On December 23, 2022, the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 (NDAA), which contained the Fair Hiring in Banking Act (Act), was signed into law and became immediately effective. The Act provides significant amendments to Section 19 of the Federal Deposit Insurance Act (12 U.S.C. § 1829) (Section 19).
Section 19 prohibits a person from participating in the affairs of an FDIC-insured institution if he or she has been convicted of an offense involving dishonesty, breach of trust, or money laundering, or has entered into a pretrial diversion or similar program in connection with a prosecution for such an offense, without the prior written consent of the FDIC.
Several of the Act’s changes to Section 19 are highlighted below and in the attached Overview. The amended Section 19 statute can be found on the FDIC’s website.
Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-insured financial institutions.
Notable Changes to Section 19:
- Certain older offenses. The Act excludes certain offenses from the scope of Section 19 based on the amount of time that has passed since the offense occurred or since the individual was released from incarceration. The Act excludes certain offenses from the scope of Section 19 that were committed by individuals 21 or younger.
- Designated lesser offenses. The Act excludes certain “lesser offenses” from the scope of Section 19.
- Criminal offenses involving dishonesty. The Act excludes certain offenses from the definition of “criminal offense involving dishonesty.”
- Expunged, sealed, and dismissed offenses. The Act excludes certain offenses from the scope of Section 19 that have been expunged, sealed, or dismissed.
- Standards for FDIC review of Section 19 applications. The Act prescribes standards for the FDIC’s review of applications submitted under Section 19. The FDIC will process new and pending applications under the provisions of the amended law. Prospective applicants may contact the appropriate regional office as instructed on the FDIC’s website for Section 19 Applications.
FDIC Actions Related to the Changes. During 2023, the FDIC will:
- Revise its Section 19 application form, industry guidance, and implementing regulations (FDIC’s Filing Procedures under Part 303, Subpart L).
- Review Section 19 Orders and Section 19 Letters previously published on the FDIC’s Enforcement Decisions and Orders webpage to determine whether, in light of the Act, particular Orders and Letters should be terminated (as to Orders) and removed from the webpage (as to both types of documents).
FDIC’s Filing Procedures - Part 303, Subpart L (does not reflect the recent amendments)
Applications and Notices