Government Regulations

Written By ESR News Blog Editor Thomas Ahearn

On August 20, 2018, the Federal Deposit Insurance Corporation (FDIC) – an independent agency created by the U.S. Congress to maintain stability and public confidence in the nation’s financial system – issued Modifications to the Statement of Policy (SOP) for Section 19 of the Federal Deposit Insurance (FDI) Act.

Section 19 prohibits – without prior written consent of the FDIC – a person convicted of any criminal offense involving dishonesty, breach of trust, money laundering, or who has entered a pretrial diversion program in connection with prosecution for such an offense, from working at a FDIC-insured institution.

On January 8, 2018, the FDIC published in the Federal Register notice of proposed modifications and sought public comment. On July 19, 2018, the FDIC approved modifications to the SOP’s de minimis exceptions to filing an application and made more technical and clarifying changes. Highlights include:

  • The de minimis exceptions, under which the FDIC’s consent is automatically granted and an application is not required, have been modified to encompass convictions or program entries for issuance of insufficient funds checks of moderate aggregate value; small dollar, simple theft; and isolated minor offenses committed by young adults.
  • Drug-related covered offenses will be granted automatic FDIC consent and not require an application if de minimis criteria are met.
  • FDIC-supervised institutions may provide prospective employees conditional offers of employment pending a background check provided that the individual does not begin employment until the institution verifies that the individual’s participation is not barred by Section 19.
  • Clarifying modifications have been made to further define the terms “complete expungement,” “jail time,” and “pretrial diversion or similar programs.”
  • The FDIC is in the process of updating its application forms to reflect these revisions.
  • The FDIC will issue an informational brochure that explains the process for submitting an application to the FDIC.

The modifications provide carefully measured changes to the SOP while preserving the purpose of the law that will reduce regulatory burden, promote public awareness of the law, and decrease the number of covered offenses that will require an application.

The modifications are expected to reduce the number of Section 19 applications and regulatory burden. The updated SOP was published in the Federal Register on August 3, 2018, and is available on the FDIC’s website at https://www.fdic.gov/news/news/financial/2018/fil18042.html.

Enacted on September 21, 1950, the Federal Deposit Insurance (FDI) Act, Pub.L. 81–797, 64 Stat. 873, is a statute that governs the Federal Deposit Insurance Corporation (FDIC). The FDIC was originally created by the Banking Act of 1933, which amended the Federal Reserve Act of 1913.

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