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Effective date of FDIC changes to Section 19 application restrictions


FDIC FIL-72-2020, issued Friday, announced the FDIC's approval of a final rule to revise and incorporate into the agency’s regulations a longstanding Statement of Policy (SOP) related to individuals with certain criminal offenses on their records who seek employment in the banking industry. Section 19 of the Federal Deposit Insurance Act prohibits a person from participating in the affairs of an FDIC-insured institution if he or she has been convicted of a crime involving dishonesty, breach of trust, or money laundering, or has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, without the prior written consent of the FDIC. Revising and codifying the SOP into the regulations will provide better transparency and clarity regarding the interpretation of Section 19 and the application process.

The rule now excludes all covered offenses that have been expunged or sealed by a court of competent jurisdiction or by operation of law from being considered an offense of record under Section 19. It also expands the de minimis offenses (minor offenses for which FDIC approval is automatic and no application is required). The FDIC expects the changes will reduce the number of applications required and reduce regulatory burden on banks and individuals. The rule will become effective 30 days after Federal Register publication.

PUBLICATION UPDATE: To be published on 8/20/2020, with an effective date of 9/21/2020.

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