Governance & Compliance

Silsilat is not just a liquidity protocol — it is a compliance-first financial infrastructure that embeds regulation, ethics, and oversight directly into its core architecture. By merging automated policy enforcement with human-in-the-loop governance, Silsilat ensures that every transaction remains transparent, lawful, and aligned with Islamic finance principles.

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Governance Principles

Silsilat’s governance framework is built upon four foundational principles:

Principle	Description
Transparency	Every valuation, transaction, and override is recorded on the Hedera Consensus Service and auditable in real time.
Accountability	All agent actions and policy decisions carry a digital signature, enabling traceability of origin and intent.
Compliance-by-Design	Regulatory, AML/KYC, and Shariah guidelines are embedded as executable rule packs within the Policy Engine.
Participatory Oversight	Pawnshops, investors, regulators, and Shariah boards all hold roles in the decision and dispute resolution process.

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Governance Structure

Entity Roles

• Silsilat Treasury: Custodian of platform fees, reserves, and protocol parameters.

• Governance Council: Sets network policies, approves new rule packs, and ratifies overrides.

• Policy & Compliance Committee: Maintains regulatory alignment and AML/KYC frameworks.

• Shariah Advisory Board: Certifies instruments and ensures compliance with Islamic finance principles.

• Liquidity Providers DAO: Represents investor interests in governance votes.

• Regulatory Observers: Authorized read-only nodes (e.g., Bank Negara Malaysia, Labuan FSA) for oversight and audit access.

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Policy Engine Overview

At the heart of Silsilat’s compliance layer lies the Policy Engine, a modular rule-based system that executes, verifies, and records compliance logic for each transaction.

Each policy is expressed as a structured JSON rule pack and stored both on IPFS and anchored to Hedera with a version hash.

Example Policy Schema

{
  "policy_id": "AR_RAHNU_STD_2025",
  "version": "1.0.3",
  "jurisdiction": "Malaysia",
  "regulatory_authority": "Bank Negara Malaysia",
  "rules": {
    "max_ltv": 0.8,
    "haircut": {
      "jewelry": 0.12,
      "bar": 0.05
    },
    "aml_threshold_myr": 25000,
    "kyc_required": true,
    "shariah_screening": true
  },
  "auditor": "BNM_COMPLIANCE_NODE",
  "valid_from": "2025-01-01",
  "valid_to": "2026-01-01",
  "policy_hash": "sha256:ad98f8b3c5a44d..."
}

Each time an agent evaluates or processes a loan, it fetches the latest active policy version and enforces the relevant constraints.

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Compliance Modules

Module	Purpose	Key Features
KYC / AML / CTF	Ensures customer due diligence and transaction monitoring	eKYC integration, sanction list screening, suspicious transaction flags
Shariah Screening	Validates conformity to Islamic finance principles	Prohibits riba (interest), ensures qard-hasan structure, zakat tracking
Transaction Monitoring	Detects anomalies or threshold breaches	Automated flagging + override request
Regulatory Reporting	Provides audit data to financial authorities	HCS message feeds, queryable dashboards
AI Compliance Evaluation	Uses AI evaluator for risk scoring and fraud detection	Evaluator output stored as Phoenix trace + IPFS artifact

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Automated Compliance Flow

Output Example (Compliance Pass)

{
  "trace_id": "1234abcd-56ef-78gh-90ij",
  "policy_id": "AR_RAHNU_STD_2025",
  "kyc_status": "verified",
  "aml_screening": "clear",
  "ltv_ratio": 0.78,
  "compliance_result": "pass",
  "policy_hash": "sha256:ad98f8b3c5a44d...",
  "timestamp": "2025-10-26T05:18:32Z"
}

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Shariah Compliance Framework

Principles Enforced

• No Riba (Interest): Returns to investors are structured as profit-sharing (mudarabah), not interest.

• Transparency (Gharar Avoidance): All terms are recorded immutably on-chain.

• Asset-Backed Financing: Each loan must correspond to a real physical gold pledge.

• Ethical Purpose: Funds must not finance prohibited (haram) activities.

Mechanism

1. Shariah rule packs are reviewed and signed by the Shariah Advisory Board.

2. Each transaction automatically checks for Shariah compliance flags.

3. Non-compliant actions trigger an override review rather than automatic execution.

Example Rule Pack (Excerpt)

{
  "rule_id": "SHARIAH_STD_2025",
  "prohibitions": ["riba", "gharar", "maysir"],
  "requirements": {
    "asset_backing": true,
    "disclosure": "mandatory",
    "profit_sharing_ratio": 0.08
  },
  "reviewed_by": "ShariahBoard_Malaysia",
  "approval_hash": "sha256:d8f9a77b21..."
}

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Override Mechanism (Human-in-the-Loop)

Not all situations can be resolved by automation. The Override Agent allows designated administrators or regulators to modify, reverse, or approve exceptional cases while maintaining audit transparency.

Override Flow

Override Event Example

{
  "trace_id": "e75a9b43-1234-43be-b761-dcb112a1a58c",
  "action": "override_reject",
  "reason": "borrower flagged by AML system",
  "approved_by": "PolicyCommittee_MYR",
  "timestamp": "2025-10-26T06:10:45Z"
}

Every override event:

• Is time-stamped and signed with the approver’s private key.

• Includes reasoning metadata for auditability.

• Is stored permanently on Hedera for compliance recordkeeping.

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Regulator Interaction Layer

Regulators access a real-time dashboard and queryable API endpoints for continuous oversight.

Regulator Access Mode	Capability
Read-only HCS Node	Subscribe to compliance events and overrides.
Query API (GraphQL)	Search transactions by trace ID, policy ID, or pawnshop.
Audit Dashboard	Visualize trends, AML alerts, and LTV distributions.
Policy Signing Interface	Approve or update rule packs digitally.

This architecture ensures continuous regulatory visibility without compromising decentralization.

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Governance Token (SLC) for Voting & Policy Upgrades

When implemented, SLC tokens will represent governance rights within the Silsilat ecosystem.

Use Cases:

• Vote on fee adjustments or pool rate changes.

• Approve new policy packs or model updates.

• Delegate validator rights to node operators.

• Fund community and sustainability programs.

Voting Model:

Quadratic or delegated staking-based, depending on regulatory jurisdiction. Each vote is recorded as an on-chain event on the Governance Topic (HCS_GOV_TOPIC_ID).

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Global Policy Interoperability

As Silsilat expands to other markets (Indonesia, Philippines, East Africa), the Policy Engine supports jurisdiction-specific rule packs under a unified schema.

Each pack references:

• Local gold valuation standards.

• AML/KYC laws.

• Shariah advisory bodies.

• Currency and FX integration rules.

This ensures global scalability without losing compliance granularity.

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Summary

Silsilat’s Governance and Compliance Framework turns regulation into code, consensus, and context:

• Code — Executable rule packs ensure objective enforcement.

• Consensus — Every event is verifiably logged on Hedera HCS.

• Context — Human override ensures fairness, ethics, and judgment.

Together, they form a self-regulating, trust-minimized network that financial institutions and regulators can depend on — a digital infrastructure for ethical, compliant, and transparent finance.