Compliance Risk Management in Islamic and Conventional Banking: A Systematic Literature Review and Research Agenda

Dede  Nurdiansyah

Authors

Dede Nurdiansyah Sharia Banking, Faculty of Economics and Business, UIN Syarif Hidayatullah, Indonesia

Keywords:

Compliance Risk Management, Shariah Governance, Corporate Governance

Abstract

This study systematically reviews the development of compliance risk management in Islamic and conventional banking by synthesizing scholarly evidence published between 2015 and 2025. Using a Systematic Literature Review approach guided by the PRISMA framework, this review analyzes 107 studies collected from Scopus and the Watase database. The analysis applies thematic synthesis, supported by the TCCM and CIMO frameworks, to identify the dominant theories, contexts, characteristics, methodologies, mechanisms, and outcomes discussed in the literature. The findings show that compliance risk management has evolved from a narrow regulatory obligation into a multidimensional governance capability shaped by regulatory pressure, corporate governance, Shariah governance, technological capability, organizational culture, and stakeholder expectations. Four major thematic clusters emerged from the reviewed studies: regulatory compliance and banking risk management, Shariah compliance and Shariah governance, corporate governance and internal control, and digital transformation in compliance practices. The review also finds that existing research is geographically concentrated in Malaysia, Indonesia, South Asia, and GCC countries, reflecting the institutional maturity of Islamic finance and dual banking systems in these regions. Although many studies emphasize the positive role of governance and compliance mechanisms in improving stability, legitimacy, and performance, the evidence also indicates that compliance may generate operational costs and rigidity when implemented only as a formal requirement. Furthermore, digital transformation, including fintech, regtech, artificial intelligence, cybersecurity, and digital monitoring tools, remains an emerging but underdeveloped area. This review contributes by offering an integrative synthesis and proposing future research directions on AI-driven compliance, ESG-Shariah integration, and cross-jurisdictional regulatory harmonization.

References

Abdulrahman, Z., Ebrahimi, T., & Al-Najjar, B. (2023). Exploring the nexus between Islamic financial institutions’ Shariah compliance disclosure and corporate governance: New insights from a cross-country analysis. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.2891

Alajmi, A. E., & Al-Shammari, B. A. (2024). Corporate governance impact on risk disclosure in Shariah-compliant financial firms of Kuwait. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-02-2024-0070

Alam, M. K. (2021). A proposed centralized Shariah governance framework for Islamic banks in Bangladesh. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-03-2021-0106

Alam, M. K., & Miah, M. S. (2024). Do Islamic banks use institutional theory in the light of Shariah governance? Empirical evidence from a Muslim dominant country. Heliyon, 10(2). https://doi.org/10.1016/j.heliyon.2024.e24252

Alam, M. K., Rahman, M. M., Runy, M. K., Adedeji, B. S., & Hassan, M. F. (2021). The influences of Shariah governance mechanisms on Islamic banks’ performance and Shariah compliance quality. Asian Journal of Accounting Research. https://doi.org/10.1108/AJAR-11-2020-0112

Alrawhani, E. M., Romli, A. B., Al-Sharafi, M. A., & Alkawsi, G. (2025). Integrating information security culture and protection motivation to enhance compliance with information security policies in banking: Evidence from PLS-SEM and fsQCA. International Journal of Human-Computer Interaction. https://doi.org/10.1080/10447318.2025.2464900

Alsaghir, M. (2023). Digital risks and Islamic FinTech: a road map to social justice and financial inclusion. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-10-2022-0262

Alsobai, B., & Aassouli, D. (2025). Assessing Digital Transformation Strategies in Retail Banks: A Global Perspective. Journal of Risk and Financial Management, 18(12), 710. https://doi.org/10.3390/jrfm18120710

Ayub, M., Hassan, M. K., & Saba, I. (2024). Revisiting the paradigm of Sharīʿah governance of Islamic financial institutions. Journal of Islamic Accounting and Business Research, 15(8), 1245-1265. https://doi.org/10.1108/JIABR-04-2022-0110

Basiruddin, R., & Ahmed, H. (2019). Corporate governance and Shariah non-compliant risk in Islamic banks: Evidence from Southeast Asia. Corporate Governance: The International Journal of Business in Society. https://doi.org/10.1108/CG-05-2019-0138

Batizani, D. (2026). Corporate Governance and Financial Sustainability of Higher Education Institutions in Malawi. Journal of Business Insight and Innovation, 5(1), 1-23.

