# FDIC FIL-72-2020: FDIC Final Rule Revises and Codifies Policy to Allow Greater Employment Opportunities for Individuals with Certain Minor Criminal Offenses on Their Records

> Federal · Agency guidance · Superseded

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL20072

## Section

- **Citation:** FDIC FIL-72-2020
- **Heading:** FDIC Final Rule Revises and Codifies Policy to Allow Greater Employment Opportunities for Individuals with Certain Minor Criminal Offenses on Their Records
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** Superseded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / FDIC Final Rule Revises and Codifies Policy to Allow Greater Employment Opportunities for Individuals with Certain Minor Criminal Offenses on Their Records

## Text

51312
Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
1 12 U.S.C. 1829.
2 See 84 FR 68353.
3 See 84 FR 68353–54.
■4. Amend § 274a.12 by adding
paragraph (b)(26) to read as follows:
§ 274a.12
Classes of aliens authorized to
accept employment.
*
*
*
*
*
(b) * * *
(26)(i) Pursuant to 8 CFR 214.2(h)(21)
and notwithstanding 8 CFR
214.2(h)(2)(i)(D) and paragraph (b)(21)
of this section, an alien is authorized to
be employed, but no earlier than the
start date of employment indicated in
the H–2A petition, by a new employer
that has filed an H–2A petition naming
the alien as a beneficiary and requesting
an extension of stay for the alien, for a
period not to exceed 45 days beginning
from the ‘‘Received Date’’ on Form I–
797 (Notice of Action) acknowledging
receipt of the petition requesting an
extension of stay, or 45 days beginning
on the start date of employment if the
start date of employment indicated in
the H–2A petition occurs after the filing.
The length of the period (up to 45 days)
is to be determined by USCIS in its
discretion. However, if USCIS
adjudicates the petition prior to the
expiration of this 45-day period and
denies the petition for extension of stay,
or if the petitioner withdraws the
petition before the expiration of the 45-
day period, the employment
authorization under this paragraph
(b)(26) will automatically terminate
upon 15 days after the date of the denial
decision or the date on which the
petition is withdrawn.
udicates the petition prior to the
expiration of this 45-day period and
denies the petition for extension of stay,
or if the petitioner withdraws the
petition before the expiration of the 45-
day period, the employment
authorization under this paragraph
(b)(26) will automatically terminate
upon 15 days after the date of the denial
decision or the date on which the
petition is withdrawn.
(ii) Authorization to initiate
employment changes pursuant to 8 CFR
214.2(h)(21) and paragraph (b)(26)(i) of
this section begins at 12 a.m. on August
19, 2020, and ends at the end of
December 17, 2020.
*
*
*
*
*
Chad R. Mizelle,
Senior Official Performing the Duties of the
General Counsel, U.S. Department of
Homeland Security.
[FR Doc. 2020–18283 Filed 8–18–20; 8:45 am]
BILLING CODE 9111–97–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 303 and 308
RIN 3064–AF19
Incorporation of Existing Statement of
Policy Regarding Requests for
Participation in the Affairs of an
Insured Depository Institution by
Convicted Individuals
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Final rule.
SUMMARY: Section 19 of the Federal
Deposit Insurance Act requires persons
convicted of certain criminal offenses to
obtain prior written consent before
participating in the conduct of the
affairs of any depository institution. The
Federal Deposit Insurance Corporation
(FDIC) is revising its existing regulations
relating to section 19 to revise the
FDIC’s procedures and standards
relating to applications for the FDIC’s
written consent, and to incorporate and
revise the FDIC’s existing Statement of
Policy for Section 19 of the Federal
Deposit Insurance Act (SOP)
duct of the
affairs of any depository institution. The
Federal Deposit Insurance Corporation
(FDIC) is revising its existing regulations
relating to section 19 to revise the
FDIC’s procedures and standards
relating to applications for the FDIC’s
written consent, and to incorporate and
revise the FDIC’s existing Statement of
Policy for Section 19 of the Federal
Deposit Insurance Act (SOP).
Incorporating the SOP into the FDIC’s
regulations will make application of the
SOP more transparent, increase
certainty concerning the FDIC’s
application process, afford regulatory
relief, and help both insured depository
institutions and affected individuals to
understand the impact of section 19 and
to potentially seek relief from it. The
FDIC’s existing SOP will be rescinded
on the date this final rule (rule) becomes
effective.
DATES: This rule is effective September
21, 2020.
FOR FURTHER INFORMATION CONTACT:
Timothy Schuett, Review Examiner
(763) 614–9473; Brian Zeller, Review
Examiner (571) 345–8170; or Larisa
Collado, Section Chief (202) 898–8509,
lcollado@fdic.gov, in the Division of
Risk Management Supervision; or
Graham Rehrig, Senior Attorney, (202)
898–3829; John Dorsey, Acting
Supervisory Counsel, (202) 898–3807;
Anne DeSimone, Deputy Regional
Counsel, (781) 794–5541; or Andrea
Winkler, Acting Assistant General
Counsel, (202) 898–3727, in the Legal
Division.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objective of the rule is to
clarify how the FDIC interprets and
applies section 19 of the Federal Deposit
Insurance Act (section 19),1 clarify the
application process for insured
depository institutions and individuals
who seek relief from section 19, and
expand the scope of relief available for
certain offenses. The FDIC SOP provides
the public with guidance relating to
section 19 and the FDIC’s application of
this statute. The current SOP, with
modifications over time, has been
published and a resource for the public
for over twenty years
on process for insured
depository institutions and individuals
who seek relief from section 19, and
expand the scope of relief available for
certain offenses. The FDIC SOP provides
the public with guidance relating to
section 19 and the FDIC’s application of
this statute. The current SOP, with
modifications over time, has been
published and a resource for the public
for over twenty years. However, the
terms and procedures outlined in the
SOP have not been adopted as formal
regulations by the FDIC. To remove
potential ambiguities about the FDIC’s
approach to section 19 or the
application process, the rule
incorporates much of the current SOP,
while adopting certain changes
suggested by commenters.
II. Background and Public Comments
Section 19 prohibits, without the
prior written consent of the FDIC, the
participation in banking by any person
who has been convicted of a crime of
dishonesty or breach of trust or money
laundering, or who has agreed to enter
into a pretrial diversion or similar
program in connection with the
prosecution for such an offense. Further,
this law forbids an insured depository
institution (IDI) from permitting such a
person to engage in any conduct or to
continue any relationship prohibited by
section 19. Section 19 also imposes a
ten-year ban for a person convicted of
certain crimes enumerated in Title 18 of
the United States Code, which can be
removed only upon a motion by the
FDIC and approval by the sentencing
court
this law forbids an insured depository
institution (IDI) from permitting such a
person to engage in any conduct or to
continue any relationship prohibited by
section 19. Section 19 also imposes a
ten-year ban for a person convicted of
certain crimes enumerated in Title 18 of
the United States Code, which can be
removed only upon a motion by the
FDIC and approval by the sentencing
court.
On December 16, 2019, the FDIC
published a notice of proposed
rulemaking (proposal) to incorporate the
SOP into the FDIC’s existing Procedure
and Rules of Practice.2 In the proposal,
the FDIC provided a history of the SOP
from its issuance in December 1998,
through clarifications in 2007 and 2011,
modification in 2012, and through its
most-recent revision in August 2018.3
The FDIC proposed to incorporate the
current provisions of the SOP into its
rules and procedures in order to provide
greater transparency into the FDIC’s
interpretation and application of section
19, to provide greater certainty
concerning the FDIC’s application
process, and to aid both IDIs and
individuals who may be affected by
section 19 to understand its impact and
potentially seek relief from its
provisions. The FDIC proposed to
rescind such sections of 12 CFR 308,
subpart M, that would be duplicative of
the changes proposed for part 303,
subpart L, and to revise the remaining
sections to ensure conformity for any
request for a hearing when an
application under section 19 has been
denied.
The FDIC, in the proposal, requested
comments on all aspects of its approach
to section 19. The FDIC also requested
comments, in particular, on the
following topics:
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request for a hearing when an
application under section 19 has been
denied.
The FDIC, in the proposal, requested
comments on all aspects of its approach
to section 19. The FDIC also requested
comments, in particular, on the
following topics:
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51313
Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
4 The FDIC notes that, during the de minimis
waiting period, individuals retain the option of
filing an application for consideration by the FDIC.
• The de minimis criteria for offenses
that represent low risk to the Deposit
Insurance Fund;
• expansion of the de minimis
category for use of fake identification;
• modification of the five-year post-
conviction cooling-off period for certain
offenses; and
• the application of section 19 to
expungements.
The comment period closed on March
16, 2020. The FDIC received multiple
comments from nine different
commenters, consisting of three policy
institutes, a reentry employment
provider, a depository institution trade
group, two financial institutions, an
advocacy group on behalf of 28
additional organizations, and an
individual. All of the comments
generally supported the proposal. The
comment received from the individual
did not offer specific changes to the
proposal, but the other eight
commenters suggested a variety of
changes. The comments and the FDIC’s
responses are discussed below in
Sections III and IV.
III. Description and Expected Effects of
the Rule
The rule addresses, among other
topics, who is covered by section 19, the
types of offenses covered by section 19,
the effect of the completion of
sentencing or pretrial-diversion program
requirements in the context of section
19, and the FDIC’s procedures for
reviewing applications filed under
section 19
d below in
Sections III and IV.
III. Description and Expected Effects of
the Rule
The rule addresses, among other
topics, who is covered by section 19, the
types of offenses covered by section 19,
the effect of the completion of
sentencing or pretrial-diversion program
requirements in the context of section
19, and the FDIC’s procedures for
reviewing applications filed under
section 19. The rule makes several
significant changes to the SOP, partly in
response to the public comments. These
revisions include the following:
• Expungements. The rule excludes
all covered offenses that have been
expunged or sealed by a court of
competent jurisdiction or by operation
of law.
• De minimis offenses (offenses for
which a person will be deemed
automatically approved and no
application will be required). Increases
the small-dollar theft threshold to
$1,000. Expands the de minimis
exception to include the use of a fake or
false identification by a person under
the age of 21 to circumvent age based
restrictions on purchases, activities, or
entry (not just alcohol-related purposes).
Allows for two covered de minimis
offenses on a person’s criminal record to
still qualify for the de minimis
exception. (Note, no offense committed
against an IDI or insured credit union
can qualify as ‘‘de minimis.’’) If an
individual has two covered offenses on
their record, the rule decreases the
amount of time that must elapse,
following the date of conviction or entry
into a pre-trial diversion program,
before the covered offenses may be
deemed de minimis.4 The rule also
eliminates this waiting period when
there is only one covered, de minimis
offense on a person’s record.
• Application procedures. Clarifies
when and how an application must be
filed, the application types available,
and how the FDIC will evaluate an
application. In addition, the rule
addresses denials of applications.
Specifically, the rule does the
following:
A. Revised Provisions of 12 CFR Part
303, Subpart L
1
d when
there is only one covered, de minimis
offense on a person’s record.
• Application procedures. Clarifies
when and how an application must be
filed, the application types available,
and how the FDIC will evaluate an
application. In addition, the rule
addresses denials of applications.
Specifically, the rule does the
following:
A. Revised Provisions of 12 CFR Part
303, Subpart L
1. Section 303.220
What is section 19
of the FDI Act?
This section combines portions of the
‘‘scope’’ section in the existing 12 CFR
303.220 and the introduction part of the
SOP. Paragraph (a) reflects the scope
provisions. Paragraph (b) sets out the
application of section 19 to insured
depository institutions, including the
conditional offers of employment that
FDIC-supervised institutions may make.
The substance of this paragraph comes
from the SOP. Paragraph (c) also comes
from the SOP and addresses the need for
an application.
2. Section 303.221
Who is covered by
section 19?
This section describes who is covered
by section 19 and comes mainly from
the existing SOP. Paragraph (a) defines
‘‘institution-affiliated parties’’ and
others who may fall within section 19.
Paragraph (b) defines the term ‘‘person’’
under section 19 as an individual, not
a legal entity. Paragraph (c) concerns
individuals who file an application with
the FDIC under section 19 and who also
seek to participate in the affairs of a
bank or savings and loan holding
company, noting that such individuals
may have to comply with any filing
requirements of the Board of the
Governors of the Federal Reserve
System under 12 U.S.C. 1829(d) and (e).
