Clearing the Road for More Individuals with Criminal Histories to Work in Financial Institutions

 Buried among the over 600 proposed amendments included in the annual defense spending bill that was passed on December 23, 2022 (H.R.7776 – James M. Inhofe National Defense Authorization Act for Fiscal Year 2023) (“Act”) are provisions intended to remove employment barriers for those with criminal histories who are looking for jobs in federally insured financial institutions. Essentially, these provisions mirror legislation that was proposed in May of last year in the Fair Hiring in Banking Act (H.R. 5911) to amend Section 19 of the Federal Deposit Insurance Corporation (FDIC) Act.

Background

Section 19 of the Federal Deposit Insurance Act prohibits individuals who were “convicted of certain criminal offenses from participating in the affairs of an insured depository institution without the written consent of the FDIC.” Section 19 governs the types of criminal convictions that disqualify a person from being employed by a financial institution, including dishonesty, breach of trust, or money laundering convictions, or pre-trial diversion programs for these crimes, with a ten-year minimum prohibition for these types of offenses. While there is no comprehensive list of crimes, the categories of crimes provide a guide for what is or isn’t acceptable for employment in a financial institution. Penalties for violations of Section 19 includes fines of up to $1,000,000 for each day the prohibition is violated and/or imprisonment for up to five years. However, exemptions may apply if the employment is considered in the interest of justice.

The Section 19 rules have been updated numerous times. For example, in 2019, procedures designed to relax some of the strict rules regarding crimes that barred many from working in the financial industry were implemented. The updates included the following:

• Excluding all offenses that have been expunged or sealed,
• Allowing a person with two (rather than one) minor “de minimis” crimes on a criminal record to qualify for an exception,
• Eliminating the five-year waiting period following a first de minimis conviction and establishing a three-year waiting period following a second de minimis conviction (or 18 months for individuals whose misconduct occurred when they were 21 or younger),
• Increasing the de minimis threshold for small-dollar, simple thefts from $500 to $1,000, and
• Expanding the de minimis exception for crimes involving the use of fake identification to circumvent age-based restrictions from alcohol-only related crimes to any such crimes related to purchases, activities, or premises entry.

2023 Amendments

Now, under this newly passed defense legislation, Section 19 has been amended further. The requirement for banks and credit unions insured by the Federal Deposit Insurance Corporation (FDIC) to receive FDIC waivers in order to hire individuals convicted of crimes that involve dishonesty and breach of trust has been significantly reduced. Specifically, the requirement for waivers now exclude:

• Individuals whose offense occurred at least seven years ago (reducing the former ten-year prohibition).
• Individuals who had been incarcerated with respect to the offense and five or more years since the individual was released has passed.
• Individuals who committed an offense when they were 21 years of age or younger if more than 30 months have passed since the sentencing.

As the country continues to face rising crime rates and unstable economies, the trend of implementing initiatives to get more people working must continue to be balanced with the legitimate concerns of employers and customers. In performing background screenings, Hire Image understands this balance. If you have any questions or concerns about these amendments or any other laws that affect your hiring practices, please contact us to speak with a representative.