Boudawara, Y., Toumi, K., Wannes, A., & Hussainey, K. (2023). Shariah governance quality and environmental, social and governance performance in Islamic banks: A cross-country evidence. Journal of Applied Accounting Research. https://doi.org/10.1108/JAAR-08-2022-0208

Burdon, W. M., & Sorour, M. K. (2018). Institutional theory and evolution of a legitimate compliance culture: The case of the UK financial service sector. Journal of Business Ethics. https://doi.org/10.1007/s10551-018-3981-4

De Souza, M. C. S., & De Souza, R. S. (2024). Law enforcement, social demands and reputation risks as drivers of compliance functions: a comparative analysis of the largest banks’ disclosures in the UK and Brazil. Crime, Law and Social Change, 81(3), 255-280. https://doi.org/10.1007/s10611-023-10116-8

El-Halaby, S., Omair Alotaibi, K., Alqatan, A., & Al-Alawi, A. N. S. (2023). The consequences of AAOIFI adoption: countrywide perspectives. In Islamic Accounting and Finance: A Handbook (pp. 197-235). https://doi.org/10.1142/9781800612426_0007

Fatmawati, D., Ariffin, N. M., Abidin, N. H. Z., & Osman, A. Z. (2022). Shariah governance in Islamic banks: Practices, practitioners and praxis. Global Finance Journal, 51, 100555. https://doi.org/10.1016/j.gfj.2020.100555

Friday, S. C., Lawal, C. I., Ayodeji, D. C., & Sobowale, A. (2022). Strategic model for building institutional capacity in financial compliance and internal controls across fragile economies. International Journal of Multidisciplinary Research and Growth Evaluation, 3(1), 944-954.

Grassa, R. (2015). Corporate governance and credit rating in Islamic banks: Does Shariah governance matter? Journal of Management & Governance. https://doi.org/10.1007/s10997-015-9322-4

Haridan, N. M., Hassan, A. F. S., & Karbhari, Y. (2018). Governance, religious assurance and Islamic banks: Do Shariah boards effectively serve? Journal of Management and Governance. https://doi.org/10.1007/s10997-018-9418-8

Hassan, M. K., & Raza Rabbani, M. (2023). Sharia governance standards and the role of AAOIFI: a comprehensive literature review and future research agenda. Journal of Islamic Accounting and Business Research, 14(5), 677-698. https://doi.org/10.1108/JIABR-04-2022-0111

Iqbal, H. R., Shahzad, M. A., & Malik, M. (2025). Sharīʿah Audit Guidelines in Islamic Financial Institutions: A Comparative and Analytical Study. Majallah-e-Talim o Tahqiq, 7(2).

Johnson, W. G. (2023). Caught in quicksand? Compliance and legitimacy challenges in using regulatory sandboxes to manage emerging technologies. Regulation & Governance, 17(3), 709-725. https://doi.org/10.1111/rego.12487

Karlsson, M., Karlsson, F., Åström, J., & Denk, T. (2021). The effect of perceived organizational culture on employees’ information security compliance. Information & Computer Security. https://doi.org/10.1108/ICS-06-2021-0073

Komandla, V., & Perumalla, S. (2017). Transforming traditional banking: Strategies, challenges, and the impact of fintech innovations. Educational Research (IJMCER), 1(6), 01-09.