Paragraph (d) defines when
‘‘ownership’’ or ‘‘control’’ results in the
application of section 19 to an
individual or individuals who may be
deemed in control of, or be deemed to
be an owner of, an IDI.
3. Section 303.222
What offenses are
covered under section 19?
This section addresses covered
criminal offenses under section 19. It
comes mainly from the SOP
r 12 U.S.C. 1829(d) and (e).
Paragraph (d) defines when
‘‘ownership’’ or ‘‘control’’ results in the
application of section 19 to an
individual or individuals who may be
deemed in control of, or be deemed to
be an owner of, an IDI.
3. Section 303.222
What offenses are
covered under section 19?
This section addresses covered
criminal offenses under section 19. It
comes mainly from the SOP. Paragraph
(a) notes that section 19 applies to any
person who has been convicted of any
criminal offense involving dishonesty,
breach of trust, or money laundering, or
who has agreed to enter into a pretrial
diversion or similar program in
connection with a prosecution for any
such offense. This paragraph also
describes the restrictions that section 19
places upon such individuals.
Paragraph (b) requires that, to determine
whether the criminal offense is one of
dishonesty, breach of trust, or money
laundering, the FDIC will look to the
statutory elements of the criminal
offense or to court decisions in the
relevant jurisdiction.
Paragraph (c) requires an application
for all drug offenses, except for simple
possession, unless the criminal offense
meets the criteria in § 303.227 for not
filing an application. The FDIC has
declined to adopt a commenter’s
proposal that the FDIC eliminate all
drug-related convictions from being
considered covered offenses under
section 19, or significantly narrow the
scope of covered drug offenses. The
FDIC maintains that an application is
required for it to determine the nature
of the offense and elements of the crime
and therefore it will continue the
current requirement that an application
be filed, unless the offense is de
minimis.
4. Section 303.223
What constitutes a
conviction under section 19?
This section comes mainly from the
SOP, but clarifies the status of
convictions reversed on appeal and
expands and simplifies the exclusion for
expungements
ture
of the offense and elements of the crime
and therefore it will continue the
current requirement that an application
be filed, unless the offense is de
minimis.
4. Section 303.223
What constitutes a
conviction under section 19?
This section comes mainly from the
SOP, but clarifies the status of
convictions reversed on appeal and
expands and simplifies the exclusion for
expungements. The current SOP notes
that a conviction or program entry that
has been completely expunged is not
subject to section 19 and does not
require an application. For the
expungement to be considered
‘‘complete’’ under the current SOP, the
jurisdiction granting the expungement
must not allow the conviction or
program entry to be used for any
subsequent purpose, including but not
limited to an evaluation of a person’s
fitness or character. This constraint has
been a source of confusion for the
industry and individual applicants, and
the FDIC has twice undertaken to clarify
this term in prior SOP revisions. The
public comments to the NPR make it
clear that the confusion remains.
Paragraph (a) states that there must
have been a conviction of record for
section 19 to apply, and that section 19
does not apply to arrests, pending cases
not brought to trial (unless the person
has a program entry as set out in
§ 303.224), or any conviction reversed
on appeal unless the reversal was for the
purpose of re-sentencing. This revised
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tion 19
does not apply to arrests, pending cases
not brought to trial (unless the person
has a program entry as set out in
§ 303.224), or any conviction reversed
on appeal unless the reversal was for the
purpose of re-sentencing. This revised
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51314
Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
language is in response to one
commenter’s request that the FDIC
clarify its position on appellate
decisions as they pertain to the scope of
section 19. The FDIC notes, however,
that covered offenses that have been
pardoned—and which are not otherwise
excluded by the SOP—will still require
an application.
Paragraph (b) clarifies that, absent a
program entry, when an individual is
charged with a covered offense but is
subsequently convicted of an offense
that is not a covered offense, that
conviction is not subject to section 19.
Paragraph (c) excludes covered
offenses that have been expunged or
sealed by a court of competent
jurisdiction or by operation of law. Six
commenters asked that the FDIC
significantly revise its policy on the
expungement of criminal records,
including proposals to eliminate the
requirement of complete expungement.
To support this view, commenters
highlighted the variance in
expungement practices between
jurisdictions and the significant
ambiguity for applicants and banks that
are tasked with interpreting unfamiliar
state law. In fact, only a few states and
jurisdictions have expungement
processes that result in a ‘‘complete
expungement’’ under the standards set
forth in the current SOP. After
considering these comments, the FDIC
has agreed to expand the scope of the
SOP’s expungement language
ictions and the significant
ambiguity for applicants and banks that
are tasked with interpreting unfamiliar
state law. In fact, only a few states and
jurisdictions have expungement
processes that result in a ‘‘complete
expungement’’ under the standards set
forth in the current SOP. After
considering these comments, the FDIC
has agreed to expand the scope of the
SOP’s expungement language. The FDIC
believes that these revisions will reduce
regulatory burden upon banks and
potential applicants by decreasing the
number of required applications and
reducing the time spent interpreting the
expungement laws of various
jurisdictions.
Paragraph (d) excludes ‘‘youthful
offender’’ judgments for minors from the
scope of section 19.
5. Section 303.224
What constitutes a
pretrial diversion or similar program
under section 19?
This section comes mainly from the
SOP. Paragraph (a) defines what
constitutes a pretrial diversion or
similar program (a program entry), and
excludes program entries that occurred
prior to November 29, 1990.
Paragraph (b) clarifies that when a
covered offense either is reduced by a
program entry to an offense that would
otherwise not be covered by section 19
or is dismissed upon successful
completion of a program entry, the
offense remains a covered offense for
purposes of section 19. The covered
offense will require an application
unless it is de minimis as provided by
§ 303.227.
Paragraph (c) states that
expungements or sealings of program
entry records will be treated the same as
expungements or sealings of
convictions.
6. Section 303.225
What are the types
of applications that can be filed?
This section is a combination of the
existing §§ 303.221 and 308.158 and the
SOP. Paragraph (a) establishes the
institution-filing requirement (bank-
sponsored applications). Paragraph (b)
establishes the procedure to apply when
an IDI will not file an application for an
individual (individual waiver
applications).
7
Section 303.225
What are the types
of applications that can be filed?
This section is a combination of the
existing §§ 303.221 and 308.158 and the
SOP. Paragraph (a) establishes the
institution-filing requirement (bank-
sponsored applications). Paragraph (b)
establishes the procedure to apply when
an IDI will not file an application for an
individual (individual waiver
applications).
7. Section 303.226
When is an
application to be filed?
This section states when an
application is to be filed, excepting from
its requirement those covered offenses
which are considered de minimis under
subpart L. An application will not be
considered by the FDIC until all
sentencing requirements associated with
a conviction have been met or all
requirements of the program entry have
been completed.
8. Section 303.227
When is an
application not required for a covered
conviction or program entry (de minimis
offenses)?
This section comes mainly from the
SOP but has been expanded. Under the
current SOP, certain minor offenses are
deemed to present low risk to insured
institutions. Currently, an individual’s
covered offense may be considered de
minimis only when there is one
conviction or program entry, and the
conviction or program entry occurred at
least five years before the date on which
an application would be required. For
applicants whose underlying
misconduct occurred when they were
21 years of age or younger, the waiting
period is reduced to 30 months. Certain
individuals may also be required to
complete all sentencing or program
requirements before qualifying for the
de minimis exception.
Eight commenters supported the
expansion of the de minimis exception
to filing as it currently exists, and seven
of the commenters provided specific
proposals for the expansion,
clarification, or modification, of this
exception. Three commenters proposed
that the FDIC reduce the waiting period
to qualify under the de minimis
framework
ents before qualifying for the
de minimis exception.
Eight commenters supported the
expansion of the de minimis exception
to filing as it currently exists, and seven
of the commenters provided specific
proposals for the expansion,
clarification, or modification, of this
exception. Three commenters proposed
that the FDIC reduce the waiting period
to qualify under the de minimis
framework. Three commenters also
proposed that the FDIC increase the
simple-theft threshold to $1,000 to align
with the ‘‘bad-check’’ or insufficient-
funds threshold under the de minimis
framework. Moreover, three commenters
proposed that the FDIC include
additional minor crimes under the de
minimis exception, regardless of the
maximum punishment for those crimes.
Paragraph (a) establishes the general
criteria for convictions or program
entries to be considered de minimis, if
the criteria are met. If the de minimis
conditions are satisfied, the person is
deemed automatically approved and no
application will be required. The
general criteria have been expanded, in
response to comments, in two
significant ways: (1) An individual with
two convictions or program entries for
covered offenses may be eligible for the
de minimis exception, provided the
other criteria are satisfied with respect
to both convictions or program entries;
and (2) the five-year waiting period has
been eliminated when the individual
has only one de minimis offense, and
the waiting period has been reduced to
three years when the individual has two
de minimis offenses (or 18 months if the
actions that resulted in both convictions
or program entries all occurred when
the individual was 21 years of age or
younger).
The FDIC continues to process a
number of applications from individuals
who are low risk, and these applications
are generally approved
e, and
the waiting period has been reduced to
three years when the individual has two
de minimis offenses (or 18 months if the
actions that resulted in both convictions
or program entries all occurred when
the individual was 21 years of age or
younger).
The FDIC continues to process a
number of applications from individuals
who are low risk, and these applications
are generally approved. FDIC review of
these applications revealed that many
include multiple convictions or program
entries for minor offenses, or
convictions or program entries that
occurred less than 5 years (or 30
months) ago. Because these applications
are considered low risk and are
generally approved, the FDIC is
expanding the de minimis criteria to
include individuals with up to two
convictions or program entries, each of
which offenses would, by themselves,
qualify under the de minimis exception.
Paragraph (b) establishes certain other
specific exceptions to the filing
requirement, which exceptions, if met,
will result in a potential application
being deemed automatically approved.
Partly in response to the comments, the
FDIC has made substantive changes to
paragraphs (b)(1), (3), and (4). Paragraph
(b)(1) shortens the 30-month waiting
period under the general criteria to 18
months when all the elements of the
offense(s) occurred when the person
was age 21 or younger. Paragraph (b)(2)
establishes the criteria for when certain
convictions or program entries for bad
or insufficient-funds checks will not
require an application. Paragraph (b)(3)
establishes the criteria for when certain
small-dollar simple theft convictions or
program entries of $1,000 or less will
not require an application. The small-
dollar, simple theft de minimis criteria
was added to the SOP by the FDIC
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(b)(3)
establishes the criteria for when certain
small-dollar simple theft convictions or
program entries of $1,000 or less will
not require an application. The small-
dollar, simple theft de minimis criteria
was added to the SOP by the FDIC
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51315
Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
5 FDIC Call Report Data, December 31, 2019.
Board in July 2018. The FDIC continues
to process section 19 applications for
convictions or program entries
involving small-dollar, simple theft.
These covered offenses are relatively
low-risk and generally result in
approval of an application following a
reasonable period of rehabilitation. The
rule increases the dollar limit to
$1,000—from the current $500—based
on some commenters’ suggestions to
better align this threshold with the limit
for ‘‘bad’’ or insufficient funds check(s),
and to reduce the number of low-risk
applications that have historically been
approved. Excluded from this exception
to filing are convictions or program
entries for burglary, forgery, identity
theft, and fraud. Paragraph (b)(4)
establishes the criteria for when the
creation or possession of a fake or false
identification by a person under the age
of 21, or the use of a fake or false
identification by a person to circumvent
age-based restrictions on purchases,
activities, or entry will not require an
application. This exception was
expanded beyond the use of a fake or
false identification to purchase alcohol
or to enter a premises where alcohol is
served. The FDIC believes that this
provision can be expanded to provide
additional regulatory relief without
significantly increasing risk to the
financial system
ge-based restrictions on purchases,
activities, or entry will not require an
application. This exception was
expanded beyond the use of a fake or
false identification to purchase alcohol
or to enter a premises where alcohol is
served. The FDIC believes that this
provision can be expanded to provide
additional regulatory relief without
significantly increasing risk to the
financial system.
