WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) Board of Directors today approved revisions to regulations under Section 19 of the Federal Deposit Insurance (FDI) Act to conform to the Fair Hiring in Banking Act (FHBA), which became effective on December 23, 2022.
“I strongly support these changes which would expand employment opportunities in the banking industry, particularly for people of color who are disproportionately affected by the criminal justice system,” said FDIC Chairman Martin J. Gruenberg.
Section 19 regulations generally prohibit any person convicted of certain crimes from participating in banking without the prior written consent of the FDIC. The revisions approved today seek to align Section 19 regulations with the FHBA’s provisions. The most significant changes to the Section 19 regulations include:
- Certain older offenses – the FHBA excludes certain offenses from the scope of Section 19 based on the amount of time that has passed since the offense occurred or since the individual was released from incarceration. The final rule reflects these exclusions.
- Expunged, sealed, and dismissed criminal records – the FHBA excludes certain convictions from the scope of Section 19 that have been expunged, sealed, or dismissed. The FDIC has harmonized the FHBA’s standard with the FDIC’s existing regulations.
- De minimis offenses – the final rule provides conforming changes to match the FHBA’s exclusion of “de minimis” offenses—including “designated lesser offenses”—from the scope of Section 19 including relatively minor offenses that are specified either by the FHBA or by the FDIC through regulations.
- Criminal offenses involving dishonesty – the FHBA excludes certain offenses from the definition of “criminal offenses involving dishonesty,” including (1) misdemeanor criminal offenses committed more than one year before the date on which an individual files an application, excluding any period of incarceration, and (2) “an offense involving the possession of controlled substances.” The FDIC interprets the term “offense involving the possession of controlled substances” to exclude, at least, the offenses of simple possession and possession with intent to distribute from the “involving dishonesty” category of crimes. Additionally, the final rule shifts the FDIC’s position from its previous presumption that other drug-related offenses are subject to Section 19 as crimes involving dishonesty, breach of trust, or money laundering. Under the final rule, such crimes do not automatically trigger the need for an application but may require one, depending on the elements of the underlying criminal offense.
The final rule also provides interpretive language that addresses, among other topics, when an offense “occurred” or was “committed” under the FHBA and whether otherwise-covered offenses that occurred in foreign jurisdictions are covered by Section 19.