Section 19 of the Federal Deposit Insurance Act prohibits an insured financial institution (i.e., a bank or financial institution) from employing or continuing to employ anyone who has been convicted of committing a crime of dishonesty, breach of trust, or money laundering unless that individual receives written consent (also known as a waiver) from the Federal Deposit Insurance Corporation (FDIC). This can mean that an individual who is found to have been convicted of one of these offenses must either resign or be terminated, if they are currently employed, and then go through the waiver application process or obtain a waiver prior to becoming employed by any such institution.
In general, there are two ways that an individual can apply for a Section 19 waiver. The first option requires an institution to sponsor (or file a waiver application on behalf of an employee). In general, sponsorship in this manner will occur when the sponsoring institution is attempting to employ a high-level executive.
Under the second method, known as an “individual waiver,” an individual files a waiver application on their own behalf, requesting that the FDIC issue a waiver. Unfortunately, many individuals have no idea that they have this right. Rather, the bank or financial institution simply informs the individual that their conviction bars their employment. Thus, many people who would otherwise eligible for a waiver never end up applying for one for this reason. Not everyone, however, is eligible to apply for and obtain a waiver. It is therefore best to speak with an attorney about your specific case to see if you would qualify for a waiver.
Below please find answers to some of the more frequently asked questions regarding FDIC Section 19 waivers.
What is an FDIC Section 19 waiver?
The laws regarding the employment of individuals with criminal records in banks or FDIC insured institutions are set forth in federal laws and administrative policies. Specifically, Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. § 1829(a), prevents individuals who have been convicted of a crime of dishonesty, breach of trust, or money laundering or who have entered into a pretrial diversion or other diversionary program from being able to work in, own, or control an insured depository institution (such as a bank or other financial institution) unless that individual has received the written consent of the FDIC.
Even if you were denied a position with a financial institution as a result of a conviction for a crime of dishonesty, breach of trust, or money laundering, however, the FDIC Section 19 waiver process may allow you to obtain employment. FDIC Section 19 waivers are considered on a case-by-case basis.
Who is eligible for an FDIC Section 19 waiver?
Any conviction for an offense involving dishonesty, breach of trust, or money laundering will require you to obtain an FDIC waiver. Whether a crime will be classified as dishonesty or breach of trust will be determined based on an analysis of the statutory elements of the crime itself. Determining which offenses requires a waiver is very important so that you can confidently work in the banking and finance industry. We are available to assist you and can research your specific case to let you know if it requires a waiver.
Section 19 applies to drug offenses in which money laundering is involved. Whether or not a crime involving simple possession of a controlled dangerous substance (“CDS”) will be covered by Section 19 will be determined by the nature of the crime as defined in the applicable state or federal state. All convictions for crimes involving illegal manufacture, distribution, sale or trafficking of CDS will require a waiver.
In addition, persons convicted of certain, more serious crimes are subject to a 10 year prohibition on working in, owning, or controlling a bank for 10 years. These individuals are unable to have this bar lifted through the individual waiver process and, instead, consent can only be achieved upon the FDIC filing a motion and with the approval of the sentencing court. These crimes include:
- Receiving commissions or gifts for procuring loans;
- Theft, embezzlement, or misapplication by bank officer or employee;
- Filing or making false or misleading bank entries, reports, and transactions;
- Laundering of monetary instruments;
- Fraud by wire, radio, or television; and
- Bank fraud.
Do I even need a Section 19 waiver?
Arrests Not Resulting in Convictions: For purposes of this law, there must be a conviction of record. Section 19 does not apply to arrests, acquittals, or convictions that were reversed on appeal.
Diversionary Programs: Participation in pre-trial diversions or similar diversionary programs for covered offenses are considered convictions, even if the charges were dismissed upon completion of the program, and will therefore require a waiver.
Expunged Records: A conviction that has been “completely expunged” is not considered a “conviction of record” and, therefore, will not require a waiver application. For a record to be considered “completely expunged,” however, “no one, including law enforcement, can be permitted access to the record even by court order under the state or federal law that was the basis of the expungement.”
Juvenile Records: A adjudication of delinquency by a court against a youthful offender are not considered convictions for criminal offenses and, therefore, will not require a waiver.
De Minimus Records: Where an offense is considered de minimus (minor) in nature, consent will automatically be granted and a waiver application will not be required. In order for an offense to qualify as de minimus, each of the following must be true:
- You were only convicted of one crime involving dishonesty, breach of trust, or money laundering;
- The 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 actual jail time. (FDIC changed these elements on December 18, 2012. Previously, for an offense to be de minimis, the offense had to be punishable only by less than one year imprisonment and/or a fine of less than $1,000, and the individual could not serve time in jail);
- The offense must be at least 5 years old; and
- The offense did not involve an insured depository institution or credit union (unless it is a “bad” or “insufficient funds” check case for $1,000 or less and the check did not have a bank or credit union as the payee).
What is involved in the waiver application process?
The purpose of a Section 19 waiver application is to provide the applicant with the opportunity to demonstrate that, despite their conviction, they are nonetheless fit to participate in the conduct of the affairs of an insured institution and also that they do not pose a risk to its safety and soundness or impair public confidence in that institution. The burden is on the applicant to establish that they deserve a waiver.
The waiver application process involves submitting an application, together with supporting documentation, to whichever regional office covers the state where the applicant lives. The FDIC will then evaluate your application and conduct a background checks. The application may also be sent to FDIC headquarters in Washington, D.C., who makes the final determination regarding the request for a waiver. If the waiver is granted, the applicant will be provided with an approval order, which will enable them to be eligible for employment at any FDIC insured institution.
Do I need an FDIC Section 19 waiver lawyer?
As several legal standards must be met in order for a waiver to be granted, the FDIC waiver application process can be difficult for an unrepresented party to complete on their own. In short, the waiver process is complex and is something that should be treated very seriously, especially when your career in banking and/or finance depends on it. If you are contemplating applying for a Section 19 waiver, contact a qualified attorney if you have any questions. An attorney’s approach to handling FDIC waivers can mean the difference between success and failure.
How long does it take to obtain a waiver?
The time frame to complete the waiver process can vary dramatically and can range anywhere from 3 to 12 months.
What are my chances of obtaining a waiver?
When evaluating your waiver application, the FDIC will consider whether or not you have demonstrated your fitness to participate in the business of an insured institution and whether you constitute a threat to the safety and soundness of the institution and whether you threaten to impair the public confidence in the institution. In evaluating the degree of risk you pose, the FDIC will analyze the following factors:
- The nature of the offense;
- Circumstances surrounding the offense;
- The applicant’s reputation;
- Evidence of rehabilitation;
- The age of the offense;
- The position to be held;
- The amount of influence/control the applicant will have over the affairs of the institution;
- The level of supervision over the applicant’s activities;
- The degree of ownership, if any, the applicant will have in the institution; and
- Any additional relevant factors.
Your chances of obtaining a waiver will vary widely depending on the specific facts of your case. Thus, we recommend that you call a waiver attorney to discuss the facts of your case for a more accurate assessment. Factors that will weigh in your favor, however, include convictions that are older, when the offense is relatively minor in nature, and when the individual has a minor criminal record.
Moreover, since those who are employed in clerical, maintenance, or purely administrative positions will not generally be in a position to cause a substantial risk, those applications are often routinely approved. For those who will be in a position of influence or control over the management of the institution, however, a more detailed review may be required.