Federal law requires FDIC-insured banks to screen job candidates for a specific category of criminal history before hiring them. The core rule, known as Section 19 of the Federal Deposit Insurance Act, bars anyone convicted of a crime involving dishonesty, breach of trust, or money laundering from working at an insured bank without the FDIC’s written consent. FDIC bank background check requirements sit on top of the Fair Credit Reporting Act, which controls how the screening itself must be conducted. Together, the two regimes decide who can be hired, what paperwork the bank must complete, and what the applicant is entitled to along the way.
Who and What Section 19 Covers
Section 19, codified at 12 U.S.C. ยง 1829, makes it illegal for anyone convicted of a covered offense to become or remain an “institution-affiliated party” at an FDIC-insured depository institution without prior written consent from the FDIC.1Office of the Law Revision Counsel. 12 U.S. Code 1829 – Penalty for Unauthorized Participation by Convicted Individual The category is broad. It reaches employees, officers, directors, agents, and independent contractors who provide services to the bank, and it also covers anyone who owns or controls a bank directly or indirectly.2Federal Deposit Insurance Corporation. FDIC Statement of Policy for Section 19 of the FDI Act The bar applies to the individual and to the bank at the same time: the person may not participate, and the bank may not let them.
Three categories of criminal conduct trigger the prohibition: offenses involving dishonesty, offenses involving a breach of trust, and money laundering. Forgery, embezzlement, bank fraud, identity theft, and misuse of entrusted funds are common examples. Severity does not control. A misdemeanor conviction for writing a bad check triggers the same bar as a felony fraud conviction.1Office of the Law Revision Counsel. 12 U.S. Code 1829 – Penalty for Unauthorized Participation by Convicted Individual Entering a pretrial diversion program in connection with a covered offense counts as a conviction for Section 19 purposes, even if the case ended without a formal guilty finding.
Simple drug possession is explicitly excluded following changes made by the Fair Hiring in Banking Act in December 2022. A conviction for possessing a controlled substance, standing alone, does not trigger the Section 19 bar.3Federal Deposit Insurance Corporation. Section 19 – Penalty for Unauthorized Participation by Convicted Individual A drug-related offense that also involves dishonesty, such as forging a prescription, can still qualify.
Records That No Longer Count
Convictions that have been expunged, sealed, or dismissed are outside Section 19. If a court has issued an order of expungement, sealing, or dismissal, and the order or the law behind it intends the conviction to be destroyed or sealed from the individual’s record, the prohibition does not apply.4GovInfo. 12 U.S. Code 1829 – Penalty for Unauthorized Participation by Convicted Individual The FDIC’s final rule, effective October 1, 2024, confirmed that expungements or sealings that happen automatically by operation of law also qualify, not only those obtained by petition.
Pardons are treated differently. A presidential or gubernatorial pardon does not automatically lift the Section 19 bar, and a pardoned individual must still apply for consent.5eCFR. 12 CFR Part 303 Subpart L The pardon strengthens the application but does not replace it.
The De Minimis Exception
Not every covered offense forces the bank to file an application. The statute carves out a de minimis exception for minor offenses that pose minimal risk to the institution.1Office of the Law Revision Counsel. 12 U.S. Code 1829 – Penalty for Unauthorized Participation by Convicted Individual Two sub-categories are recognized.
- General de minimis offenses are those punishable by three years or less of confinement, subject to additional FDIC criteria that look at the nature of the offense and the individual’s overall record.
- Designated lesser offenses are specifically named in the statute and include using a fake ID, shoplifting, trespass, fare evasion, and driving with an expired license or tag. For these, the prohibition drops away once at least one year has passed since the conviction or program entry.6Federal Deposit Insurance Corporation. Final Rule to Revise FDIC Regulations Concerning Section 19
When an offense fits the de minimis criteria, the bank can hire the individual without filing anything with the FDIC. Documenting the analysis is still important, because examiners will want to see how the bank reached that conclusion if they later review the hire.
When Consent Is Required and Who Files
If the prohibition applies and no exception covers the offense, someone must file for the FDIC’s written consent before the person can start work. Applications can come from the bank or from the individual.7Federal Deposit Insurance Corporation. Section 19 Rule Brochure
In a bank-sponsored application, the institution files on behalf of the individual for a specific role. The bank agrees to supervise the person and must confirm that they will be covered by the institution’s fidelity bond to the same extent as others in similar positions. Approval applies only to that role at that bank, and does not transfer if the person moves jobs.