Mayienga, B. A., Onwuzulike, O. C., Oyeyipo, I., Ayodeji, D. C., Nwaozomudoh, M. O., Attipoe, V., & Ahmadu, J. (2024). A conceptual model for global risk management, compliance, and financial governance in multinational corporations. International Journal of Advanced Multidisciplinary Research and Studies, 1351-1363. https://doi.org/10.62225/2583049X.2024.4.6.3916

Minhas, I. H. (2023). Shariah governance for Islamic financial institutions. In Shariah governance in Islamic banking institutions (pp. 152-175). Routledge.

Mohd Zain, F. A., Muhamad, S. F., Abdullah, H., Sheikh Ahmad Tajuddin, S. A. F., & Wan Abdullah, W. A. (2024). Integrating environmental, social and governance (ESG) principles with Maqasid al-Shariah: A blueprint for sustainable takaful operations. International Journal of Islamic and Middle Eastern Finance and Management. https://doi.org/10.1108/IMEFM-11-2023-0422

Mohd Zain, F. A., Wan Abdullah, W. A., & Muhamad, S. F. (2025). Governance mechanisms and Islamic bank performance: insights from South East Asia and the Gulf Cooperation Council. Management & Accounting Review (MAR), 24(1), 57-97. https://doi.org/10.24191/MAR.V24i01-03

Mollah, S., & Zaman, M. (2015). Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks. Journal of Banking & Finance. https://doi.org/10.1016/j.jbankfin.2015.04.030

Nawaz, T., Haniffa, R., & Hudaib, M. (2020). On intellectual capital efficiency and Shariah governance in Islamic banking business model. International Journal of Finance & Economics. https://doi.org/10.1002/ijfe.1986

Nipa, N. N., Zahid, Z., Amin, M. R., Alamm, M. S., Haque, Z. M. E., & Parves, M. M. (2026). Harnessing Islamic FinTech for disaster risk financing: Innovative strategies for economic resilience and sustainable development. Journal of Islamic Economics Lariba, 12(1). https://doi.org/10.20885/jielariba.vol12.iss1.art9

Odedina, E. A. (2023). Redefining governance, risk, and compliance (GRC) in the digital age: integrating AI-Driven risk management frameworks. World Journal of Advanced Engineering Technology and Sciences, 10(1), 264-282. https://doi.org/10.30574/wjaets.2023.10.1.0257

Safiullah, M., & Shamsuddin, A. (2018). Risk in Islamic banking and corporate governance. Pacific-Basin Finance Journal. https://doi.org/10.1016/j.pacfin.2017.12.008

Sufyan, A., & Othman, S. (2025). Governance, Ethics, and Transparency: A Comparative Analysis of Takaful and Conventional Insurance in Malaysia. Journal of Business and Economic Options, 8(3), 13-23. https://doi.org/10.5281/zenodo.17338416

Sunkara, V. L. B. (2024). Integrating product management strategies into risk management frameworks: Enhancing banking resilience in the era of fintech and regulatory evolution. International Research Journal of Modernization in Engineering Technology and Science, 6. https://doi.org/10.2139/ssrn.5074168

Tabash, M. I., Alam, M. K., & Rahman, M. M. (2022). Ethical legitimacy of Islamic banks and Shariah governance: evidence from Bangladesh. Journal of Public Affairs, 22(2), e2487. https://doi.org/10.1002/pa.2487

Udoh, O. R. (2024). Enhancing internal audit efficiency for effective risk management and corporate governance frameworks. International Journal of Research Publication and Reviews, 5(12), 3646-3659. https://doi.org/10.55248/gengpi.5.1224.250122

Wasim, M. H., & Zafar, M. B. (2023). Shariah governance framework for Islamic banking in Pakistan: A critical review and comparison with AAOIFI. Journal of Islamic Accounting and Business Research. https://doi.org/10.1108/JIABR-03-2023-0101

Yu, Z., & Liu, J. (2025). The digital revolution in banking: Unpacking risk management in the age of transformation. International Review of Economics & Finance. https://doi.org/10.1016/j.iref.2025.104444