Paragraph (c) requires that, for any
case where the person is able to avail
themselves of the de minimis exception
to filing, she or he must disclose the
conviction(s) or program entry(ies) to an
IDI and must qualify for a fidelity bond
to the same extent as others in a similar
position.
Paragraph (d) states that any
conviction or program entry for criminal
offenses under Title 18 of the U.S. Code,
as set out in 12 U.S.C. 1829(a)(2), cannot
qualify under the de minimis exception
to filing an application.
9. Section 303.228
How To File an
Application
This section comes from the SOP and
requires that an IDI is required to file an
application on behalf of an individual
under section 19 to participate in its
affairs unless the FDIC grants the
individual a waiver for good cause
shown to file on her or his own behalf.
IDIs should file with the FDIC’s regional
office where the institution’s home
office is located, and any individual
waiver and application should be filed
with the FDIC’s regional office where
the person lives.
10. Section 303.229
How an
Application is Evaluated
This section comes from a
combination of § 308.157 and the SOP.
Paragraph (a) sets out the ultimate
determination the FDIC will make as to
the level of risk the applicant poses to
an IDI and whether it will consent to
allow the person to participate in an
IDI’s affairs. In evaluating the risk posed
by the person’s participation, the FDIC
has established nine factors that it will
consider, including other factors that
might be relevant to a particular
application
) sets out the ultimate
determination the FDIC will make as to
the level of risk the applicant poses to
an IDI and whether it will consent to
allow the person to participate in an
IDI’s affairs. In evaluating the risk posed
by the person’s participation, the FDIC
has established nine factors that it will
consider, including other factors that
might be relevant to a particular
application. Paragraph (b) states that the
question of whether a person was guilty
of the offense for which the person was
convicted, or had a program entry for,
is not an issue for part 303, subpart L
or for part 308, subpart M. Paragraph (c)
states that the FDIC will apply the
factors and determination used in
paragraph (a) when evaluating an
application that is made to terminate the
ten-year ban under 12 U.S.C. 1829(a)(2).
Paragraph (d) provides that a person
must be bonded the same as others in
that position, and the person must
disclose the covered conviction or
program entry to any IDI in which she
or he intends to participate.
Paragraphs (e) and (f) pertain to bank-
sponsored applications. Paragraph (e)
provides that FDIC approval to work
pertains to a specific job at a specific
IDI. The IDI may be required to seek
permission from the FDIC before there
may be a significant change in a
person’s duties or responsibilities, and
the FDIC regional director may request
a new application. Paragraph (f) states
that approval to work at a specific IDI
is limited to that institution—or to a
successor institution (for instance, as a
result of the IDI’s merger with or
acquisition by another IDI)—and a new
application is required to work at
another IDI.
11. Section 303.230
What will the
FDIC do if the application is denied?
This section is a combination of
current §§ 303.223, 308.157, and
308.159. Paragraph (a) provides that the
FDIC will provide a written denial of an
application, which will summarize or
cite the relevant factors from § 303.229
th or
acquisition by another IDI)—and a new
application is required to work at
another IDI.
11. Section 303.230
What will the
FDIC do if the application is denied?
This section is a combination of
current §§ 303.223, 308.157, and
308.159. Paragraph (a) provides that the
FDIC will provide a written denial of an
application, which will summarize or
cite the relevant factors from § 303.229.
Paragraph (b) provides that the
applicant can file a written request for
a hearing under part 308, subpart M
within 60 days of the denial.
12. Section 303.231
Waiting Time for
a Subsequent Application if an
Application is Denied
This section comes mainly from
§ 308.158 and was clarified so that an
applicant will need to wait one year
from the date of the denial or decision
of the FDIC Board or its designee.
B. Revised Provisions of 12 CFR Part
308, Subpart M
1. Section 308.156
Scope
This section has been revised to
reflect its application to denials that are
issued under 12 CFR part 303, subpart
L.
2. Section 308.157
Relevant
Considerations
This section will be rescinded.
3. Section 308.158
Filing Papers and
Effective Date
This section will be rescinded.
4. Section 308.159
Denial of
Application
This section has been revised to
reflect the outcome of the application
process in part 303, subpart L and to
clarify the procedure by which a hearing
may be requested. It will be renumbered
as § 308.157.
5. Section 308.160
Hearings
This section will remain as it
currently exists, but will be renumbered
as § 308.158.
After renumbering, §§ 308.159 and
309.160 will be reserved.
C. Expected Effects
The changes adopted will provide
immediate relief to IDIs, as well as to
individuals who represent a low risk to
the Deposit Insurance Fund and who
would otherwise be required under
section 19 to file waiver applications, if
they wish to be employed by an IDI.
Moreover, these applications would
very likely be approved under existing
practices
09.160 will be reserved.
C. Expected Effects
The changes adopted will provide
immediate relief to IDIs, as well as to
individuals who represent a low risk to
the Deposit Insurance Fund and who
would otherwise be required under
section 19 to file waiver applications, if
they wish to be employed by an IDI.
Moreover, these applications would
very likely be approved under existing
practices. Based on the FDIC’s analysis
of applications submitted between
January 1, 2017, through April 30, 2020,
the changes would not have altered the
outcome of any applications that were
controversial or ultimately denied.
Overall, the FDIC expects the rule to
have relatively small effects, in the
aggregate, on the public and insured
institutions. The FDIC currently insures
5,186 depository institutions, which
could be affected by the rule.5
Additionally, as discussed previously,
the rule will apply to certain persons
covered by the provisions of section 19
who are or wish to become employees,
officers, directors or shareholders of an
IDI. In the period from 2014 through
2019, the FDIC received 69 bank-
sponsored section 19 applications, an
average of about 12 per year.
Additionally, the FDIC received 654
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6 Application Tracking System.
individual section 19 applications
during the same period, an average of
109 per year.6 Therefore, the FDIC
estimates that the rule would affect at
least 12 FDIC-insured depository
institutions, and 109 individuals per
year. The FDIC acknowledges that these
estimates do not fully capture the full
effect of the rule; most notably, the
estimates do not take into account any
individuals or institutions who choose
not to apply rather than go through the
application process
ar.6 Therefore, the FDIC
estimates that the rule would affect at
least 12 FDIC-insured depository
institutions, and 109 individuals per
year. The FDIC acknowledges that these
estimates do not fully capture the full
effect of the rule; most notably, the
estimates do not take into account any
individuals or institutions who choose
not to apply rather than go through the
application process.
One commenter made this point,
suggesting that the FDIC is likely
underestimating the number of ex-
offenders affected by the rule.
Specifically, this commenter suggested
that the number of section 19
applications received does not take into
account the number of individuals or
institutions who choose not to apply
because of the complexity of the
application process. The FDIC agrees
that this is one reason the estimates
chosen do not fully reflect the impact of
the rule.
As described previously, the rule
incorporates and revises the current
content of the SOP into the FDIC’s
regulations. The FDIC believes the
codification is unlikely to have
substantive effects on most covered
entities and individuals. The FDIC
already considers individuals who have
been convicted of a crime of dishonesty,
breach of trust, or money laundering,
who participate in the affairs of an IDI
without the prior written consent of the
FDIC, to be subject to section 19, and
will continue to do after the SOP
becomes codified.
To the extent that the revised
consideration of expungements,
reduction in waiting periods, increase in
the threshold for certain small-dollar
simple-theft convictions, or other items
provide relief to certain institutions or
individuals, the FDIC believes that such
effects are likely to be relatively small.
As discussed previously, some of these
changes are being adopted to establish
better alignment with other regulatory
limits or more-consistent treatment of
individuals
ods, increase in
the threshold for certain small-dollar
simple-theft convictions, or other items
provide relief to certain institutions or
individuals, the FDIC believes that such
effects are likely to be relatively small.
As discussed previously, some of these
changes are being adopted to establish
better alignment with other regulatory
limits or more-consistent treatment of
individuals. Other revisions are
intended to reduce regulatory burden on
individuals and IDIs by decreasing the
number of applications that would
otherwise be required under section 19.
The FDIC believes that such changes
more accurately reflect the risk of
dishonesty and breach of trust posed by
the potential employment of certain
individuals to institutions. As noted
earlier, the FDIC has received on
average about 109 section 19
applications per year since 2014,
relative to a population of insured
institutions of over 5,000, suggesting
that the effects of the rule are likely to
be relatively small.
In short, the rule will benefit covered
entities and individuals by further
clarifying the FDIC’s interpretation of
section 19 and the application process,
expanding regulatory relief, and
reducing the number of applications
required under section 19.
IV. Alternatives Considered
The FDIC considered the other
proposals that were submitted by the
commenters but believes that the final
amendments represent the most
appropriate option for covered entities
and individuals.
A. Application Process
Two commenters requested that the
FDIC reduce the section 19 application
burden. One commenter provided this
recommendation without specifying the
proposed changes
nsidered
The FDIC considered the other
proposals that were submitted by the
commenters but believes that the final
amendments represent the most
appropriate option for covered entities
and individuals.
A. Application Process
Two commenters requested that the
FDIC reduce the section 19 application
burden. One commenter provided this
recommendation without specifying the
proposed changes. The other commenter
asked that the FDIC continually
streamline and simplify the application
process and not require court
documentation from an applicant
because the FDIC already has access to
criminal ‘‘rap sheets.’’ The FDIC notes
that it has periodically revised the SOP
over the past several decades, and it
anticipates that it will revise its section
19 regulations, as needed, in the future.
The FDIC revises its application
instructions as warranted to improve
clarity—such as by noting that bank-
sponsored applications and individual-
waiver applications are distinct
application processes, rather than a two-
step process—but a regulation is not the
appropriate method to amend the
application form. The FDIC declines to
adopt the proposal concerning court
records. Rap sheets generally do not
contain the level of detail needed to
adequately assess the circumstances
surrounding a crime and sentencing,
especially with regard to pretrial
diversions. Moreover, the court
documentation is used to confirm the
information provided by the applicant.
Two commenters made
recommendations concerning the FDIC’s
approval rate of section 19 applications.
The two commenters asked that the
FDIC simplify the application process to
encourage a higher number of
applicants, and one commenter asked
that the FDIC commit to significantly
increasing its application approval-rate.
The FDIC does clarify aspects of the
application instructions, as noted above
menters made
recommendations concerning the FDIC’s
approval rate of section 19 applications.
The two commenters asked that the
FDIC simplify the application process to
encourage a higher number of
applicants, and one commenter asked
that the FDIC commit to significantly
increasing its application approval-rate.
The FDIC does clarify aspects of the
application instructions, as noted above.
The FDIC anticipates that the expansion
of the de minimis framework and the
exclusion of all expungements and
sealed-records orders from the scope of
section 19 will reduce the number of
applications required. The FDIC,
however, declines to commit to an
increase in approval rates, since doing
so would be arbitrary, and applications
are reviewed on a case-by-case basis.
One commenter asked that the FDIC
relax approval conditions for bank-
sponsored applications. The FDIC
declines to adopt this proposal, because
the approval conditions are meant to
address the specific position being
sought at a particular IDI.
One commenter proposed that the
FDIC not require the repayment of fees
or fines before the submission of an
application. The FDIC declines to adopt
this proposal in full. Rehabilitation is a
significant factor that is evaluated
during the application process, and
completion of all sentencing
requirements is an integral part of
rehabilitation. As such, the case must be
considered final by the procedures of
the applicable jurisdiction. The FDIC
notes, however, that an individual is not
required to have completed all
sentencing requirements in order to
qualify for the de minimis exceptions
pertaining to convictions or program
entries for (i) ‘‘bad’’ or insufficient funds
checks, and (ii) the creation, possession,
or use of a fake, false, or altered
identification to circumvent age-based
restrictions.
One commenter asked that the FDIC
delegate more authority to process
section 19 applications to FDIC regional
offices
ements in order to
qualify for the de minimis exceptions
pertaining to convictions or program
entries for (i) ‘‘bad’’ or insufficient funds
checks, and (ii) the creation, possession,
or use of a fake, false, or altered
identification to circumvent age-based
restrictions.
One commenter asked that the FDIC
delegate more authority to process
section 19 applications to FDIC regional
offices. The FDIC believes that the
current delegations are appropriate and
provide more consistency and
uniformity in decision-making.
