred to it, which resulted in the complete
Islamization of the banking sector, and the establishment of a new type of supervision,
which is “Sharia supervision”, but the matter remains new, which imposes with it several
questions, including Does the Central Bank of Libya provide privacy for Islamic banks in
Libya, as it is a non-profit institution and does not seek profit, but rather to financial and
monetary stability in the state, economic growth, maintenance of the exchange rate,
supervision and follow-up of commercial banks within the state, and a link between the
state and abroad in financial transactions and economic. In addition to the oversight of the
Central Bank of Libya, the legislator obligated the Audit Bureau to monitor and follow up on
Islamic commercial banks in Libya, and to prepare reports on their work, which of course is
considered an external oversight away from the legal oversight exercised by the Shariah
oversight bodies.4 The financial and service institutions in the state are subject to oversight,
supervision and follow-up, and what he has done well. With reference to the establishment
of Islamic commercial banks in Libya, they take the legal form of the Libyan joint stock
company, according to the conditions set by the Commercial Activity Law No. (23) of 2010
AD and are committed to the control stipulated in it and imposed by its legal texts on Libyan
joint stock companies.

RESEARCH QUESTIONS
1. What is the impact of the Central Bank of Libya’s control on Islamic commercial banks?
2. What is the legislative regulation of external supervision of Islamic banks?

2 Mejia, A. L., Aljabrin, S., Awad, R., Norat, M. M., & Song, M. I. 2014. Regulation and supervision of Islamic banks.
International Monetary Fund.
3 El-Brassi, M. A. A., Bello, N., & Alhabshi, S. M. 2018. Conversion of conventional banks to islamic banks in Libya:

issues and challenges. International Journal of Accounting, 3(15), 25-39.

4 Lawhaishy, Z. B. 2018. English Legal and Regulatory Framework of Islamic Banking in Libya. Al Mashalih-Journal

Of Islamic Law, 1(2), 46-46.

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RESEARCH OBJECTIVES
1. To Discover the impact of the Central Bank of Libya’s control on Islamic commercial
banks.
2. To illustrate the legislative regulation of external supervision of Islamic banks.

SIGNIFICANCE OF STUDY
The importance of the research comes from the importance of Islamic commercial banks,
and the accuracy of their work, as they provide a legitimate alternative to traditional banks,
and the need for oversight over them to be one of their basic characteristics that are
established on them, and the state should help them in performing their mission and lead
them to success in accordance with the provisions of Islamic Sharia, and it will During this
topic, we are exposed to the oversight of the Central Bank of Libya and the role it plays in
terms of supervision and follow-up, whether through Sharia supervision or through regular
- traditional supervision, as it is the primary responsible for all banks operating in Libya,
and because the banks, although they are legitimate financial institutions, they are also
financial and economic institutions Financial and social contribution to community service.

RESEARCH METHODOLOGY
This study adopts the descriptive analysis research method approach. This method allows
to describe and analysis the research problem and justify the legal system of oversight.
Moreover, The descriptive-analytical approach contributes to discussing the legal system
for the supervision of Islamic commercial banks. Using this method, a researcher composes
a descriptive and detailed analysis of legal rules found in primary sources (cases, statutes,
or regulations).

RESEARCH FRAMEWORK
The Establishment Of The Central Bank Of Libya And The Laws Regulating Its Work
One of the most powerful oversight bodies on Islamic banks is the Central Bank of Libya,
because it is the one who establishes these banks and is primarily responsible for their work
and the services they provide.
The Central Bank of Libya was established in the year 1951 AD with the
establishment of the Libyan Monetary Committee, according to Law No. (4) of the same year.
Then, with the development of life and the increase in the state’s financial transactions, this
committee developed with it, until the establishment of the first central bank in Libya on
26-26 4-1955 AD.5
It was renamed the Libyan National Bank, and began its work in March 1956, and
issued the first Libyan currency in its name at the end of 1958. He may establish commercial
banks, but with the issuance of Banking Law No. (4) of 1963 AD, the legal regulation of banks
in Libya improved by giving them more powers and an acceptable organization for their
work. National commercial banks were also established, and this period coincided with the
export of oil abroad, and this in turn The Central Bank of Libya helped to present itself and
the role that it can play as a central bank, which has opportunities to practice commercial,
financial and economic activity that leads it to independence gradually.
Law No. 4 of 1963 regulating the work of banks continued until 1993, and even after
changing the regime in Libya in 1969, it remained for it to continue working with the
issuance of several legislations, which had a great impact on banking activity, and despite
the great banking development that The country witnessed during the seventies and
eighties of the last century, but Law No. (4) continued until Law No. (1) of 1993 was issued,
regulating the work of the Central Bank of Libya accurately and enhancing its monetary
strength and how to deal with foreign banks, and for the importance of its place and vital

5Abdullah Muhammad Abu Aqleh. 2018. The Impact of the Application of the Standards of the Islamic Financial
Services Board in Achieving Control and Supervision of Islamic Banks (a field study on Islamic banks). PhD Thesis,
Omdurman Islamic University, College of Research and Studies Institute of the Islamic World, Sudan, p. 5.

