Another “financial institution letter” about changes to policy for prohibitions and removals of individuals from engagement with a federally insured bank was issued Thursday by the Federal Deposit Insurance Corp. (FDIC), superseding a version of the letter released in August.
At the beginning of the year, the agency proposed a new statement of policy (SOP) to replace the existing procedure, adopted in 1998. The revised SOP was adopted by the FDIC Board and became applicable July 18. It concerns participation in banking of a person convicted of a crime of dishonesty or breach of trust or money laundering, or who has entered a pretrial diversion or similar program in connection with the prosecution for such offense.
More specifically, it prohibits a person from becoming or continuing as an institution-affiliated party (IAP), owning or controlling, directly or indirectly an insured depository institution (insured institution), or otherwise participating, directly or indirectly, in the conduct of the affairs of the insured institution.
In July, the agency released FIL-42-2018, outlining the new policy. The letter released Thursday supersedes that letter, the agency said.
The latest letter (FIL-68-2018) states that highlights of the new policy are:
- 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 updated its application form to reflect the revisions.
- The FDIC issued an informational brochure, Your Complete Guide to Section 19, 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.