Moreover, the FDIC anticipates that the
expansion of the de minimis framework
will result in more decision-making at
the regional-office level, as regional
office staff typically respond to inquiries
as to whether the de minimis exception
applies to particular offenses.
Two commenters requested that the
FDIC commit to reducing application-
processing times by certain amounts. In
response, the FDIC notes that while the
agency tries to process applications
quickly, the establishment of such a
timeline would be an internal-
processing matter and would not fall
within the purpose or intent of the rule.
Moreover, application processing is
dependent upon receipt of background
investigation materials from other
agencies, whose timeframes for action
the FDIC does not control.
One commenter made several
proposals concerning an applicant’s
rehabilitation, requesting that the FDIC
do the following: provide a checklist of
rehabilitation factors, assess
rehabilitation relative to the position
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the FDIC does not control.
One commenter made several
proposals concerning an applicant’s
rehabilitation, requesting that the FDIC
do the following: provide a checklist of
rehabilitation factors, assess
rehabilitation relative to the position
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sought by the applicant, set maximum
limits on rehabilitation time, and relax
rehabilitation standards. The FDIC may
provide additional information in the
application instructions and in the
publication Your Complete Guide to
Section 19, but the rule is not the
appropriate forum to provide this
information. The FDIC declines to adopt
the other proposals. For bank-sponsored
applications, the FDIC already considers
rehabilitation relative to the position
sought by the applicant. However,
individual waivers allow a person to
work in any position, so this proposal
is not feasible for such applications.
Rehabilitation, in the context of
individual waivers, is not assessed
relative to any potential position but
rather to the nature of the covered
offense. The FDIC does not adopt the
proposal concerning setting maximum
limits on rehabilitation time because the
agency believes that such limits would
be arbitrary. Nor does the FDIC adopt
the proposal concerning the relaxation
of rehabilitation standards.
Rehabilitation in relation to the nature
of the offense is one of the standards
that is assessed when the FDIC
processes applications, and the de
minimis exception, as amended,
provides sufficient flexibility.
Three commenters made proposals
concerning transparency, asking that the
FDIC improve its web resources, issue
written denials (rather than ask an
applicant to withdraw an application),
and publicize more application data
of the offense is one of the standards
that is assessed when the FDIC
processes applications, and the de
minimis exception, as amended,
provides sufficient flexibility.
Three commenters made proposals
concerning transparency, asking that the
FDIC improve its web resources, issue
written denials (rather than ask an
applicant to withdraw an application),
and publicize more application data.
The FDIC believes that its website,
www.fdic.gov, specifically the brochure
Your Complete Guide to Section 19,
available at https://www.fdic.gov/
regulations/applications/resources/
brochure-section-19.pdf, provides
sufficient and convenient resources in a
single location. The FDIC also notes that
a regulation is not the appropriate
mechanism to apply such a requirement
on the FDIC. As for the request
concerning written denials, the FDIC
cannot issue a denial if an individual
chooses not to proceed with an
application. The FDIC already publishes
the orders for approvals and denials of
section 19 applications on its website—
specifically, on the FDIC Enforcement
Decisions and Orders page (https://
orders.fdic.gov/s/searchform), which is
searchable—and aggregates numbers of
all section 19 applications processed in
its annual report. A regulation is not the
appropriate method to apply such a
requirement on the FDIC.
B. Bank Hiring Practices
Four commenters suggested that the
FDIC revise policies concerning bank
hiring practices. Two commenters asked
that the FDIC clarify that banks are
allowed to delay inquiry into an
applicant’s criminal history until after a
job offer is extended. The FDIC notes
that this approach is already stated as
permissible in the SOP for FDIC-
supervised banks. To the extent that the
commenters request that the FDIC direct
IDIs to follow this practice, the FDIC
declines to make this change for several
reasons
at the FDIC clarify that banks are
allowed to delay inquiry into an
applicant’s criminal history until after a
job offer is extended. The FDIC notes
that this approach is already stated as
permissible in the SOP for FDIC-
supervised banks. To the extent that the
commenters request that the FDIC direct
IDIs to follow this practice, the FDIC
declines to make this change for several
reasons. First, the FDIC does not have
primary supervisory authority over IDIs
that are subject to the supervisory
authority of other Federal banking
agencies (FBAs). Therefore, it is within
the supervisory authority of the other
FBAs to determine what is satisfactory
to them in reviewing which policies and
procedures their respective institutions
adopt to ensure compliance with section
19. Second, the FDIC’s authority under
section 19 focuses on the review needed
to provide consent to remove the bar
imposed by section 19 and allow an
individual to participate in the affairs of
an IDI. It does not grant the FDIC
rulemaking authority to impose
conditions or requirements on an IDI
other than to note that the IDI faces a
criminal penalty for acting in violation
of the statute.
Two commenters asked that the FDIC
clarify what constitutes a ‘‘reasonable
inquiry’’ for a bank background check.
The FDIC declines to adopt this
proposal. The procedures that constitute
a reasonable inquiry will vary from bank
to bank, and the FDIC believes that this
determination is best left to the business
judgments of these institutions.
C. Coverage of Section 19
Five commenters requested that the
FDIC change its interpretation of the
coverage of section 19. One commenter
asked that the SOP note that Federal law
preempts state and local law concerning
section 19. The FDIC believes that it is
inappropriate to include such a
statement in this regulation but notes
that section 19 applies to all IDIs, as
defined under Title 12 of the U.S. Code
ion 19
Five commenters requested that the
FDIC change its interpretation of the
coverage of section 19. One commenter
asked that the SOP note that Federal law
preempts state and local law concerning
section 19. The FDIC believes that it is
inappropriate to include such a
statement in this regulation but notes
that section 19 applies to all IDIs, as
defined under Title 12 of the U.S. Code.
One commenter asked that the FDIC
further clarify whether independent
contractors and other individuals are
considered institution-affiliated parties
(IAPs), for section 19 purposes. The
FDIC believes that additional
clarification is unnecessary because the
FDIC’s revised section 19 regulations, 12
U.S.C. 1813(u) and its related caselaw,
as well as other statutory and regulatory
provisions, provide ample clarification
as to who qualifies as an IAP under Title
12 of the U.S. Code.
Two commenters asked that the FDIC
recommend changes to section 19 to
Congress. This request is outside the
scope of this rulemaking.
Four commenters requested that the
FDIC establish a time limit on covered
offenses, whereby offenses would be
‘‘washed out,’’ for section 19 purposes,
after a certain period of time has passed.
The FDIC notes that certain covered
offenses—such as money laundering—
have a mandatory 10-year prohibition
period, absent court approval, under 12
U.S.C. 1829(a)(2). Therefore, the FDIC
could not grant a section 19 waiver for
an applicant convicted under a crime
listed in section 1829(a)(2) without
Congress amending section 19. For
covered offenses that are not specifically
listed under section 1829(a)(2), the FDIC
declines to provide a blanket washout
rule. Section 19 has no maximum time
limit for how long an individual is
prohibited from participation at an IDI.
Congress would have to change section
19 for the FDIC to implement such a
proposal. However, the FDIC notes that
the expanded de minimis framework
provides significant regulatory relief.
D
ically
listed under section 1829(a)(2), the FDIC
declines to provide a blanket washout
rule. Section 19 has no maximum time
limit for how long an individual is
prohibited from participation at an IDI.
Congress would have to change section
19 for the FDIC to implement such a
proposal. However, the FDIC notes that
the expanded de minimis framework
provides significant regulatory relief.
D. Covered Offenses
One commenter requested that the
FDIC narrow the definition of ‘‘pretrial
diversion’’ in the SOP. The FDIC
declines to adopt this proposal and
believes that the existing SOP language
adequately and fairly describes pretrial
diversion program entries.
Two commenters proposed that the
FDIC reduce the type of offenses
covered by the SOP. The FDIC declines
to adopt these proposals. The types of
offenses covered by section 19 are
broadly defined in the statute as those
involving dishonesty, breach of trust, or
money laundering. The FDIC
determines whether certain crimes
involve such elements under section 19
when the FDIC processes applications.
A change to the text of section 19 would
require legislation. Moreover, the
regulation will codify certain minor
crimes as de minimis, which will
exclude such crimes from requiring an
application.
E. De minimis Exception
Two commenters asked that the time
actually served in jail component of the
de minimis exception be amended to
exclude instances where the applicant
only served pretrial detention. The FDIC
declines to adopt this proposal because
pretrial detention is typically
incorporated into the ultimate sentence
as time served.
One commenter proposed that the
maximum time served be increased to
three years, and that other restrictions
on the freedom of movement (such as
probation), be excluded from being
considered actual time served
applicant
only served pretrial detention. The FDIC
declines to adopt this proposal because
pretrial detention is typically
incorporated into the ultimate sentence
as time served.
One commenter proposed that the
maximum time served be increased to
three years, and that other restrictions
on the freedom of movement (such as
probation), be excluded from being
considered actual time served. The FDIC
notes that the ‘‘time served’’ factor does
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7 12 CFR part 303, subpart L and 12 CFR part 308,
subpart M.
8 44 U.S.C. 3501 et seq.
9 5 U.S.C. 601 et seq.
10 The SBA defines a small banking organization
as having $600 million or less in assets, where an
organization’s ‘‘assets are determined by averaging
the assets reported on its four quarterly financial
statements for the preceding year.’’ See 13 CFR
121.201 (as amended by 84 FR 34261 (July 18,
2019), effective August 19, 2019). In its
determination, the ‘‘SBA counts the receipts,
employees, or other measure of size of the concern
whose size is at issue and all of its domestic and
foreign affiliates.’’ See 13 CFR 121.103. Following
these regulations, the FDIC uses a covered entity’s
affiliated and acquired assets, averaged over the
preceding four quarters, to determine whether the
covered entity is ‘‘small’’ for the purposes of RFA.
11 FDIC Call Report, December 31, 2019.
12 Application Tracking System.
13 (115/3,815) * 100 = 3.01 percent.
not apply to individuals on probation or
parole who may be restricted to a
particular jurisdiction, or who must
report occasionally to an individual or
to a specified location
he
preceding four quarters, to determine whether the
covered entity is ‘‘small’’ for the purposes of RFA.
11 FDIC Call Report, December 31, 2019.
12 Application Tracking System.
13 (115/3,815) * 100 = 3.01 percent.
not apply to individuals on probation or
parole who may be restricted to a
particular jurisdiction, or who must
report occasionally to an individual or
to a specified location. The FDIC further
notes that the ‘‘time served’’ factor does
not apply to individuals who are
restricted to a substance abuse treatment
program facility for part or all of the
day. The ‘‘time served’’ factor applies to
individuals confined to a psychiatric
treatment center in lieu of a jail, prison,
or house of correction on mental-
competency grounds, but not to
individuals ordered to attend outpatient
psychiatric treatment. The FDIC
declines to further expand the time-
served component, because the FDIC
believes that this proposal is too
expansive.
Two commenters asked that the FDIC
expand the de minimis exception for
offenses committed by persons aged 21
or younger. One proposal called for the
elimination of the maximum-
punishment factor. The FDIC declines to
expand the de minimis framework
beyond the significant revisions
outlined in Section III, which revisions
pertain, in part, to offenses committed
by persons 21 years of age or younger.
One commenter asked that the FDIC
exclude entirely from consideration all
offenses that occurred before a certain,
relatively young age. The FDIC believes
that this request is too expansive and
declines to adopt the proposal.
Three commenters recommended that
the FDIC increase the actual jail-time-
served factor. The FDIC declines to
further expand the de minimis
framework beyond the significant
revisions outlined in Section III.
One commenter suggested that the
FDIC increase the ‘‘bad’’ or insufficient
funds check(s) threshold from $1,000 to
$2,500
equest is too expansive and
declines to adopt the proposal.
Three commenters recommended that
the FDIC increase the actual jail-time-
served factor. The FDIC declines to
further expand the de minimis
framework beyond the significant
revisions outlined in Section III.
One commenter suggested that the
FDIC increase the ‘‘bad’’ or insufficient
funds check(s) threshold from $1,000 to
$2,500. The FDIC declines to expand the
de minimis framework as proposed,
because the FDIC considers the current
threshold appropriate.