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role what the Central Bank carries out within the country, on which economic activity and
the strength of monetary and financial funds depend, and which has all the effect in building
the strength of the national economy or disrupting and destroying it. It is compatible with
the modern development of the central banks in the world, and to carry out its activities in
a comfortable and harmonious manner under legal and economic rules that protect it and
help it to carry out its work tasks.6
As a result of all this, Law No. 1 of 2005 was issued regarding commercial banks
regulating their work in a way that the legislator saw it as serving the country’s economy
and keeping pace with the technical and technological development reached by the banks’
work. Islamic banks and their regulation, and the existing regulation only helps the ordinary
commercial banks. As a result, there were no Shariah supervisory bodies, but the work of
the normal supervision of those banks, which is financial and legal control only, and this
was the vision and policy of the legislator at that time.
After changing the system of government in Libya in 2011, many legislations were
changed and amendments were made to them that advocated the interests of individuals
and groups within the state, and of course the banking sector had a share in this change, so
an amendment to Law No. For the year 2012 AD, and through this amendment, a chapter on
Islamic banking was added with the hearing of the existence of Islamic windows within
traditional banks, and opened the door to the Islamization of the banking sector in a large
way from the establishment of the banking system in a stronger manner, and also expanded
the powers of the Central Bank in terms of control and independence that monitors banks
affiliated with it, and that Law No. (46) opened the door for these banks to switch from the
traditional banking sector to the Islamic banking system, and in this same law it did not
obligate them to compulsory conversion nor to the periods in which they must convert, but
the matter hinged on allowing them if they wanted to change.
The matter was not satisfied to this extent, and in response to the desire of the
Libyans to implement the provisions of Islamic Sharia throughout their lives and regarding
their daily and financial dealings, including banking transactions of course, it was necessary
to issue Law No. (1) of 2013 AD, which is the firm and decisive law that addressed the texts
of Its articles are the traditional commercial banks, and it is forbidden for them to deal with
interest and usury, and although this law has brought about a great change in the banking
sector, the technical application mechanism was a subject of great disagreement among
economists. However, conventional banks converted to Islam without a clear technical
economic vision that impedes the optimal implementation of this law, or that it causes
damage and losses that it would have been more appropriate to avoid, which results in a
strike and destabilizes the banking sector, and makes laws outside the scope of application
due to the inability of banks to implement them due to the lack of their technical vision And
this is what happened now from the instability of the banking sector from the lack of
liquidity, and it was legitimate to make the treatment more accurate and complete in order
to be well implemented.7
It should be noted that the Central Bank of Libya is not an ordinary bank, as it is not
subject to the same legal and procedural rules to which banks operating in the state are
subject, because it is the one who founded and established these commercial banks
branching from it. Commercial.
Where Law No. (1) of 2005 AD regarding commercial banks, as amended by Law No.
(46) of 2012 AD, clarified in its first chapter - Chapter One - “The nature and functions of
the bank.” It came in Article One (the Central Bank of Libya is an independent institution
enjoying legal personality and financial liability). The second article of the same law
stipulates that the bank is subordinate to the legislative authority, and that it exercises its

6 Nasri Abu Munis. 2016. Reputational Risks and Compliance with Islamic Law, Case Study on Reserves in Central
Banks and How to Form Sharia Supervisory Boards. Journal of Sharia Studies and Law, University of Jordan, Vol.
43, No. 1, p. 222.
7 Abdullah Yassin. 2014. Shari’a Supervision of Islamic Banks. Journal of Law and Human Sciences, Zayan Ashour

University in Djelfa, No. 19, p. 45.

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functions and performs its purposes stipulated in this law within the framework of the
general policy of the state. and its financial, administrative, technical and other affairs by
decisions of the board of directors, and this text contains the independence of the Central
Bank of Libya, as it makes the bank to prepare and approve through its board of directors
all the regulations and decisions it deems appropriate and contribute to the exercise of its
work tasks, in accordance with the general policy of the state to facilitate through it
Preparing all decisions he deems good, to complete the process of supervision and
inspection of commercial and Islamic banks and support them in a manner that maintains
the strengthening of the supervisory body in general, and the first and main body authorized
to control It is the Central Bank of Libya, because it is responsible for setting and directing
all policies related to the loan and credit market, as well as the one charged with handling
any financial or economic strikes that affect the stability of the credit situation, or they call
for facing necessary needs related to the global market.8
One of the main tasks that expresses the independence of the Central Bank of Libya
is its task of supervising banks and preparing reports on them. Therefore, the issue of
supervision remains a private matter for the Central Bank of Libya, which is organized as it
pleases according to its perception and the general legal system for it, and this is in contrast
to what some countries have followed, where The task of supervising commercial banks
was entrusted to the Banking Control Commission, as in France, and this is what happened
with the Moroccan legislator, who made the task of oversight joint between the Ministry of
Finance and the Central Bank of Morocco.9

The Supervisory Role Of The Central Bank Of Libya

First of all, the Central Bank of Libya is considered the cornerstone of monetary stability
and facilitating credit operations, in order to achieve the main objective that it performs in
its supervisory role, which is to achieve the objective of the existence of Islamic commercial
banks and to perform their role and what they found, and to achieve the purpose of its
establishment, that is, it is a watchdog on achieving The goals that banks seek to achieve.10
The rules laid down by the previous article were based on the principle that the
Central Bank of Libya monitors and supervises Islamic commercial banks, and that the
subordination of these banks is binding on them, and not taking them and ignoring them
puts them under the legal issue. Technical, legal, financial, legal and administrative level. 11
It is noticeable on Law No. (46) of 2012 that it fully regulated the banking sector
(traditional banks with Islamic banks together), and the regulation of conventional banks
prevailed more than Islamic banks, given that the latter was added later in a special chapter,
to include the supervision exercised by the Central Bank of Libya on Islamic commercial
banks are off-site supervision, which is carried out by following up and checking periodic
reports referred by the banks themselves to be analyzed and unloaded by the relevant
departments of the Central Bank of Libya. One day of each month to prepare a summary
report on its financial positions, to be published in the Official Gazette.12
The Central Bank of Libya was not satisfied with this oversight, but it may carry out
on-site supervision at any time of the year, by sending its own inspectors, and the inspection
and inspection shall be at the headquarters of Islamic commercial banks, and the law also
obligated these banks to enable the inspection and oversight committees to work and

8 Abudirbala, A. M., & Mukhtar, M. M. 2019. Shifting from Conventional to Islamic Banking: Challenges and Barriers

(a case study on Libya). Journal of Pure & Applied Sciences, 18(2).

9 Abudirbala, A. M., & Mukhtar, M. M. 2019. Shifting from Conventional to Islamic Banking: Challenges and Barriers

(a case study on Libya). Journal of Pure & Applied Sciences, 18(2).

10 Law No. (4) of 1951 AD, Official Gazette Issue (1) of 1951 AD.
11 Youssef Hammumi. 2016. The Risks of Banking Work: A Comparative Study between Conventional Banks and

Participation Banks. Journal of Law, Legal and Judicial Knowledge Series, No. 49, p. 52.
12 Shalba, A. 2016. An investigation of the roles and responsibilities of the board of directors in the Libyan banking

sector. United Kingdom: Nottingham Trent University.