An individual waiver lets a person file on their own without a bank’s sponsorship. This is the route when someone wants to clear the bar before job hunting, or when no bank is willing to sponsor without knowing the FDIC’s answer first. Individual waivers get an additional layer of review at the FDIC’s Washington office and take longer to process, but if granted, the waiver is broad: the person is no longer barred from any position at any FDIC-insured institution.
No application can be filed until every sentencing requirement tied to the conviction has been completed, including imprisonment, fines, restitution, probation, and any conditions of rehabilitation. The case must be final under the rules of the jurisdiction where the conviction occurred.5eCFR. 12 CFR Part 303 Subpart L Filing while probation or fines are still outstanding gets the application returned.
What the Application Includes and How Long It Takes
The application is submitted on FDIC Form 6710/07 and goes to the FDIC Regional Office covering either the applicant’s state of residence (for individual filings) or the bank’s home office (for sponsored filings).8Federal Deposit Insurance Corporation. Section 19 Application Instructions Sending it to the wrong office delays processing.
Applicants should gather certified copies of all court records related to the conviction, including the charging document, judgment, and sentencing order. A detailed personal statement covering the circumstances of the offense, the punishment received, and rehabilitation since then anchors the package. Evidence of rehabilitation carries substantial weight: steady employment, community involvement, completion of any treatment or educational programs, and full payment of court-ordered restitution or fines. Bank-sponsored applications must describe the duties of the proposed position and the safeguards the institution will put in place. Character references from people who can speak to the applicant’s conduct since the offense complete the file.
The FDIC’s published targets are 30 days for bank-sponsored applications after a substantially complete filing, and 45 days for individual waivers after the Regional Office forwards its recommendation to Washington.7Federal Deposit Insurance Corporation. Section 19 Rule Brochure The clock does not really start until the FDIC considers the application complete. Missing court documents, thin personal statements, and misrouted filings are the usual causes of delay. FDIC staff may request additional information or an interview during their review, and the applicant cannot begin work until formal written approval arrives.
If the FDIC Denies the Application
A denied applicant has two options. A request for reconsideration must be filed with the Regional Director within 15 days of the denial notice; the Regional Office consults with Washington, and if denial still stands, the Washington Office makes the final call.9Federal Deposit Insurance Corporation. Section 19 Applications Procedures Manual – Requests for Reconsideration A formal hearing is the other path: a written hearing request must be filed with the FDIC’s Administrative Officer within 60 days of the denial, and an applicant who prefers not to appear can waive the hearing and have the matter decided on written submissions.10eCFR. 12 CFR Part 308 Subpart M
FCRA Rules for the Background Check Itself
Section 19 controls who a bank can hire. The Fair Credit Reporting Act controls how the screening happens. When a bank uses a third-party consumer reporting agency to run a background check on a job applicant, FCRA obligations apply on top of Section 19.
Before ordering the report, the bank must give the applicant a clear written disclosure, in a standalone document separate from the job application, stating that a background check may be obtained. The applicant must provide written authorization before the bank can proceed.11Office of the Law Revision Counsel. 15 U.S. Code 1681b – Permissible Purposes of Consumer Reports
If information in the report leads the bank to consider not hiring the applicant, a two-step adverse action process applies. First, before making a final decision, the bank must send a pre-adverse action notice that includes a copy of the report and a summary of rights under the FCRA, giving the applicant an opportunity to dispute inaccurate information. Second, after the decision, the bank must send a formal adverse action notice that identifies the consumer reporting agency, states that the agency did not make the hiring decision, and informs the applicant of the right to dispute the report’s accuracy and request a free copy within 60 days.12Federal Trade Commission. Using Consumer Reports – What Employers Need to Know Skipping either step creates liability even when the underlying Section 19 disqualification is valid.
Penalties for Getting It Wrong
The stakes are steep. Anyone who knowingly violates Section 19 faces a criminal fine of up to $1,000,000 for each day the violation continues, imprisonment for up to five years, or both.1Office of the Law Revision Counsel. 12 U.S. Code 1829 – Penalty for Unauthorized Participation by Convicted Individual Because the fine is measured per day, exposure adds up quickly. Even a few weeks of unauthorized participation can generate potential liability in the tens of millions.
Both sides are on the hook. The individual who participates without consent violates the statute, and the bank that knowingly permits the participation does too. Institutions also face regulatory enforcement actions and consent orders on top of any criminal exposure. That is why banks treat Section 19 screening as a firm precondition to hiring rather than a step that can be revisited after onboarding.