One commenter asked that the FDIC
expand the maximum potential
incarceration period for a covered
offense from one year to three years,
under the de minimis framework. The
FDIC declines to further expand the de
minimis exception beyond the
significant revisions outlined in Section
III and believes that the current
threshold is appropriate.
F. Status Quo, or Issuing the Rule as
Originally Proposed
The FDIC also considered the status
quo alternative of retaining the existing
section 19 SOP and regulations, as well
as issuing the rule as originally
proposed.7 The FDIC, however, believes
that the rule further clarifies the FDIC’s
application of section 19 and the
application process for IDIs and
individuals who seek relief from its
provisions, while posing no substantive
costs, relative to the status quo
alternative. Additionally, the FDIC
believes that the changes adopted more
accurately reflect the risk of dishonesty,
breach of trust, and money laundering
posed by the potential employment of
certain individuals to institutions. None
of the commenters advocated for the
status quo alternative. Moreover, the
revisions made between the proposal
and the final rule should result in
significant regulatory relief for IDIs and
individuals.
V
the changes adopted more
accurately reflect the risk of dishonesty,
breach of trust, and money laundering
posed by the potential employment of
certain individuals to institutions. None
of the commenters advocated for the
status quo alternative. Moreover, the
revisions made between the proposal
and the final rule should result in
significant regulatory relief for IDIs and
individuals.
V. Regulatory Analysis
The Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act (PRA),8
the FDIC may not conduct or sponsor,
and the respondent is not required to
respond to, an information collection
unless it displays a currently valid
Office of Management and Budget
(OMB) control number.
The rule includes clarification of
reporting requirements in an existing
FDIC information collection entitled
Application Pursuant to Section 19 of
the Federal Deposit Insurance Act
(3064–0018) that should result in a
decrease in the number of applications
filed. However, the FDIC does not
currently have access to data that would
enable it to accurately estimate what the
actual decrease may be. As such, the
FDIC does not believe that a change to
the number of respondents or the PRA
burden in its existing information
collection is necessary at this time. The
FDIC will continue to monitor the
number of applications received going
forward, and will incorporate any
changes in future submissions,
including the next information-
collection renewal. Therefore, no
information collection request will be
submitted to the OMB for review
o
the number of respondents or the PRA
burden in its existing information
collection is necessary at this time. The
FDIC will continue to monitor the
number of applications received going
forward, and will incorporate any
changes in future submissions,
including the next information-
collection renewal. Therefore, no
information collection request will be
submitted to the OMB for review.
The Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
generally requires an agency, in
connection with a proposed rule, to
prepare and make available for public
comment an initial regulatory flexibility
analysis that describes the impact of a
rule on small entities.9 However, a
regulatory flexibility analysis is not
required if the agency certifies that the
rule will not have a significant
economic impact on a substantial
number of small entities. The Small
Business Administration (SBA) has
defined ‘‘small entities’’ to include
banking organizations with total assets
of less than or equal to $600 million that
are independently owned and operated
or owned by a holding company with
less than or equal to $600 million in
total assets.10 Generally, the FDIC
considers a significant effect to be a
quantified effect in excess of 5 percent
of total annual salaries and benefits per
institution, or 2.5 percent of total
noninterest expenses. The FDIC believes
that effects in excess of these thresholds
typically represent significant effects for
FDIC-supervised institutions. As
discussed further below, the FDIC
certifies that this rule will not have a
significant economic impact on a
substantial number of FDIC-supervised
small entities.
The FDIC insures 5,186 depository
institutions, of which 3,815 are defined
as small banking organizations
according to the RFA.11 In the period
from 2014 through 2019, the FDIC
received 33 bank-sponsored section 19
applications from small, FDIC-insured
institutions, an average of about 6 per
year
e a
significant economic impact on a
substantial number of FDIC-supervised
small entities.
The FDIC insures 5,186 depository
institutions, of which 3,815 are defined
as small banking organizations
according to the RFA.11 In the period
from 2014 through 2019, the FDIC
received 33 bank-sponsored section 19
applications from small, FDIC-insured
institutions, an average of about 6 per
year. Additionally, the FDIC received
654 section 19 applications from
individuals during the same period, an
average of 109 per year.12 To determine
the maximum number of small, FDIC-
supervised institutions who could be
affected by the rule, this analysis
assumes that each applicant is seeking
employment at a different bank; each
bank is a small, FDIC-insured
institution; and no FDIC-insured
institutions or individuals are affected
except those who have submitted
section 19 applications. Based on these
assumptions, 115 (3.0 percent of) small,
FDIC-insured institutions on average,
annually, would be affected by the
rule.13 However, in the FDIC’s
experience, section 19 applications from
individuals are compelled by the
applicant’s intent to seek employment at
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14 12 U.S.C. 4809.
15 12 U.S.C. 4802(a).
16 12 U.S.C. 4802.
17 5 U.S.C. 801 et seq.
18 5 U.S.C. 801(a)(3).
19 5 U.S.C. 804(2).
FDIC-insured institutions that are
generally not small. Therefore, the FDIC
believes that the number of small, FDIC-
insured institutions affected by the rule
could be less than 115.
As described previously, the rule
incorporates and revises the current
content of the SOP into the FDIC’s
regulations
16 12 U.S.C. 4802.
17 5 U.S.C. 801 et seq.
18 5 U.S.C. 801(a)(3).
19 5 U.S.C. 804(2).
FDIC-insured institutions that are
generally not small. Therefore, the FDIC
believes that the number of small, FDIC-
insured institutions affected by the rule
could be less than 115.
As described previously, the rule
incorporates and revises the current
content of the SOP into the FDIC’s
regulations. The FDIC considers
individuals who have been convicted of
a crime of dishonesty, breach of trust, or
money laundering, who participate in
the affairs of an IDI without the prior
written consent of the FDIC, to be
subject to section 19, and will continue
to do so under the rule. The rule will,
however, expand the scope of the de
minimis exception and, therefore,
expand the number of offenses that will
not require an application under section
19. Both of these changes will likely
result in a reduction in section 19
applications.
To the extent that the current content
of the SOP conveys any ambiguity as to
the FDIC’s application of section 19 or
the application process, the rule will
benefit covered entities by further
clarifying this topic and process. Based
on the FDIC’s estimate, mentioned
earlier, that the rule could affect about
3 percent of small FDIC-insured
institutions per year, such effects are
likely to be relatively small.
To the extent that the revised
consideration of expungements,
reduction in waiting periods, increases
in certain small-dollar simple-theft
convictions, or other items provide
relief to certain small institutions or
individuals, the FDIC believes that such
effects are likely to be relatively small.
As discussed previously, some of these
changes are being adopted to establish
better alignment with other regulatory
limits or more-consistent treatment of
individuals. Other revisions are
intended to reduce regulatory burden on
individuals and IDIs by decreasing the
number of applications that would
otherwise be required under section 19
t such
effects are likely to be relatively small.
As discussed previously, some of these
changes are being adopted to establish
better alignment with other regulatory
limits or more-consistent treatment of
individuals. Other revisions are
intended to reduce regulatory burden on
individuals and IDIs by decreasing the
number of applications that would
otherwise be required under section 19.
The FDIC believes that such changes
more accurately reflect the risk of
dishonesty and breach of trust posed by
the potential employment of certain
individuals to small institutions. Again,
based on the FDIC’s estimate,
mentioned earlier, that the rule could
affect about 3 percent of small FDIC-
insured institutions per year, such
effects are likely to be relatively small.
Based on the information above, the
FDIC certifies that the rule will not have
a significant economic impact on a
substantial number of small entities.
Plain Language
Section 722 of the Gramm-Leach-
Bliley Act 14 requires each FBA to use
plain language in all of its proposed and
final rules published after January 1,
2000. The FDIC has sought to present
the rule in a simple and straightforward
manner. The FDIC did not receive any
comments on the use of plain language.
Riegle Community Development and
Regulatory Improvement Act of 1994
Under section 302(a) of the Riegle
Community Development and
Regulatory Improvement Act
(RCDRIA),15 in determining the effective
date and administrative compliance
requirements for new regulations that
impose additional reporting, disclosure,
or other requirements on IDIs, each FBA
must consider, consistent with
principles of safety and soundness and
the public interest, any administrative
burdens that such regulations would
place on depository institutions,
including small depository institutions,
and customers of depository
institutions, as well as the benefits of
such regulations
t
impose additional reporting, disclosure,
or other requirements on IDIs, each FBA
must consider, consistent with
principles of safety and soundness and
the public interest, any administrative
burdens that such regulations would
place on depository institutions,
including small depository institutions,
and customers of depository
institutions, as well as the benefits of
such regulations. In addition, section
302(b) of the RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally to take
effect on the first day of a calendar
quarter that begins on or after the date
on which the regulations are published
in final form.16
The FDIC has determined that the
final rule would not impose additional
reporting, disclosure, or other
requirements on IDIs; therefore, the
requirements of the RCDRIA do not
apply. Therefore, in conjunction with
the RCDRIA, the rule will be effective
on September 21, 2020.
The Congressional Review Act
For purposes of Congressional Review
Act, the OMB makes a determination as
to whether a final rule constitutes a
‘‘major’’ rule.17 If a rule is deemed a
‘‘major rule’’ by the OMB, the
Congressional Review Act generally
provides that the rule may not take
effect until at least 60 days following its
publication.18
The Congressional Review Act defines
a ‘‘major rule’’ as any rule that the
Administrator of the Office of
Information and Regulatory Affairs of
the OMB finds has resulted in or is
likely to result in: (A) An annual effect
on the economy of $100,000,000 or
more; (B) a major increase in costs or
prices for consumers, individual
industries, Federal, State, or local
government agencies or geographic
regions; or (C) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreign-
based enterprises in domestic and
export markets.19
The OMB has
(B) a major increase in costs or
prices for consumers, individual
industries, Federal, State, or local
government agencies or geographic
regions; or (C) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreign-
based enterprises in domestic and
export markets.19
The OMB has determined that the
final rule is not a major rule for
purposes of the Congressional Review
Act, and the FDIC will submit the final
rule and other appropriate reports to
Congress and the Government
Accountability Office for review.
List of Subjects
12 CFR Part 303
Administrative practice and
procedure.
12 CFR Part 308
Rules of practice and procedure.
Authority and Issuance
For the reasons stated in the preamble
and under the authority of 12 U.S.C.
1819 (Seventh and Tenth), the FDIC
amends 12 CFR parts 303 and 308 as
follows:
PART 303—FILING PROCEDURES
■1. The authority citation for part 303
continues to read as follows:
Authority: 12 U.S.C. 378, 1464, 1813, 1815,
1817, 1818, 1819(a) (Seventh and Tenth),
1820, 1823, 1828, 1831a, 1831e, 1831o,
1831p–1, 1831w, 1835a, 1843(l), 3104, 3105,
3108, 3207, 5414, 5415, and 15 U.S.C. 1601–
1607.
■2. Revise subpart L to read as follows:
Subpart L—Section 19 of the FDI Act
(Consent to Service of Persons Convicted
of, or Who Have Program Entries for,
Certain Criminal Offenses)
Sec.
303.220
What is section 19 of the FDI Act?
303.221
Who is covered by section 19?
303.222
What offenses are covered under
section 19?
303.223
What constitutes a conviction
under section 19?
303.224
What constitutes a pretrial
diversion or similar program (program
entry) under section 19?
303.225
What are the types of applications
that can be filed?
303.226
When must an application be filed?
303.227
When is an application not
required for a covered offense or program
entry (de minimis offenses)?
303.228
How to file an application
t constitutes a conviction
under section 19?
303.224
What constitutes a pretrial
diversion or similar program (program
entry) under section 19?
303.225
What are the types of applications
that can be filed?
303.226
When must an application be filed?
303.227
When is an application not
required for a covered offense or program
entry (de minimis offenses)?
303.228
How to file an application.
303.229
How an application is evaluated.
303.230
What will the FDIC do if the
application is denied?
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303.231
Waiting time for a subsequent
application if an application is denied.
Subpart L—Section 19 of the FDI Act
(Consent to Service of Persons
Convicted of, or Who Have Program
Entries for, Certain Criminal Offenses)
§ 303.220
What is section 19 of the FDI
Act?
(a) This subpart covers applications
under section 19 of the Federal Deposit
Insurance Act (FDI Act), 12 U.S.C. 1829.