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submit to them All documents and information necessary to perform their work as
required.13
It should be noted that the committees are able to access information and data
related to banks, as the law prohibits them from disclosing and starting any information
related to the control process except to the legally authorized entities. To legal auditors
chosen by the entity’s general assembly, and the decision to assign these legal auditors must
be approved by the governor, and the texts of the law obligate the entities subject to the
Central Bank of Libya to present throughout the fiscal year and in a conspicuous place in its
head office and all its branches, a copy of the latest audited financial statements, and on
them It was published in the Official Gazette, in a local newspaper, and on its website on the
International Information Network.14
Law No. (1) of 2005, amended by Law No. (46) of 2012, obligated Islamic banks in
many legal articles to be monitored and supervised by the Central Bank of Libya, and that
they follow it and are directly subject to its control and instructions, and the repetition of
legal texts cannot be limited to more than From a place, except for the legislator’s keenness
on this oversight, the legislator was keen to provide the Central Bank of Libya with accurate,
detailed data and with accurate dates. The Governor of the Central Bank of Libya may,
within one month from the date of receiving the financial statements and reports, issue a
decision not to approve, reserve or approve.15 This legal text focused mainly on the
subordination of Islamic commercial banks to the Central Bank of Libya, and they are
obliged to provide everything that is required of them, otherwise they become responsible
for any failure that may lead to their liquidation, and just not doing what is stipulated is
considered a violation of the provisions of the law, meaning that the Banks subject to the
provisions of this law shall abide by the controls and rules provided by the Central Bank of
Libya to regulate clearing operations and issues related to the national payment system. If
it becomes clear to the Central Bank of Libya, after examining the data and documents
related to the entities subject to its control, that it suffers from financial problems, among
them, the first of which is of course the Islamic commercial banks, then the governor must
take the necessary legal measures to address this problem, which is from a written warning
to stopping the general manager of the bank and referring him to investigation, or
suspending the board of directors from work and referring it to investigation with the
appointment of a management committee or merging with another bank, and the matter
may amount to canceling the permission granted to the bank to carry out its work and
activity and, then, taking the procedures for its liquidation, and where the same article
stipulated to apply the penalty of merging and cancellation of the removed permission, the
approval of the board of directors Administration of the Central Bank of Libya.16
Among the supervisory role occupied by the Central Bank of Libya, which was
granted to it by the legislator on Islamic banks, and the importance of this role is that it has
the right to take the appropriate action through which it addresses any problems that the
bank may be exposed to, and this treatment is what is called the supervisory treatment at
the same time, that is, it It takes place in stages, and the bank may help in its early stages
before it gets complicated.17
The legislator also obligated the board of directors of the Central Bank of Libya in
Article (100-bis/2) of drawing up a model for the establishment contract of an Islamic bank

13 Alfadli, A., & Djalila, S. 2022. Factors Affecting Commercial Banks’ Capital Adequacy Ratios in Gulf Cooperation
Council (GCC) Countries. Sch J Econ Bus Manag, 2, 37-42.
14 Waseem Ismail Al-Habil, Imad Al-Masry. 2011. The Impact of the Application of the Islamic Supervision Principle

on the Success of the Performance of Islamic Banks in the Gaza Strip: Case Study of the Arab Islamic Bank and the
Palestinian Islamic Bank. Journal of Al-Azhar University in Gaza, Humanities Series, Issue B1, p. 1144 .
15 Pratten, J. D., & Mashat, A. A. 2009. Corporate social disclosure in Libya. Social Responsibility Journal.
16 Habib Khalifa Jabouda. The Legal Nature of the Central Bank of Libya, p. 157.
17 Künkler, M. 2022. Legal Professionals in the Muslim World: Between Social Transformation, Judicial Control, and

Feminisation. Mirjam Künkler. Lawyers in the Muslim World: Between Social Transformation, Judicial Control, and
Feminisation. In Rick Abel, Ole Hammerslev, Hillary Sommerlad, Ulrike Schultz (eds.) Lawyers in 21st-Century
Societies: Comparisons and Theories. Oxford: Hart, 73-97.

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and setting the statute for it, based on what the Central Authority for Shari’a Supervision
proposes, and this obligation is nothing but a previous oversight of Islamic commercial
banks, And the beginning of its establishment so that this beginning is in conformity with
the principles and provisions of Islamic Sharia.18
Islamic banking activities were also subject to the provisions of bank control carried
out by the Central Bank of Libya, stipulated in Law No. (1) of 2005 AD and amended by Law
No. (46) of 2012 AD. Banks licensed to engage in Islamic activities are also obligated to
comply with the provisions of the law regarding the submission of financial statements to
the Central Bank of Libya, taking into account their amendment in line with the established
standards regarding the audit of Islamic banks’ accounts.19

Oversight of the State Audit Bureau and the Control of the Administrative Control
Authority on Islamic Commercial Banks
These bodies work on preparing specialized technical reports in terms of financial, legal and
administrative terms on the work of Islamic commercial banks, issued on a regular basis,
and the importance of these technical reports serve many of these bodies and other bodies
that regulate the results of their work, because of the statement of the characteristics that
these banks carry and to clarify their documents And its financial transactions, including
the tax authority and the legislative authority itself, the owners of funds, shareholders and
investors with these banks, the Ministry of Economy and the Ministry of Planning in order
to be able to decide the general budget of the state, and what may be wrong with these two
agencies is the overlap of competencies with each other in practice, and this may constitute
a burden On the banks that are monitored, they may be indispensable, so we explain in this
requirement that we are going to study the legal basis for the oversight of the Audit Bureau,
and knowing its real role in the supervision of banks in (first), and then we move on to
knowing the oversight of the Administrative Control Authority and what is its role The
supervisory authority and is there coordination between it and the accounting debts in
(Second).20

First: The Audit Bureau’s Control Over Islamic Commercial Banks

The Libyan Audit Bureau aims under the provisions of the articles of its organizing law No.
19 / of 2013 AD, and its amendments, to achieve effective control over public money, and
to verify its proper use and disposal, by examining and auditing accounts, documents and
financial statements, and evaluating the performance of all entities subject to the control of
the Bureau, including Islamic commercial banks, which is the supreme body for control and
accountability in Libya, and its subordination to the legislative authority directly, is a
technical body that provides its oversight services with independence and impartiality.
Inside banks, the safety of financial discharges, accounting entries, financial and technical
reports for the departments and supervisory committees of banks in accordance with the
legislation and regulations regulating the work of these banks. Of its existence, and one of
the main tasks of the Audit Bureau is to detect the presence of financial irregularities in the
work of the For banks and when presenting their services and in their financial
statements.21
The Bureau prepares an annual report on the work of these banks, in which it shows
in detail the shortcomings, deficiencies, and weaknesses of the commercial banks, and

18 Abdalla, M. A., Aziz, M. R., & Johari, F. 2015. Analyzing the Impact of Banking laws and Legislations on the
Converting of Conventional Banks into Islamic in Libya. International journal of management and applied
research, 2(4), 156-171.
19 Law No. (46) of 2012 AD, Official Gazette Issue (13), issued on 7-5-2012 AD, and is effective from the date of

its publication.
20 Grassa, R. 2015. Shariah supervisory systems in Islamic finance institutions across the OIC member countries: An

investigation of regulatory frameworks. Journal of Financial Regulation and Compliance.

