Reduce liability for losses on commercial accounts by adhering to four requirements.
FDIC Modifies Statement of Policy for Section 19 of the Federal Deposit Insurance Act
Feb 8 - Section 19 of the Federal Deposit Insurance Act prohibits, without the prior written consent of the FDIC, a person convicted of a criminal offense involving dishonesty, breach of trust, money laundering, or who has entered into a pretrial diversion program, from participating in the affairs of an FDIC-insured institution. On Dec. 11, 2012, the FDIC board of directors modified the de minimis exceptions regarding the potential fine and the number of days of imprisonment.
Modifications of the criteria are expected to reduce the number of Section 19 applications and regulatory burden. The updated Statement of Policy for Section 19 of the FDI Act is available on the FDIC's website and was published in the Federal Register on Dec. 18, 2012. 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).
- 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 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 laws.
- 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.
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