Under section 19, any person who has
been convicted of any criminal offense
involving dishonesty, breach of trust, or
money laundering, or has agreed to
enter into a pretrial diversion or similar
program (program entry) in connection
with a prosecution for such offense, may
not become, or continue as, an
institution-affiliated party (IAP) of an
insured depository institution (IDI); own
or control, directly or indirectly, any
IDI; or otherwise participate, directly or
indirectly, in the conduct of the affairs
of any IDI without the prior written
consent of the FDIC.
on or similar
program (program entry) in connection
with a prosecution for such offense, may
not become, or continue as, an
institution-affiliated party (IAP) of an
insured depository institution (IDI); own
or control, directly or indirectly, any
IDI; or otherwise participate, directly or
indirectly, in the conduct of the affairs
of any IDI without the prior written
consent of the FDIC.
(b) In addition, the law bars an IDI
from permitting such a person to engage
in any conduct or to continue any
relationship prohibited by section 19.
IDIs should therefore make a reasonable
inquiry regarding an applicant’s history
to ensure that a person who has a
conviction or program entry covered by
the provisions of section 19 is not hired
or permitted to participate in its affairs
without the written consent of the FDIC
issued under this subpart. FDIC-
supervised IDIs may extend a
conditional offer of employment
contingent on the completion of a
background check satisfactory to the
institution and to determine if the
applicant is barred under section 19, but
the job applicant may not work for, be
employed by, or otherwise participate in
the affairs of the IDI until the IDI has
determined that the applicant is not
barred under section 19.
(c) If there is a conviction or program
entry covered by the bar of section 19,
an application under this subpart must
be filed seeking the FDIC’s consent to
become, or to continue as, an IAP; to
own or control, directly or indirectly, an
IDI; or to otherwise participate, directly
or indirectly, in the affairs of the IDI.
The application must be filed, and
consented to, prior to serving in any of
the foregoing capacities unless such
application is not required under the
subsequent provisions of this subpart
filed seeking the FDIC’s consent to
become, or to continue as, an IAP; to
own or control, directly or indirectly, an
IDI; or to otherwise participate, directly
or indirectly, in the affairs of the IDI.
The application must be filed, and
consented to, prior to serving in any of
the foregoing capacities unless such
application is not required under the
subsequent provisions of this subpart.
The purpose of an application is to
provide the applicant an opportunity to
demonstrate that, notwithstanding the
bar, a person is fit to participate in the
conduct of the affairs of an IDI without
posing a risk to its safety and soundness
or impairing public confidence in that
institution. The burden is upon the
applicant to establish that the
application warrants approval.
§ 303.221
Who is covered by section 19?
(a) Section 19 covers IAPs, as defined
by 12 U.S.C. 1813(u), and others who
are participants in the conduct of the
affairs of an IDI. Therefore, all
employees of an IDI that fall within the
scope of section 19, including de facto
employees, as determined by the FDIC
based upon generally applicable
standards of employment law, will also
be subject to section 19. Whether other
persons who are not IAPs are covered
depends upon their degree of influence
or control over the management or
affairs of an IDI. In the context of the
FDIC’s application of section 19,
coverage would apply to an IDI’s
holding company’s directors and
officers to the extent that they have the
power to define and direct the
management or affairs of an IDI.
Similarly, directors and officers of
affiliates, subsidiaries or joint ventures
of an IDI or its holding company will be
covered if they participate in the affairs
of the IDI or are in a position to
influence or control the management or
affairs of the insured institution.
Typically, an independent contractor
does not have a relationship with the
IDI other than the activity for which the
institution has contracted
ficers of
affiliates, subsidiaries or joint ventures
of an IDI or its holding company will be
covered if they participate in the affairs
of the IDI or are in a position to
influence or control the management or
affairs of the insured institution.
Typically, an independent contractor
does not have a relationship with the
IDI other than the activity for which the
institution has contracted. An
independent contractor who influences
or controls the management or affairs of
the IDI would be covered by section 19.
(b) The term ‘‘person,’’ for purposes of
section 19, means an individual, and
does not include a corporation, firm, or
other business entity.
(c) Individuals who file an application
with the FDIC under the provisions of
section 19 who also seek to participate
in the affairs of a bank holding company
or savings and loan holding company
may have to comply with any filing
requirements of the Board of the
Governors of the Federal Reserve
System under 12 U.S.C. 1829(d) and (e).
(d) Section 19 specifically prohibits a
person subject to its provisions from
owning or controlling an IDI. The terms
‘‘control’’ and ‘‘ownership’’ under
section 19 shall have the meaning given
to the term ‘‘control’’ in the Change in
Bank Control Act (12 U.S.C.
1817(j)(8)(B)). A person will be deemed
to exercise ‘‘control’’ if that person has
the power to vote 25 percent or more of
the voting shares of an IDI (or 10 percent
of the voting shares if no other person
has more shares) or the ability to direct
the management or policies of the
institution. Under the same standards, a
person will be deemed to ‘‘own’’ an IDI
if that person owns 25 percent or more
of the institution’s voting stock, or 10
percent of the voting shares if no other
person owns more. These standards
would also apply to an individual acting
in concert with others so as to have such
ownership or control
bility to direct
the management or policies of the
institution. Under the same standards, a
person will be deemed to ‘‘own’’ an IDI
if that person owns 25 percent or more
of the institution’s voting stock, or 10
percent of the voting shares if no other
person owns more. These standards
would also apply to an individual acting
in concert with others so as to have such
ownership or control. Absent the FDIC’s
consent, persons subject to the
prohibitions of section 19 will be
required to divest their control or
ownership of shares above the foregoing
limits.
§ 303.222
What offenses are covered
under section 19?
(a) The conviction or program entry
must be for a criminal offense involving
dishonesty, breach of trust, or money
laundering. ‘‘Dishonesty’’ means
directly or indirectly to cheat or
defraud, to cheat or defraud for
monetary gain or its equivalent, or
wrongfully to take property belonging to
another in violation of any criminal
statute. Dishonesty includes acts
involving want of integrity, lack of
probity, or a disposition to distort,
cheat, or act deceitfully or fraudulently,
and includes offenses that Federal, state
or local laws define as dishonest.
‘‘Breach of trust’’ means a wrongful act,
use, misappropriation, or omission with
respect to any property or fund that has
been committed to a person in a
fiduciary or official capacity, or the
misuse of one’s official or fiduciary
position to engage in a wrongful act,
use, misappropriation, or omission.
(b) Whether a crime involves
dishonesty, breach of trust, or money
laundering will be determined from the
statutory elements of the offense itself or
from court determinations that the
statutory provisions of the offense
involve dishonesty, breach of trust, or
money laundering.
isuse of one’s official or fiduciary
position to engage in a wrongful act,
use, misappropriation, or omission.
(b) Whether a crime involves
dishonesty, breach of trust, or money
laundering will be determined from the
statutory elements of the offense itself or
from court determinations that the
statutory provisions of the offense
involve dishonesty, breach of trust, or
money laundering.
(c) All convictions or program entries
for offenses concerning the illegal
manufacture, sale, distribution of, or
trafficking in controlled substances shall
require an application unless no
application is required under this
subpart. Convictions or program entries
for criminal offenses involving the
simple possession of a controlled
substance are not covered under section
19.
§ 303.223
What constitutes a conviction
under section 19?
(a) Convictions requiring an
application. There must be a conviction
of record. Section 19 does not cover
arrests or pending cases not brought to
trial, unless the person has a program
entry as set out in § 303.224. Section 19
does not cover acquittals or any
conviction that has been reversed on
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appeal, unless the reversal was for the
purpose of re-sentencing. A conviction
with regard to which an appeal is
pending requires an application. A
conviction for which a pardon has been
granted will require an application.
(b) Convictions not requiring an
application. When an individual is
charged with a covered offense and, in
the absence of a program entry as set out
in § 303.224, is subsequently convicted
of an offense that is not a covered
offense, the conviction is not subject to
section 19.
pending requires an application. A
conviction for which a pardon has been
granted will require an application.
(b) Convictions not requiring an
application. When an individual is
charged with a covered offense and, in
the absence of a program entry as set out
in § 303.224, is subsequently convicted
of an offense that is not a covered
offense, the conviction is not subject to
section 19.
(c) Expungements. If an order of
expungement or an order to seal has
been issued in regard to a conviction, or
if a record has been otherwise expunged
by operation of law, then the conviction
shall not be considered a conviction of
record and shall not require an
application.
(d) Youthful offenders. An
adjudication by a court against a person
as a ‘‘youthful offender’’ under any
youth-offender law applicable to minors
as defined by state law, or any judgment
as a ‘‘juvenile delinquent’’ by any court
having jurisdiction over minors as
defined by state law, does not require an
application. Such an adjudication does
not constitute a matter covered under
section 19 and is not a conviction or
program entry for determining the
applicability of § 303.227.
§ 303.224
What constitutes a pretrial
diversion or similar program (program
entry) under section 19?
(a) A program entry is characterized
by a suspension or eventual dismissal or
reversal of charges or criminal
prosecution upon agreement, whether
formal or informal, by the accused to
treatment, rehabilitation, restitution, or
other non-criminal or non-punitive
alternatives. Whether the outcome of a
case constitutes a program entry is
determined by relevant Federal, State,
or local law, and, if not so designated
under applicable law, then the
determination of whether a disposition
is a program entry will be made by the
FDIC on a case-by-case basis. Program
entries prior to November 29, 1990, are
not covered by section 19.
minal or non-punitive
alternatives. Whether the outcome of a
case constitutes a program entry is
determined by relevant Federal, State,
or local law, and, if not so designated
under applicable law, then the
determination of whether a disposition
is a program entry will be made by the
FDIC on a case-by-case basis. Program
entries prior to November 29, 1990, are
not covered by section 19.
(b) When a covered offense either is
reduced by a program entry to an
offense that would otherwise not be
covered by section 19 or is dismissed
upon successful completion of a
program entry, the covered offense
remains a covered offense for purposes
of section 19. The covered offense will
require an application unless it is de
minimis as provided by § 303.227 of this
subpart.
(c) Expungements or sealings of
program entries will be treated the same
as those for convictions.
§ 303.225
What are the types of
applications that can be filed?
(a) Institution filing requirement
(bank-sponsored applications).
Applications are required to be filed by
the IDI, which intends for a person
covered by the provisions of section 19
to participate in its affairs. Bank-
sponsored applications shall be filed
with the appropriate FDIC Regional
Office, as required by this subpart.
(b) Waiver applications. If an IDI does
not file an application regarding an
individual, the individual may file a
request for a waiver of the institution
filing requirement. Such a waiver
application shall be filed with the
appropriate FDIC Regional Office and
shall set forth substantial good cause
why the application should be granted.
§ 303.226
When must an application be
filed?
Except for situations in which no
application is required under this
subpart, an application must be filed
when there is present a conviction by a
court of competent jurisdiction for a
covered offense by any adult or minor
treated as an adult, or when such person
has a program entry regarding that
offense
hy the application should be granted.
§ 303.226
When must an application be
filed?
Except for situations in which no
application is required under this
subpart, an application must be filed
when there is present a conviction by a
court of competent jurisdiction for a
covered offense by any adult or minor
treated as an adult, or when such person
has a program entry regarding that
offense. Before an application is
considered by the FDIC, all of the
sentencing requirements associated with
a conviction, or conditions imposed by
the program entry, including but not
limited to, imprisonment, fines,
condition of rehabilitation, and
probation requirements, must be
completed, and the case must be
considered final by the procedures of
the applicable jurisdiction. The FDIC’s
application forms as well as additional
information concerning section 19 can
be accessed at the FDIC’s regional
offices or on the FDIC’s website.
§ 303.227
When is an application not
required for a covered offense or program
entry (de minimis offenses)?
(a) In general. Approval is
automatically granted and an
application will not be required where
all of the following de minimis criteria
are met.