21 Law No. (1) of 2013 regarding the prevention of usurious transactions, Official Gazette No. (5), second year,

issued on 1-7-2013.

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through which it takes a steppingstone to addressing these shortcomings according to the

treatment methods approved by it. It has been attached to it over the years.
The Bureau is a supreme control body, meaning the highest supervisory body in the
state, that evaluates the performance of the bodies subject to its control and directs them
towards improving their performance and raising their efficiency, and assisting them in
correcting deviations that may exist. Also, the article referred to above, which indicated that
Islamic commercial banks are subject to the control of the Audit Bureau, even if these banks
have their own mechanisms and supervisory bodies, that is, the control of the Bureau is
mandatory oversight by the text of the law and cannot be excluded.22
The role of the Audit Bureau did not stop at investigating and researching financial
violations in banks, no, but the law granted it much more powers. In addition to these two
characteristics, there is a legal and technical neutral opinion about the financial statements
and final accounts of banks, and a statement of deficiencies and shortcomings in laws and
regulations The investigation also granted him the extent to which the manual and
electronic internal control systems are appropriate, and their sufficiency for banking work,
and whether they are appropriate and developed to suit the development of the Islamic
banking sector, or not.23
The law also granted the Bureau a supervisory authority to carry out its work and
its functions to the fullest extent by carrying out an examination of accounts and documents
supporting it, at the Bureau’s headquarters or one of its branches or in the same banks
whose accounts it reviews. He may examine all documents he deems necessary to examine,
even confidential ones, and he has the right to seize whatever documents, documents or
records he deems appropriate, or to obtain copies of them.24
It is not hidden from the legislator’s wisdom in granting these great powers to the
Bureau, as it made it a supreme supervisory body, content with preparing financial reports
and establishing facts and violations, as it does not have the authority to investigate, but its
role is limited to detecting violations and evaluating the performance of institutions – banks
– and this difference is different with which the organization of the Audit Bureau differs. On
the regulation of the Administrative Control Authority Law, and all of this in order to
perform its role with full merit, and for the supervision process to be a real process that
leads the banks to safety, and the financial institutions actually evaluate what they practice
and perform in terms of banking business and services, and obligate banks to submit and
submit their accounts on the legally prescribed dates. To the Audit Bureau, so that it is
audited accurately and in a timely manner.25
Where it came in the second chapter of Law No. (19) of 2013 AD (Examination and
Evaluation of Performance) as if this supervision is based on evaluating the general
performance of the banks, as stipulated (The Bureau shall practice examination and
evaluation of the performance of the bodies subject to its control, to indicate the duration
of their sufficiency and effectiveness in carrying out their activities and to ensure that their
programs And its projects are managed in a scientific and economic manner and that it
achieves the objectives set for it, and that these parties have used their financial resources
in the activities and tasks entrusted to them, with the highest degree of efficiency,
effectiveness and economy in spending). What they were designated for in the laws of their
establishment and their ability to present their business in the legitimate manner,
effectively and efficiently, and to achieve the goals for which these banks were established,
such as achieving profit, legal dealing, and achieving social justice. - Which he deems

22 Garrido, J., Liu, Y., Sommer, J., & Viancha, J. S. 2022. Keeping Pace with Change: Fintech and the Evolution of
Commercial Law. FinTech Notes, 2022(001).
23 Zagoub, A. A. 2011. Corporate governance in Libyan commercial banks. Doctoral dissertation, University of

Dundee.
24 - Article (100 bis/5/first) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding

commercial banks and adding a special chapter on Islamic banking.

25 Habib Khalifa Jabouda. 2017. Law No. (46) for the year 2012 AD regarding Islamic banking “politics and

mechanisms”. Journal of Law, University of Tripoli, Libya, the 6th issue of the second honorary conference, p. 186.

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appropriate according to his assessment of the importance of the method, whether it is a

subsequent audit, a previous audit, or even an accompanying audit, in accordance with the
generally accepted auditing standards. And Article (14) of Resolution No. (27) of 2015
stated that the authority of the Audit Bureau to monitor the audit of the accounts of
independent entities whose budgets are not from the state.26

Second: Supervision Of The Administrative Control Authority On Islamic Commercial

Banks
The Administrative Control Authority in Libya is one of the oversight institutions affiliated
to the legislative authority in the state, which exercises its jurisdiction in accordance with
Law No. (20) of 2013, issued by the General National Congress. It is an independent body
that enjoys independent financial and legal personality through which it presents its work
with impartiality, independence and integrity.27
Since Islamic commercial banks are considered the device that provides, exploits
and uses funds in the first place, implement the saving policy and contribute to its stability,
so restrictions and supervision must be imposed on them constantly and at different times
and times - with coordination and interdependence between the multiplicity of regulatory
bodies and under special well-restricted laws -, this Administrative control is concerned
with the administrative and technical aspect of banks, with its competence in administrative
investigation, according to what is specified by the law of their establishment.28
It is important that there is an urgent need to practice administrative control
activities on banks, effectively due to the importance of the observer and the observer,
because it is keen on the safety of every cell of this sensitive facility, and that the role of the
Administrative Control Authority is in linking banks with each other, providing regulation
and improving general performance It also aims to achieve full effective supervision within
Islamic commercial banks, and to follow up their work to ensure the extent to which the
responsibility for performing their duties is achieved in the field of their competence, and
the extent to which they implement laws and regulations and abide by them, and that their
employees aim in the performance of their work to serve the citizens and seek to achieve
their interests.29
It is necessary for us to know that the role of the oversight of the Administrative
Control Authority in achieving oversight is to detect crimes and violations related to job
performance and investigate them administratively, and to take the necessary legal
measures to hold their perpetrators accountable. An investigation into the violations that
may be committed by the observer or the observer, with the preparation of supervisory
reports and the investigation of the violations and abuses that they may contain, or any
shortcomings or defects contained in these reports.30
In order to fully achieve the aspects of the objectives of the control and to carry out
its functions, the authority may take the necessary means to investigate, detect and detect
violations and crimes, and find out the shortcomings in the bank’s work. However, this
individual oversight can only take place after obtaining written permission from the head
of the commission.31

