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4000 - Advisory Opinions

Whether a Bank Executive Convicted Under 31 U.S.C. § 5322(a) for "Willful Failure to Report Currency Transactions'' is a Crime Under Section 19 of the FDI Act.


April 26, 1990

Nancy L. Alper, Counsel

This is in reply to your second inquiry regarding Mr. *** and whether he is subject to section 19 of the Federal Deposit Insurance Act ("section 19"), 12 U.S.C. § 1829.

This second inquiry raises the question of whether Mr. ***'s conviction under 31 U.S.C. § 5322(a) for willful failure to report currency transactions while serving as an officer of a bank constitutes a crime involving dishonesty or breach of trust under section 19.

In the September 1968 Federal Deposit Insurance Corporation's ("FDIC") Corporation Guidelines and Policies with respect to Section 19 ("Section 19 Policy Statement"), the FDIC has defined dishonesty as follows:

Dishonesty means to cheat or defraud for monetary gain or its equivalent, directly or indirectly, or to wrongfully take from any person, property lawfully belonging to that person in violation of any criminal statute or code; acts of dishonesty are further defined to include, but not limited to such acts which involved want of integrity, lack of probity, or a disposition to distort, defraud, cheat, or to act deceitfully or fraudulently; and may also include crimes which by Federal or State criminal statutes and codes are defined as dishonest. (Emphasis added.)

1 Fed. Dep. Ins. Corp. 5155 (P-H). Thus, under the Section 19 Policy Statement, monetary gain or its equivalent and a wrongful taking of property are not necessary elements for a finding that an individual has been convicted of a crime involving dishonesty.

We believe that the willful failure to report currency transactions as required by 31 U.S.C. § 5322(a) involves a criminal offense involving dishonesty. Such a violation comprises acts, which involve ". . . a want of integrity or probity . . . [and manifest] a disposition to distort, defraud, cheat, or to act deceitfully or fraudulently." Id. at 5155. Contrary to your contention in your letter, the fact that Mr. *** might not have realized any gain from these transactions does not determine whether a conviction involves dishonesty under section 19.

In addition, by failing to report the currency transactions as required by 31 U.S.C. § 5322(a), Mr. *** breached his fiduciary duty. The Section 19 Policy Statement states that an omission, misappropriation or a wrongful use of funds with respect to any property or fund which has been lawfully committed to a person in a fiduciary capacity constitutes a breach of trust. Here, Mr. *** committed an act of omission with respect to property that had been lawfully committed to him.

In our response to your first inquiry concerning whether Mr. *** was particularly directly or indirectly in any manner in the conduct of the affairs of an insured depository institution such as to require a section 19 application, we stated that "certain activities by their nature are so closely related to banking or managing or controlling insured depository institutions as to be a proper incident thereto. . . .". We continue to believe that Mr. ***'s activities as a consultant providing advice and services in the area of acquisitions to *** Incorporated are so closely related to banking, managing or controlling an insured depository institution as to constitute participation directly or indirectly in the conduct of the affairs of such an institution. Accordingly, we have concluded that a section 19 application would be required to be filed on behalf of Mr. ***.

However, as we stated in our first letter, you should note that under 12 C.F.R. § 308.101(b) of the FDIC's Rules and Regulations, a section 19 application may be filed only after three years from the date of a final conviction. If Mr. ***'s conviction occurred more than three years ago, a section 19 application may be filed.

In accordance with this discussion and if appropriate at this time, a section 19 application should be executed and sent to:

Mr. George J. Masa

Regional Director (Supervision)

Federal Deposit Insurance Corporation

30 South Wacker Drive

Suite 3100

Chicago, Illinois 60606

Please note that a knowing violation of section 19 may result in a fine of $1,000,000 for each day of violation or imprisonment for not more than five years, or both. I hope that this discussion has been useful.

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