On Monday, August 20, 2018, the FDIC modified its Statement of Policy for Section 19 of the Federal Deposit Insurance Act (12 U.S.C. § 1829). Section 19 requires persons convicted of any criminal offense involving dishonesty, breach of trust, or money laundering (conviction), or who have agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense (program entry), to request the written consent of the FDIC before participating in the affairs of any FDIC-insured institution. However, de minimis offenses are automatically granted approval without a required application. Any offense that meets the following criteria is considered de minimis: (1) there is only one conviction or program entry of record for the offense; (2) 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 jail time; (3) the conviction or program was entered at least five years prior to the date an application would otherwise be required; and (4) the offense did not involve an insured depository institution or insured credit union.
The de minimis exception was modified in the following ways:
- Age at time of offense. If the actions that resulted in a conviction or program entry occurred entirely when the individual was 21 years of age or younger, then the subsequent conviction or program entry, if it otherwise meets the general de minimis criteria specified above, will be considered de minimis if it was entered at least 30 months prior to the date an application would otherwise be required and all sentencing or program requirements have been met.
- Insufficient funds checks. A conviction or program entry based on the writing of "bad" or insufficient funds checks will be considered a de minimis offense if (i) there is no other conviction or program entry subject to Section 19, and the aggregate total face value of all "bad" or insufficient funds checks is $1,000 or less, and (ii) no insured depository institution or insured credit union was a payee on any of the "bad" or insufficient funds checks that were the basis of the convictions or program entries.
- Small-dollar, simple theft. A conviction or program entry based on a simple theft of goods, services, and/or currency (or other monetary instrument) will be considered a de minimis offense when (i) the aggregate value of the currency, goods, and/or services taken was $500 or less at the time of the conviction or program entry, (ii) the individual has no other conviction or program entry under Section 19, (iii) it has been five years since the conviction or program entry (or 30 months if the individual was 21 years of age or younger), and (iv) no insured financial institution or insured credit union was involved.
- Use of a fake, false, or altered identification card. The use of a fake, false, or altered identification by a person under the legal age for the purpose of obtaining or purchasing alcohol, or used for the purpose of entering a premise where alcohol is served but for which age appropriate identification is required, provided that there is no other conviction or program entry for a covered offense, will be considered de minimis.
In addition to the expansion of the de minimis exception, the modified Statement of Policy also clarifies a number of other provisions, including when an insured institution may extend a conditional offer of employment, and the definitions of the terms "complete expungement," "jail time," and "pretrial diversion or similar programs." Further, drug-related offenses that otherwise meet the de minimis criteria will now be granted automatic FDIC consent without an application. The modified Statement of Policy is expected to provide some regulatory relief by reducing the number of required Section 19 applications. The full text of the Financial Institution Letter is available here.