26 Article (62) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial banks
and adding a special chapter on Islamic banking.
27 Abdul Razzaq Jaber. 2004. Financial Control and Financial Controller in Theory. Beirut: Dar Al-Nahda Al-

Arabiya, 1st ed., p. 23.

28 Article (100-bis/4-5) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding

commercial banks and the addition of a special chapter on Islamic banking.

29 Siham Milad. 2014. The Legal System of Banking Institutions in Algeria. Master's thesis. Larbi Ibn al-Mahdi

University, Umm al-Bawa'i, Faculty of Law and Political Science, Department of Law, p. 11.
30 Qasaimeh, G., Al-Gasaymeh, A., Kaddumi, T., & Kilani, Q. 2022. Expert Systems and Neural Networks and their

Impact on the Relevance of Financial Information in the Jordanian Commercial Banks. In 2022 International
Conference on Business Analytics for Technology and Security (ICBATS), p. 1-7. IEEE.
31 Article (62-Second) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial

banks and adding a special chapter on Islamic banking.

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As for the time of conducting the control and inspection process, the law grants the
authority to do it at any time it deems appropriate and surprising, and it has the right to do
so, as well as the right to see all documents, even if they are confidential and the nature of
privacy for the bank, and there is no doubt that this expansion of powers is justified. By the
legislator, as without full access to all documents and transactions, you will not get a good
and real oversight, and there may be some irregularities and crimes in the hidden
documents, and you need to search and carefully inspect the documents until they are
accessed.
The matter may reach the suspension of the worker in the bank from his work, for
the requirements of the public interest and the interest of the investigation, and all this so
that the control process is without external influences or pressures on the member of the
supervisory board, and the suspension period may not exceed three months except by a
decision of the competent authority to discipline.
Article (34) of Law No. 20 of 2013 stated that the competence of the Administrative
Control Authority to investigate financial and administrative violations committed by
employees of the bodies subject to its control - banks - or referred to it by the competent
authorities - the Audit Bureau, as for criminal offenses or administrative investigation As a
result of criminal offenses, the Administrative Control Authority must refer papers and
documents to the competent Public Prosecution, within a period not exceeding one month,
and take legal measures regarding the subject matter of the incident.32
It is natural for criminal offenses to fall under the jurisdiction of the Public
Prosecution, because it has the original jurisdiction in criminal cases, and the administrative
oversight authorities are relieved of the investigation until the Public Prosecution has
completed it.
To complete the process of oversight and investigation of financial and
administrative violations, a Disciplinary Board was formed, to prosecute employees and
workers of the entities subject to the control of the Administrative Control Authority and
the Audit Bureau, for financial violations committed in violation of the provisions of the
financial law of the state, the regulations issued pursuant thereto, and other financial
violations stipulated in the The legislation in force that regulates the work of Islamic
commercial banks.33

Law No. 23/2010 On Islamic Commercial Banks And The External Auditor’s Control
Over Them
Law No. 23/2010 regarding commercial activity regulates commercial businesses and how
the law is applied to them in general, and the work of commercial companies in particular,
from their establishment to the liquidation and division of their funds, and among these
companies and the most powerful is (the joint stock company). Commercial companies and
for the financial consideration that is characterized by it, and that the public companies
owned by the state are only in the form of a Libyan joint stock company, and the legislator
works on setting legal rules that help make these companies to present the purpose of their
creation to the fullest, which made them have texts Legal regulating the work of the
oversight bodies that follow up and supervise their work, and the jurisprudential and legal
opinion has been established that the legal nature of commercial banks is joint stock
companies, and banks cannot depart from this template, even if the banks have a special law
regulating their work.34
The Central Bank of Libya also obligated the bodies subject to its control and
supervision to submit their documents to a legal auditor to review them and submit his

32 Rammal, H. G. 2006. The importance of Shari’ah supervision in Islamic financial institutions. Corporate
Ownership and Control, 3(3), 204-208.
33 Gamal El-Din Awad. 1993. Banks’ Operations from the Legal Interface, A Study of the Egyptian and Comparative

Judiciary and the Legislation of Arab Countries, p. 13.

34 Čihák, M., & Hesse, H. 2010. Islamic banks and financial stability: An empirical analysis. Journal of Financial

Services Research, 38(2), 95-113.

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report to the general assembly of the bank. Many regulatory agencies, most of which focus
on financial and accounting control, impose deterrent penalties in the event of not working
with them, and slackening in taking them, so we will address in this requirement to the
study of the oversight of Law No. 23/2010 AD regarding commercial activity and the extent
to which it is implemented in ( First), then we move on to the legal references’ oversight to
learn about the role that Islamic commercial banks play in (Second).35