(1) The individual has been convicted
of, or has program entries for, no more
than two covered offenses, including
those subject to paragraph (b) of this
section; and for each covered offense, all
of the sentencing requirements
associated with the conviction, or
conditions imposed by the program
entry, have been completed (the
sentence- or program-completion
requirement does not apply under
paragraphs (b)(2) and (4) of this section);
program entries for, no more
than two covered offenses, including
those subject to paragraph (b) of this
section; and for each covered offense, all
of the sentencing requirements
associated with the conviction, or
conditions imposed by the program
entry, have been completed (the
sentence- or program-completion
requirement does not apply under
paragraphs (b)(2) and (4) of this section);
(2) Each covered 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 served
three days or less of jail time for each
covered offense. The FDIC considers jail
time to include any significant restraint
on an individual’s freedom of
movement which includes, as part of
the restriction, confinement to a specific
facility or building on a continuous
basis where the person may leave
temporarily only to perform specific
functions or during specified times
periods or both. Jail time includes
confinement to a psychiatric treatment
center in lieu of a jail, prison, or house
of correction on mental-competency
grounds. The definition is not intended
to include any of the following:
(i) Persons on probation or parole who
may be restricted to a particular
jurisdiction, or who must report
occasionally to an individual or to a
specified location;
(ii) Persons who are restricted to a
substance-abuse treatment program
facility for part or all of the day; and
(iii) Persons who are ordered to attend
outpatient psychiatric treatment;
(3) If there are two convictions or
program entries for a covered offense,
each conviction or program entry was
entered at least three years prior to the
date an application would otherwise be
required, except as provided in
paragraph (b)(1) of this section; and
(4) Each covered offense was not
committed against an IDI or insured
credit union.
o attend
outpatient psychiatric treatment;
(3) If there are two convictions or
program entries for a covered offense,
each conviction or program entry was
entered at least three years prior to the
date an application would otherwise be
required, except as provided in
paragraph (b)(1) of this section; and
(4) Each covered offense was not
committed against an IDI or insured
credit union.
(b) Other types of offenses for which
the de minimis exception applies and
no application is required—(1) Age of
person at time of covered offense. If
there are two convictions or program
entries for a covered offense, and the
actions that resulted in both convictions
or program entries all occurred when
the individual was 21 years of age or
younger, then the de minimis criteria in
paragraph (a)(3) of this section shall be
met if the convictions or program
entries were entered at least 18 months
prior to the date an application would
otherwise be required.
(2) Convictions or program entries for
insufficient funds checks. Convictions
or program entries of record based on
the writing of ‘‘bad’’ or insufficient
funds check(s) shall be considered de
minimis offenses under this provision if
the following conditions apply:
(i) The aggregate total face value of all
‘‘bad’’ or insufficient funds check(s)
cited across all the conviction(s) or
program entry(ies) for ‘‘bad’’ or
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Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
insufficient funds checks is $1,000 or
less;
(ii) No IDI or insured credit union was
a payee on any of the ‘‘bad’’ or
insufficient funds checks that were the
basis of the conviction(s) or program
entry(ies); and
(iii) The individual has no more than
one other de minimis offense under this
section.
2
Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
insufficient funds checks is $1,000 or
less;
(ii) No IDI or insured credit union was
a payee on any of the ‘‘bad’’ or
insufficient funds checks that were the
basis of the conviction(s) or program
entry(ies); and
(iii) The individual has no more than
one other de minimis offense under this
section.
(3) Convictions or program entries for
small-dollar, simple theft. Convictions
or program entries based on the simple
theft of goods, services, or currency (or
other monetary instrument) shall be
considered de minimis offenses under
this provision if the following
conditions apply. Simple theft excludes
burglary, forgery, robbery, identity theft,
and fraud.
(i) The value of the currency, goods,
or services taken is $1,000 or less;
(ii) The theft was not committed
against an IDI or insured credit union;
(iii) The individual has no more than
one other de minimis offense under this
section; and
(iv) If there are two de minimis
offenses under this section, each
conviction or program entry was entered
at least three years prior to the date an
application would otherwise be
required, or at least 18 months prior to
the date an application would otherwise
be required if the actions that resulted
in the conviction or program entry all
occurred when the individual was 21
years of age or younger.
(4) Convictions or program entries for
the use of a fake, false, or altered
identification. A conviction or program
entry for the creation or possession of a
fake, false, or altered form of
identification by a person under the age
of 21, or the use of a fake, false, or
altered form of identification by such a
person to circumvent age-based
restrictions on purchases, activities, or
premises entry, shall be considered a de
minimis offense under this provision if
the following conditions apply.
program
entry for the creation or possession of a
fake, false, or altered form of
identification by a person under the age
of 21, or the use of a fake, false, or
altered form of identification by such a
person to circumvent age-based
restrictions on purchases, activities, or
premises entry, shall be considered a de
minimis offense under this provision if
the following conditions apply.
(i) The individual has no more than
one other de minimis offense under this
section; and
(ii) If there are two de minimis
offenses under this section, each
conviction or program entry was entered
at least three years prior to the date an
application would otherwise be
required; or at least 18 months prior to
the date an application would otherwise
be required if the actions that resulted
in the conviction or program entry all
occurred when the individual was 21
years of age or younger.
(c) Fidelity bond coverage and
disclosure to institutions. Any person
who meets the criteria under this
section shall be covered by a fidelity
bond to the same extent as others in
similar positions, and shall disclose the
presence of the conviction(s) or program
entry(ies) to all IDIs in the affairs of
which he or she intends to participate.
(d) Non-qualifying convictions or
program entries. No conviction or
program entry for a violation of the Title
18 sections set out in 12 U.S.C.
1829(a)(2) can qualify under any of the
de minimis exceptions set out in this
section.
§ 303.228
How to file an application.
Forms and instructions should be
obtained from the FDIC’s website
(www.fdic.gov), and the application
must be filed with the appropriate FDIC
Regional Director. The application must
be filed by an IDI on behalf of a person
(bank-sponsored) unless the FDIC grants
a waiver of that requirement (individual
waiver). Individual waivers will be
considered on a case-by-case basis
where substantial good cause for
granting a waiver is shown
om the FDIC’s website
(www.fdic.gov), and the application
must be filed with the appropriate FDIC
Regional Director. The application must
be filed by an IDI on behalf of a person
(bank-sponsored) unless the FDIC grants
a waiver of that requirement (individual
waiver). Individual waivers will be
considered on a case-by-case basis
where substantial good cause for
granting a waiver is shown. A person
may request an individual waiver and
file an application on her or his own
behalf within the same application. The
appropriate Regional Office for a bank-
sponsored application is the office
covering the state where the IDI’s home
office is located. The appropriate
Regional Office for an individual filing
for a waiver of the institution filing
requirement is the office covering the
state where the person resides. States
covered by each FDIC Regional Office
can be located on the FDIC’s website.
§ 303.229
How an application is evaluated.
(a) The ultimate determinations in
assessing an application are whether the
person has demonstrated his or her
fitness to participate in the conduct of
the affairs of an IDI, and whether the
affiliation, ownership, control, or
participation by the person in the
conduct of the affairs of the institution
may constitute a threat to the safety and
soundness of the institution or the
interests of its depositors or threaten to
impair public confidence in the
institution. In determining the degree of
risk, the FDIC will consider:
(1) Whether the conviction or program
entry is for a criminal offense involving
dishonesty, breach of trust, or money
laundering and the specific nature and
circumstances of the offense;
(2) Whether the participation directly
or indirectly by the person in any
manner in the conduct of the affairs of
the IDI constitutes a threat to the safety
and soundness of the institution or the
interests of its depositors or threatens to
impair public confidence in the
institution;
honesty, breach of trust, or money
laundering and the specific nature and
circumstances of the offense;
(2) Whether the participation directly
or indirectly by the person in any
manner in the conduct of the affairs of
the IDI constitutes a threat to the safety
and soundness of the institution or the
interests of its depositors or threatens to
impair public confidence in the
institution;
(3) Evidence of rehabilitation
including the person’s age at the time of
the covered offense, the amount of time
that has elapsed since the occurrence of
the conviction or program entry, and the
person’s employment history and full
legal history;
(4) The position to be held or the level
of participation by the person at an IDI;
(5) The amount of influence the
person will be able to exercise over the
operation, management, or affairs of an
IDI;
(6) The ability of management of the
IDI to supervise and control the person’s
activities;
(7) The level of ownership or control
the person will have at an insured
depository institution;
(8) The applicability of the IDI’s
fidelity bond coverage to the person;
and
(9) Any additional factors in the
specific case that appear relevant to the
application or the applicant including,
but not limited to, the opinion or
position of the primary Federal or State
regulator.
(b) The question of whether a person,
who was convicted of a crime or who
agreed to a program entry, was guilty of
that crime shall not be at issue in a
proceeding under this subpart or under
12 CFR part 308, subpart M.
(c) The foregoing factors will also be
applied by the FDIC to determine
whether the interests of justice are
served in seeking an exception in the
appropriate court when an application
is made to terminate the ten-year ban
prior to its expiration date under 12
U.S.C. 1829(a)(2) for certain Federal
offenses.
t issue in a
proceeding under this subpart or under
12 CFR part 308, subpart M.
(c) The foregoing factors will also be
applied by the FDIC to determine
whether the interests of justice are
served in seeking an exception in the
appropriate court when an application
is made to terminate the ten-year ban
prior to its expiration date under 12
U.S.C. 1829(a)(2) for certain Federal
offenses.
(d) All approvals and orders will be
subject to the condition that the person
be covered by a fidelity bond to the
same extent as others in similar
positions. In cases in which a waiver of
the institution filing requirement has
been granted to an individual, approval
of the application will also be
conditioned upon that person disclosing
the presence of the conviction(s) or
program entry(ies) to all IDIs in the
affairs of which he or she wishes to
participate.
(e) When deemed appropriate, bank-
sponsored applications are to allow the
person to work in a specific job at a
specific bank and may also be subject to
the additional conditions, including that
the prior consent of the FDIC will be
required for any proposed significant
changes in the person’s duties or
responsibilities. In the case of bank-
sponsored applications, such proposed
changes may, in the discretion of the
Regional Director, require a new
application.
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(f) In situations in which an approval
has been granted for a person to
participate in the affairs of a particular
IDI and the person subsequently seeks
to participate at another IDI, another
application must be submitted and
approved by the FDIC prior to the
person participating in the affairs of the
other IDI.
§ 303.230
What will the FDIC do if the
application is denied?
Regulations
(f) In situations in which an approval
has been granted for a person to
participate in the affairs of a particular
IDI and the person subsequently seeks
to participate at another IDI, another
application must be submitted and
approved by the FDIC prior to the
person participating in the affairs of the
other IDI.
§ 303.230
What will the FDIC do if the
application is denied?
(a) The FDIC will inform the applicant
in writing that the application has been
denied and summarize or cite the
relevant considerations specified in
§ 303.229 of this subpart.
(b) The denial will also notify the
applicant that a written request for a
hearing under 12 CFR part 308, subpart
M, may be filed with the Executive
Secretary within 60 days after the
denial. The request for a hearing must
include the relief desired, the grounds
supporting the request for relief, and
any supporting evidence.
§ 303.231
Waiting time for a subsequent
application if an application is denied.
An application under section 19 may
be made in writing at any time more
than one year after the issuance of a
decision denying an application under
section 19. If the original denial is
subject to a request for a hearing, then
the subsequent application may be filed
at any time more than one year after the
decision of the Board of Directors, or its
designee, denying the application. The
prohibition against participating in the
affairs of an IDI under section 19 shall
continue until the individual has been
granted consent in writing to participate
in the affairs of an IDI by the Board of
Directors or its designee.
PART 308—RULES OF PRACTICE AND
PROCEDURE
■3. The authority citation for part 308
continues to read as follows:
Authority: 5 U.S.C. 504, 554–557; 12
U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a,
1468, 1815(e), 1817, 1818, 1819, 1820, 1828,
1829, 1829(b), 1831i, 1831m(g)(4), 1831o,
1831p–1, 1832(c), 1884(b), 1972, 3102,
3108(a), 3349, 3909, 4717, 5412(b)(2)(C),
5414(b)(3); 15 U.S.C
ignee.
