FDIC Modifies Statement of Policy for Section 19 of Federal Deposit Insurance Act

In December of 2012, the Federal Deposit Insurance Corporation (FDIC) Board of Directors modified the Statement of Policy (SOP) for Section 19 of the Federal Deposit Insurance (FDI) Act which prohibits a person convicted of a criminal offense involving dishonesty, breach of trust, money laundering, or who has entered into a pretrial diversion program, from working at an FDIC-insured institution without prior written consent of the FDIC. The updated SOP for Section 19 of the FDI Act, which includes modifications the de minimis exceptions regarding the potential fine and the number of days of imprisonment, is available on the FDIC website at http://www.fdic.gov/news/news/financial/2013/fil13003.html.

The modifications of the criteria that were published in the Federal Register on December 18, 2012 are expected to reduce the number of Section 19 applications and regulatory burden. Further, the FDIC reminds the industry to become familiar with the requirements of Section 19 of the FDI Act and the related SOP, and to ensure that its personnel policies and procedures comply. All FDIC-insured institutions, bank holding companies, and savings and loan holding companies must comply with the requirements of Section 19 of the FDI Act (12 U.S.C. 1829).This guidance applies to all FDIC-insured depository institutions. Highlights include:

  • The SOP de minimis exceptions under which the FDIC will grant an automatic approval under Section 19 have been modified to reflect the following: “[t]he offense was punishable by imprisonment for a term of one year or less and/or a fine of $2,500 or less, and the individual did not serve more than three (3) days of actual jail time.”
  • Industry applications for employment, background check programs, and hiring practices must comply with Section 19. Offenses covered by Section 19 have no statute of limitations. Therefore, institutions must consider a job applicant’s entire legal history.
  • In matters related to Section 19, federal law pre-empts applicable state law(s).
  • Individuals with convictions subject to Section 19 may apply to the FDIC for permission to participate in the affairs of an FDIC- insured institution and to the Board of Governors of the Federal Reserve System for permission to participate in the affairs of a bank holding company or a savings and loan holding company.
  • An individual cannot be affiliated with, or employed by, an insured institution while a Section 19 application is pending with the FDIC.

The Statement of Policy for Section 19 of the FDI Act is available at: http://www.fdic.gov/regulations/laws/rules/5000-1300.html#fdic5000applicationsus. The Section 19 application form is available at: http://www.fdic.gov/regulations/laws/FORMS/section19.html.

As reported previously on the ESR News blog, several older workers at financial institutions were fired for seemingly minor crimes in their youth due to strict adherence to the ‘FDIC STATEMENT OF POLICY FOR SECTION 19 OF THE FDI ACT’ that prohibits a person convicted of any criminal offense involving dishonesty or breach of trust or money laundering from working at an FDIC-insured depository institution without the prior written consent of the FDIC. These stories include:

For more information about background checks for a safe hiring program, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS) – at http://www.esrcheck.com, call 415.898.0044, or email clientsupport@esrcheck.com.

Sources:

http://www.fdic.gov/news/news/financial/2013/fil13003.html

http://www.fdic.gov/regulations/laws/rules/1000-2100.html#fdic1000sec19a

http://www.fdic.gov/regulations/laws/rules/5000-1300.html

About Employment Screening Resources (ESR):

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