First: Law No. (23) of 2010 Regarding Commercial Activity Oversight Of Islamic Banks
At the outset, it must be said that the legislator obligated a different legal system to control
commercial companies - commercial banks - that differs from institutions and interests that
are directly financed by the state, as these institutions and interests have their own control
system, which is the assignment of a financial controller assigned by the Ministry of Finance
in accordance with the state's financial law and its amendments However, the Islamic
commercial banks that are owned by the state or by private persons, the legislator has made
for them a special control system, consisting of committees and bodies that follow up and
supervise them, and are assigned by the company’s general assembly, and the legislator did
not differentiate between public or private companies - banks - the legal regulation applies
on Monday.36
The legislator has created legal texts in Law No. 23/2010 AD regarding commercial
activity regulating the work of oversight on joint stock companies and called it (the
Companies Control Board), which in general undertakes the oversight of the accounts,
technical, legal and financial works of the company - the bank - and it imposes duties on it
and imposes responsibilities on it.37
It is necessary to know that the supervision stipulated in the above-mentioned law
is not binding on commercial banks, and it can be replaced by other control systems, when
the bank’s statute stipulates the combination of the Sharia supervisory board and the
regular supervisory board stipulated in its formation by Law No. 23/2010 AD. The
provisions of the Commercial Law are considered It is complementary to the will of the
parties and public and private legal persons, and this is stated by Article (196) of the same
law that (... the statutes of banks subject to the supervision of the Central Bank of Libya may
not provide for the appointment of a supervisory body and may be replaced by other
supervisory methods).38
Therefore, in the event that the Sharia supervisory board is not formed in the
statute, and this is unlikely to happen, because it is one of the necessary conditions that must
be met, there must be an ordinary supervisory board. What did the Central Bank of Libya
do with this combination?39
The honorable reader may ask about the relationship between the commercial law
that regulates the work of commercial companies in Islamic commercial banks, and the
answer to this question can be found in Article (65) of the same Banking Law No. (1) of 2005
A.D., which stipulates that (First: A commercial bank is every company It usually accepts
deposits in current accounts payable on demand or in term accounts and grants loans or
credit facilities and other banking activities...), and here the legislator called those who do
these works the name and form of the joint-stock company as stated in (First: Except for

35 Habib Khalifa Jabouda, previous reference, p. 180.

36 Al-Beshtawi, S. H., Zraqat, O. M., & Moh'd Al-hiyasat, H. 2014. The Impact of Corporate Governance on Non
Financial Performance in Jordanian Commercial Banks and Islamic Banks. International Journal of Financial
Research, 5(3), 54.
37 Habib Khalifa Jabouda, previous reference, referred to in the margin, p. 182.
38 Article (62 - first) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial

banks and the addition of a special chapter on Islamic banking.

39 Rammal, H. G. 2006. The importance of Shari’ah supervision in Islamic financial institutions. Corporate

Ownership and Control, 3(3), 204-208.

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Exchange offices, it is required that the entities subject to the supervision of the Central
Bank of Libya be established in the form of a Libyan joint stock company. 40
It is applied to the law of Islamic commercial banks, the law of banks first, then the
commercial law. Predominance of the private commercial law over the general civil law that
regulates commercial and civil business.
As a consequence, the Banking Law and the chapter on Islamic banking have priority
in application, although it is not sufficient to regulate the daily work of banks, which is
expanding day by day, and which was based on an incomplete law from the beginning.
Rather, it came in unstable circumstances and its articles were built on the exceptions of
Law No. (1) for the year 2005 AD regarding commercial banks.
Accordingly, the researcher believes that the matter needs to reorganize the
banking law in Libya, and urgently, and we appeal to the legislature and the competent
authorities to issue special legislation for the work of Libyan banks, to organize their work
and govern their dealings with Islamic law and expand their practice of Islamic bank
activities on a correct basis and sufficient legal texts to protect the bank First, and those who
deal with it secondly, and to ensure an Islamic economic system that helps build the state,
and strengthens its pillars and monetary policy on sound foundations. 41
The general assembly of the company - the bank - is considered to be the supreme
supervisory body on the work of the board of directors, and as the sole owner of the
company - the bank - but the practical reality makes the process of oversight and its
implementation by the general assembly, unimaginable and non-existent for several
reasons, perhaps the most important of which is the absence of members of the general
assembly in The company - the bank - as all of them are shareholders and have wide powers,
and because of the large number of shareholders, even if they are relied upon in the
supervision process, you will not find an honest woman that reflects and expresses the
financial position of the bank, and they are not obligated to attend except in official meetings
only, and among them is that the supervision work needs special specialization In the
accounts or in the legal or technical procedures and this may not be available in the
members of the association.42
Law No. 23/2010 A.D. organized the organization of the monitoring body, and
explained its composition, the duties imposed on it, the legal impediments that fall on the
body, and their mission and responsibilities ended, and stipulated that the monitoring body
shall consist of three active members and two reserve members, provided that one of its
members must be a qualified holder. A university in accounting and the other in law, and it
is not hidden from the practical and scientific benefit that this has due to the requirement
of the members of the commission to have technical specialization in their membership,
because their reports will be issued by members with specialization in accounting and legal
terms, and these pillars are the most important aspects of interest to commercial banks
Islamic law, after its actions comply with the provisions of Islamic Sharia. 43
Because of the importance of the role provided by the supervisory body, the
commercial activity law is keen to be in accordance with the proper legal quorum, so that it
can present its work according to the required, by making two reserve members of the body
who meet the same conditions as the original members, and the work of the supervisory
body is focused on the statement of the financial and legal position of the bank Basically
speaking the truth about the work of the board of directors and its records and documents,
and the authority must work with complete independence from the board of directors,

40 Mejia, A. L., Aljabrin, S., Awad, R., Norat, M. M., & Song, M. I. 2014. Regulation and supervision of Islamic banks.
International Monetary Fund.
41 Archer, S., & Karim, R. A. A. 2012. The structure, regulation and supervision of Islamic banks. Journal of Banking

Regulation, 13(3), 228-240.

42 Article (60) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial banks

and the addition of a special chapter on Islamic banking.

43 Article (84) of Law No. (1) of 2005, as amended by Law No. (46) of 2012 regarding commercial banks and the

addition of a special chapter on Islamic banking.