PART 308—RULES OF PRACTICE AND
PROCEDURE
■3. The authority citation for part 308
continues to read as follows:
Authority: 5 U.S.C. 504, 554–557; 12
U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a,
1468, 1815(e), 1817, 1818, 1819, 1820, 1828,
1829, 1829(b), 1831i, 1831m(g)(4), 1831o,
1831p–1, 1832(c), 1884(b), 1972, 3102,
3108(a), 3349, 3909, 4717, 5412(b)(2)(C),
5414(b)(3); 15 U.S.C. 78(h) and (i), 78o(c)(4),
78o–4(c), 78o–5, 78q–1, 78s, 78u, 78u–2,
78u–3, 78w, 6801(b), 6805(b)(1); 28 U.S.C.
2461 note; 31 U.S.C. 330, 5321; 42 U.S.C.
4012a; Pub. L. 104–134, sec. 31001(s), 110
Stat. 1321; Pub. L. 109–351, 120 Stat. 1966;
Pub. L. 111–203, 124 Stat. 1376; Pub. L. 114–
74, sec. 701, 129 Stat. 584.
■4. Revise subpart M to read as follows:
Subpart M—Procedures Applicable to the
Request for and Conduct of a Hearing after
Denial of an Application Under Section 19
of the FDI Act
Sec.
308.156
Scope.
308.157
Denial of applications.
308.158
Hearings.
308.159–308.160
[Reserved]
Subpart M—Procedures Applicable to
the Request for and Conduct of a
Hearing after Denial of an Application
under Section 19 of the FDI Act
§ 308.156
Scope.
The rules and procedures set forth in
this subpart shall apply to an
application filed under section 19 of the
FDI Act, 12 U.S.C. 1829 (section 19),
and 12 CFR part 303, subpart L, by an
insured depository institution (IDI) or
an individual, which individual has
been convicted of any criminal offense
involving dishonesty, a breach of trust,
or money laundering, or who has agreed
to enter into a pretrial diversion or
similar program in connection with the
prosecution of such offense, to seek the
prior written consent of the FDIC for the
individual to become or continue as an
institution-affiliated party (IAP) with
respect to an IDI; to own or control
directly or indirectly an IDI; or to
participate directly or indirectly in any
manner in the conduct of the affairs of
an IDI; and shall apply only after such
application has been denied under par
ecution of such offense, to seek the
prior written consent of the FDIC for the
individual to become or continue as an
institution-affiliated party (IAP) with
respect to an IDI; to own or control
directly or indirectly an IDI; or to
participate directly or indirectly in any
manner in the conduct of the affairs of
an IDI; and shall apply only after such
application has been denied under part
12 CFR part 303, subpart L.
§ 308.157
Denial of applications.
If an application is denied under 12
CFR part 303, subpart L, then the
applicant may request a hearing under
this subpart. The applicant will have 60
days after the date of the denial to file
a written request with the Executive
Secretary. In the request, the applicant
shall state the relief desired, the grounds
supporting the request for relief, and
provide any supporting evidence that
the applicant believes is responsive to
the grounds for the denial.
§ 308.158
Hearings.
(a) Hearing dates. The Executive
Secretary shall order a hearing to be
commenced within 60 days after receipt
of a request for hearing on an
application filed under § 308.157. Upon
the request of the applicant or FDIC
enforcement counsel, the presiding
officer or the Executive Secretary may
order a later hearing date.
(b) Burden of proof. The burden of
going forward with a prima facie case
shall be upon the FDIC. The ultimate
burden of proof shall be upon the
person proposing to become or continue
as an IAP with respect to an IDI; to own
or control directly or indirectly an IDI;
or to participate directly or indirectly in
any manner in the conduct of the affairs
of an IDI.
order a later hearing date.
(b) Burden of proof. The burden of
going forward with a prima facie case
shall be upon the FDIC. The ultimate
burden of proof shall be upon the
person proposing to become or continue
as an IAP with respect to an IDI; to own
or control directly or indirectly an IDI;
or to participate directly or indirectly in
any manner in the conduct of the affairs
of an IDI.
(c) Hearing procedure. (1) The hearing
shall be held in Washington, DC, or at
another designated place, before a
presiding officer designated by the
Executive Secretary.
(2) The provisions of §§ 308.6 through
308.12, 308.16, and 308.21 of the
Uniform Rules (subpart A of this part)
and §§ 308.101, 308.102, and 308.104
through 308.106 the Local Rules
(subpart B of this part) shall apply to
hearings held under this subpart.
(3) The applicant may appear at the
hearing and shall have the right to
introduce relevant and material
documents and oral argument. Members
of the FDIC enforcement staff may
attend the hearing and participate as a
party.
(4) There shall be no discovery in
proceedings under this subpart.
(5) At the discretion of the presiding
officer, witnesses may be presented
within specified time limits, provided
that a list of witnesses is furnished to
the presiding officer and to all other
parties prior to the hearing. Witnesses
shall be sworn, unless otherwise
directed by the presiding officer. The
presiding officer may ask questions of
any witness. Each party shall have the
opportunity to cross-examine any
witness presented by an opposing party.
The transcript of the proceedings shall
be furnished, upon request and payment
of the cost thereof, to the applicant
afforded the hearing.
r to the hearing. Witnesses
shall be sworn, unless otherwise
directed by the presiding officer. The
presiding officer may ask questions of
any witness. Each party shall have the
opportunity to cross-examine any
witness presented by an opposing party.
The transcript of the proceedings shall
be furnished, upon request and payment
of the cost thereof, to the applicant
afforded the hearing.
(6) In the course of or in connection
with any hearing under this paragraph,
the presiding officer shall have the
power to administer oaths and
affirmations; to take or cause to be taken
depositions of unavailable witnesses;
and to issue, revoke, quash, or modify
subpoenas and subpoenas duces tecum.
Where the presentation of witnesses is
permitted, the presiding officer may
require the attendance of witnesses from
any state, territory, or other place
subject to the jurisdiction of the United
States at any location where the
proceeding is being conducted. Witness
fees shall be paid in accordance with
§ 308.14 of the Uniform Rules (subpart
A of this part).
(7) Upon the request of the applicant
afforded the hearing, or FDIC
enforcement staff, the record shall
remain open for five business days
following the hearing for the parties to
make additional submissions to the
record.
(8) The presiding officer shall make
recommendations to the Board of
Directors, where possible, within 20
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Federal Register / Vol. 85, No. 162 / Thursday, August 20, 2020 / Rules and Regulations
days after the last day for the parties to
submit additions to the record.
(9) The presiding officer shall forward
his or her recommendation to the
Executive Secretary who shall promptly
certify the entire record, including the
recommendation to the Board of
Directors or its designee. The Executive
Secretary’s certification shall close the
record.
August 20, 2020 / Rules and Regulations
days after the last day for the parties to
submit additions to the record.
(9) The presiding officer shall forward
his or her recommendation to the
Executive Secretary who shall promptly
certify the entire record, including the
recommendation to the Board of
Directors or its designee. The Executive
Secretary’s certification shall close the
record.
(d) Written submissions in lieu of
hearing. The applicant or the IDI may in
writing waive a hearing and elect to
have the matter determined on the basis
of written submissions.
(e) Failure to request or appear at
hearing. Failure to request a hearing
shall constitute a waiver of the
opportunity for a hearing. Failure to
appear at a hearing in person or through
an authorized representative shall
constitute a waiver of a hearing. If a
hearing is waived, the person shall
remain barred under section 19.
(f) Decision by Board of Directors or
its designee. Within 60 days following
the Executive Secretary’s certification of
the record to the Board of Directors or
its designee, the Board of Directors or its
designee shall notify the affected person
whether the person shall remain barred
under section 19. The notification shall
state the basis for any decision of the
Board of Directors or its designee that is
adverse to the applicant.
§ § 308.159–308.160
[Reserved]
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on July 24, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020–16464 Filed 8–19–20; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2020–0294; Airspace
Docket No. 20–AGL–8]
RIN 2120–AA66
Amendment of Area Navigation (RNAV)
Route T–354; Northcentral United
States.
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule
ant Executive Secretary.
[FR Doc. 2020–16464 Filed 8–19–20; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2020–0294; Airspace
Docket No. 20–AGL–8]
RIN 2120–AA66
Amendment of Area Navigation (RNAV)
Route T–354; Northcentral United
States.
AGENCY: Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
SUMMARY: This action modifies Area
Navigation (RNAV) route T–354 in the
northcentral United States. The
modified T-route expands the
availability of RNAV routing in support
of the FAA’s Next Generation Air
Transportation System (NextGen)
modernization efforts to transition the
National Airspace System (NAS) from a
ground-based to satellite-based
Performance Based Navigation (PBN)
system.
The RNAV route T–325 modifications
proposed in the notice of proposed
rulemaking (NPRM) require additional
coordination and flight inspection
activities. As such, the T–325
modifications are removed from this
rule.
DATES: Effective date 0901 UTC,
November 5, 2020. The Director of the
Federal Register approves this
incorporation by reference action under
Title 1 Code of Federal Regulations part
51, subject to the annual revision of
FAA Order 7400.11 and publication of
conforming amendments.
ADDRESSES: FAA Order 7400.11D,
Airspace Designations and Reporting
Points, and subsequent amendments can
be viewed online at https://
www.faa.gov/air_traffic/publications/.
For further information, you can contact
the Rules and Regulations Group,
Federal Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
The Order is also available for
inspection at the National Archives and
Records Administration (NARA). For
information on the availability of FAA
Order 7400.11D at NARA, email:
fedreg.legal@nara.gov or go to https://
www.archives.gov/federal-register/cfr/
ibr-locations.html
roup,
Federal Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
The Order is also available for
inspection at the National Archives and
Records Administration (NARA). For
information on the availability of FAA
Order 7400.11D at NARA, email:
fedreg.legal@nara.gov or go to https://
www.archives.gov/federal-register/cfr/
ibr-locations.html.
FOR FURTHER INFORMATION CONTACT:
Colby Abbott, Rules and Regulations
Group, Office of Policy, Federal
Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
SUPPLEMENTARY INFORMATION:
Authority for This Rulemaking
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the United States Code.
Subtitle I, Section 106 describes the
authority of the FAA Administrator.
Subtitle VII, Aviation Programs,
describes in more detail the scope of the
agency’s authority. This rulemaking is
promulgated under the authority
described in Subtitle VII, Part A,
Subpart I, Section 40103. Under that
section, the FAA is charged with
prescribing regulations to assign the use
of the airspace necessary to ensure the
safety of aircraft and the efficient use of
airspace. This regulation is within the
scope of that authority as it modifies the
route structure as necessary to preserve
the safe and efficient flow of air traffic
within the National Airspace System.
History
The FAA published a NPRM for
Docket No. FAA–2020–0294 in the
Federal Register (85 FR 22047; April 21,
2020), amending RNAV routes T–325
and T–354 to expand the availability of
RNAV routing in support of NextGen
efforts to transition the NAS from a
ground-based to satellite-based PBN
system. Interested parties were invited
to participate in this rulemaking effort
by submitting written comments on the
proposal. No comments were received.
Subsequent to the NPRM, the FAA
published a rule for Docket No
nding RNAV routes T–325
and T–354 to expand the availability of
RNAV routing in support of NextGen
efforts to transition the NAS from a
ground-based to satellite-based PBN
system. Interested parties were invited
to participate in this rulemaking effort
by submitting written comments on the
proposal. No comments were received.
Subsequent to the NPRM, the FAA
published a rule for Docket No. FAA–
2019–1105 in the Federal Register (85
FR 38785; June 29, 2020), amending
RNAV route T–354 by changing the
Siren, WI (RZN), route point listed as a
VOR/Distance Measuring Equipment
(‘‘VOR/DME’’) to ‘‘DME’’. That airway
amendment, effective September 10,
2020, is included in this rule.
Additionally, subsequent to the
NPRM, the FAA determined the RNAV
route T–325 modifications proposed in
the NPRM require additional
coordination and flight inspection
activities. As a result, the T–325
modifications are removed from this
rule and will be reworked in a separate
rulemaking action.
United States RNAV T-routes are
published in paragraph 6011 of FAA
Order 7400.11D, dated August 8, 2019,
and effective September 15, 2019, which
is incorporated by reference in 14 CFR
71.1. The RNAV route listed in this
document will be subsequently
published in the Order.
Availability and Summary of
Documents for Incorporation by
Reference
This document amends FAA Order
7400.11D, Airspace Designations and
Reporting Points, dated August 8, 2019,
and effective Se

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL20072. Check the current official text before relying on it. Not legal advice.