FDIC Modifies its Statement of Policy Regarding Section 19 of the FDI Act

On August 3, 2018, the FDIC issued modifications to its Statement of Policy regarding the FDI Act. Specifically, the changes were made to the FDIC’s interpretation of Section 19, which prohibits a person convicted of any criminal offense involving dishonesty, breach of trust, money laundering, or who has entered into a pretrial diversion or similar program in connection with a prosecution for such offense, from participating in the affairs of an FDIC-insured institution.

The FDIC’s new interpretation of Section 19:

• Allows convictions or program entries for the issuance of insufficient funds checks of moderate aggregate value, small dollar, simple theft, and isolated minor offenses committed by young adults to be de minimus exceptions;
• Allows drug-related covered offenses to be granted automatic FDIC consent and an application is not required if de minimus criteria are met;
• Allows the issuance of conditional offers of employment to prospective employees pending a background check provided the individual does not begin employment until the FDIC-insured institution verifies that the individual’s participation is not barred by Section 19; and
• Clarifies terms such as “complete expungement,” “jail time,” and “pretrial diversion or similar programs.”

The FDIC believes these modifications will reduce regulatory burden while preserving the purpose of the law.