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which is a control tool over its work, and is free from any exploitation that may affect its
belief in the direction of its work, and part of the jurisprudence saw that this prohibition
does not prevent The supervisory body may occasionally offer consultancy work in
accounting, law, or any technical matter for the bank’s account.44

Second: Control And Approval Of The External Auditor On Islamic Commercial Banks
All the regulators that organized the work of Islamic commercial banks, whether directly or
indirectly, confirmed the existence of (external auditor’s oversight), which is a basic control
organized by law due to its importance and effective role, as stated in the text of Article No.
(82) of Law No. 1 of 2005 regarding Banks that (The Central Bank of Libya, in coordination
with the relevant authorities, prepares a record for auditing offices, which are able to review
and examine bank accounts, and another record for offices and houses of expertise, capable
of evaluating real estate assets, and other things that are provided to banks as a guarantee
for financing, loans and facilities that they grant. The Central Bank of Libya rules, conditions
and procedures for registration in these two records), and this is the establishment and
approval by the Central Bank of Libya of the external auditor, and stipulated that he be
accredited and registered in the special register in the bank, and obligated banks and
affiliated entities that are subject to the control and supervision of the Central Bank of Libya,
to undertake to check their accounts annually To legal auditors selected by the general
assembly of the bank, for a period of two years, renewable once only, and this choice is
restricted to those who are registered in the register prepared by the Egyptian In the Central
Libya, and the same article obligated that the legal auditor be approved by the Governor of
the Central Bank of Libya, as a kind of activating the supervisory role of the governor, and it
is stipulated that the legal auditor should not be a member of the bank’s board of directors,
employees, or those who obtained a loan or facility with or without a guarantee And there
is no relationship between him and the members of the board of directors, or with the other
legal auditor of the bank, up to the fourth degree.45
In addition to the obligations stipulated above regarding the legal auditor, the law
obligates Islamic banks to have a Shariah audit and audit department that reports directly
to the Board of Directors.46
They also emphasized Law No. 23/2010 AD on the importance and duties of the
external auditor, to review the financial statements of the company - the bank - which will
be presented to the General Assembly in its regular annual session, as Article (209) of the
law obligates the external auditor to submit a written report It states his opinion on the
bank’s accounting and financial matters, and emphasized that the report bears the extent of
the correctness of the financial accounts, the validity of the final financial statements, and
the extent to which these statements comply with the provisions of the relevant law. All this
must be taken into account in the report prepared by the external auditor and the extent of
commercial bookkeeping and inventory operations The bank and how they are carried out
and the statement of the financial obligations of the bank, and the bank’s board of directors
and managers must provide assistance in clarifying and clarifying all documents and final
financial statements, to be reviewed within sixty days from the end of the financial year.47

44 Article (83) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial banks
and the addition of a special chapter on Islamic banking.
45 Article (85) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial banks

and the addition of a special chapter on Islamic banking.

46 Article (61) of Law No. (1) of 2005, amended by Law No. (46) of 2012 regarding commercial banks and the

addition of a special chapter on Islamic banking, which states that (the Central Bank of Libya may, at any time,
review the books and documents of the entities subject to its control The accounts opened by banks, and the
electronic systems and files related to them, and the review is at the headquarters of each of them. It is carried
out by the bank inspectors who are appointed for this purpose. The authorities must provide these inspectors
with all the data and facilities necessary to perform their task. any records, papers, or information related to the
inspection, except in the cases authorized by law, or when it is necessary for a judicial investigation).
47 Article (63) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding commercial banks

and the addition of a special chapter on Islamic banking.

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FINDINGS
Findings discussion related to objective of study

OB1: To Discover The Impact Of The Central Bank Of Libya’s Control On Islamic
Commercial Banks
Islamic commercial banks in Libya operate in a single legal system, and under the
supervision and follow-up of the Central Bank of Libya, and the Central Supreme Authority
for Sharia Supervision, and all banks operating in Libya are subject to the same supervision
and the same laws apply to them and the same decisions apply to them. A legal basis issued
by the legislative authority of the state. The multiplicity of supervisory bodies on Islamic
commercial banks comes from the multiplicity of risks that these important institutions may
be exposed to, and the legislator appreciates this importance, especially with the high risks
themselves and their diversity according to their nature. These banks must have their own
legal system, which is clear and easy to regulate the multiplicity of these devices well, away
from the existing legislative ambiguity and fog. The law in force in regulating the work and
practice of the Islamic banking sector also regulates the traditional banking sector, and the
legislator should have introduced a special law for the work of Islamic banks, due to the
specificity of their nature and Islamic economic activity, especially after the abolition of
dealing with traditional banking activity inside Libya by Law No. (1) of the year 2013 AD.
Therefore, we appeal to the legislator, from this platform, to urgently issue a complete law
regulating the work of Islamic banks, in accordance with the will of the legislator and an
alternative to what is currently in place. It can be taken from the last amendment of Law No.
(1) of 2005 AD and amended by Law No. (46) of 2012 AD, in which he added a chapter on
Islamic banking, that it was not completely regulated and is inaccurate, so it contains, for
example, the exceptions related to the work of banks Islamic law by law, and a decision by
the Board of Directors of the Central Bank of Libya sufficed, and it is not necessary for it to
be excluded by law, including what was stated in Article (100-bis/9). Although it is no longer
valid for use after the abandonment of the activities of traditional banks and the obligation
to convert them to Islamic banks, there must be a law of complete Islamic reference.

OB2: To illustrate the legislative regulation of external supervision of Islamic banks.

No matter how many forms and means of oversight, they still have positive and positive
effects, provided that they are carried out in accordance with a legal regulation that
regulates them well and that it is carried out in coordination between the various oversight
bodies. The multiplicity of control bodies is also a result of the results of the separation of
powers in the state from the legislative authority and the executive authority. It is not good
and appropriate to monitor a financial institution simultaneously and on the same
transactions and services more than three supervisory bodies. The legislative authority in
Libya has granted the Audit Bureau to carry out its duties in supervising, following up and
evaluating the financial performance of Islamic commercial banks in accordance with the
laws regulating it. Dozens of years ago with different names and minor modifications to
them, and it was not enough to this extent, as the legislative authority established another
body to monitor the oversight of institutions and agencies in the state and named it the Anti-
Corruption Authority. At the international level, interest in monitoring and follow-up has
increased in terms of organization and efficiency, due to the increased interest in accounting
departments. Which is the main source of information and to increase the size and activity
of Islamic business operations in banks, which calls for the presence of external control
bodies, which supervise and follow up on their work, including experts and specialized
committees, and that the latter bear the task of monitoring and follow-up and keeping public
funds on behalf of the state, and these bodies It has set special conditions for this work and
joining it, as it always seeks to select the outstanding graduates from the faculties of law and
accounting, in order to ensure that they are at the required level of performing audit and
accounting work to the fullest. It is noted from the legal texts regulating the work of the
Libyan Audit Bureau that they focused on financial accounts, and on the accounts of

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commercial banks, that is, they are financial control of the first degree, with clarification and
development of some texts of laws regulating and developing them and finding faults and
places of deficiencies in them, but his interest was clear in financial and accounting control,
that Public institutions, in particular financial and monetary ones, must start financial
control over them first, because the issue of defect, fraud and forgery comes from this point
of view, which directly affects the performance of their work. Aspects and documents of
non-financial access to financial accounts for this must be taken care of of great importance.
The control process is a cooperative process between the supervisory authority and
the bank that monitors it. If the bank’s management discovers any financial or
administrative violation by any of them, it must inform the Administrative Control
Authority of these violations as a matter of urgency to take the necessary legal measures
regarding it.
The authority works to follow the accompanying supervision also because of its
usefulness, by informing the bank of the observations and inquiries that the authority
discovers that do not rise to the level of investigation, but merely alert the management to
work on settling them, responding to them and treating them.
The Authority's lack of objection to providing professional and technical advice to
the management may exceed the limits of this advice, and that these works are done for a
financial fee and open the door to rapprochement, and to turn a blind eye to the original
works provided by the Board of Directors.
The legislator also stipulated that the commission should be made of natural
persons and not of legal persons, because of the more precise definition of responsibility
and obligations in this regard, so that the natural person is more worthy than the legal
person to perform this task..
It should be noted that the oversight work carried out by the authority must be
separated from the work of the board’s management, and not included in its work and
decisions, as the board of directors is an executive tool that implements the
recommendations and instructions of the general assembly, and is primarily responsible for
its decisions, and that the supervisory body is an oversight tool on the work of the board
The board and the bank in general, managers and employees, and each of them has a role
assigned to it, as it is considered the appointment of the general assembly for the work of
the bank.
Based on the foregoing, we reach a clarification and statement that the supervisory
board stipulated in Law No. (23) of 2010 AD regarding commercial activity, its work and
competencies were collected in the Sharia Supervisory Board stipulated in Law No. (1) of
2005 and amended by Law No. (46) For the year 2012 on Islamic banking, and we conclude
that the role of the Shari’a Supervisory Board has increased in importance above its
importance, and that its role did not depend on Shari’a supervision only, but extended to
technical, accounting and legal oversight as well.
It is noted from the texts of the Commercial Activity Law No. (23) of 2010 AD that
the submission of the law and the work of the final accounts auditor is linked to the end of
the fiscal year, in contrast to what was stated in Law No. (1) of 2005 AD that made the work
of the auditor and the legal auditor to submit his report every three months and in the
capacity of Periodically, and there is no doubt that his work periodically makes him follow
the bank’s work on an ongoing basis and submit his report first-hand, which is more
accurate, beneficial and beneficial to the bank, provided that this control and the
preparation of periodic reports do not obstruct the bank’s work to provide its services, as
error, fraud and negligence can be detected before the end of the period. The financial year,
and it can be corrected and treated before it causes financial and administrative losses to
the bank, and preparing periodic reports on the bank’s work is one of the control
accompanying its work, and it is one of the most important types of control because through
it it discovers the places of defects and shortcomings while correcting them, and it
completes the provision of the bank’s services to its business, i.e. The bank does not stop
providing its services and that it remains closely following its plan, which remains with the

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management with full knowledge of the bank’s work, and with certainty that the bank is
moving in the right direction, towards achieving profit and avoiding losses, to be Reports of
the external auditor, a woman reflecting the work and reality of the bank.
As for the organization of legal accountants and auditors, it is regulated in
accordance with Law No. (116) of 1973 A.D. regarding the organization of the accounting
and auditing profession, according to which the Accountants and Auditors Syndicate was
established to be called the Libyan Accountants and Auditors Syndicate, and it shall have
the public legal personality. Therefore, it is not permissible to practice the profession of
accounting or auditing in Libya, except for those who were registered in the list of working
accountants and auditors, after which he may open an office in his name, with the use of the
definition - a chartered accountant - and to be removed from supervision and auditing in
his name and under his legal responsibility.
Law No. (116) gave the accountant and legal auditor registered in the table of
working Libyan accountants and auditors the right to approve the budgets and accounts of
all companies and banks, who are responsible before taxes, appeal committees, and the like
from management bodies. The legal auditor and the accountant registered in the
accountants’ table. The public and state-funded entities that are subject to the control of the
Audit Bureau and the Administrative Control Authority are required to approve the final
accounts and conclude the budget for each fiscal year by the external financial auditor and
accountant, which is considered the common denominator in all activities within the state,
and from His duties are to protect public and private money, and the accountant must be
the master of himself and be subject only to the authority of his duty and conscience, and to
be familiar with the science of accounting, accounting, financial and commercial sciences
and their application in practical life, and the reality of the work of Islamic commercial
banks, continuous knowledge and the formation of a scientific culture in the field of
accounting and auditing Legal.

RECOMMENDATIONS
1. Provide control widely supervisory authority for improving monitors in Libyan banks.
2. Provide professional and technical to the management, through a financial fee and open
the door to rapprochement, between Board of Directors and employees.
3. The authority must be separated from the work of the board’s management, and not
included in its work and decisions.
4. Expanding the research on the legal system for the supervision of Libyan Islamic
commercial banks.
5. Attempts to compare between legal system for the supervision of Libyan Islamic
commercial banks and Malaysian legal system for the supervision of Malaysian Islamic
commercial banks for exploit the Malaysian experience in Islamic commercial banks.
6. Adderessing the political problem through amendment the legal system of Libyan
Commercial Banks.

REFERENCES

Book
Abdul Razzaq Jaber. 2004. Financial Control and Financial Controller in Theory. Beirut,
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Article (62) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding
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Article (62 - First) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD
regarding commercial banks and the addition of a special chapter on Islamic
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Article (62-Second) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD
regarding commercial banks and adding a special chapter on Islamic banking.
Article (63) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding
commercial banks and the addition of a special chapter on Islamic banking.
Article (83) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding
commercial banks and the addition of a special chapter on Islamic banking.
Article (84) of Law No. (1) of 2005, as amended by Law No. (46) of 2012 regarding
commercial banks and the addition of a special chapter on Islamic banking.
Article (85) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD regarding
commercial banks and the addition of a special chapter on Islamic banking.
Article (100-bis/4-5) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD
regarding commercial banks and the addition of a special chapter on Islamic
banking.
Article (100 bis/5/first) of Law No. (1) of 2005 AD, as amended by Law No. (46) of 2012 AD
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