(a) This subpart covers applications under section 19 of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1829. The FDIC refers to such applications as “consent applications.” Under section 19, any person who has been convicted of any criminal offense involving dishonesty, breach of trust, or money laundering, or has agreed to enter into a pretrial diversion or similar program (program entry) in connection with a prosecution for such offense (collectively, Covered Offenses), may not become, or continue as, an institution-affiliated party (IAP) of an insured depository institution (IDI); own or control, directly or indirectly, any IDI; or otherwise participate, directly or indirectly, in the conduct of the affairs of any IDI without the prior written consent of the FDIC.

(b) In addition, the law prohibits an IDI from permitting such a person to engage in any conduct or to continue any relationship prohibited by section 19. IDIs must therefore make a reasonable, documented inquiry to verify an applicant's history to ensure that a person who has a Covered Offense under section 19 is not hired or permitted to participate in its affairs without the written consent of the FDIC issued under this subpart. FDIC-supervised IDIs may extend a conditional offer of employment contingent on the completion of a background check satisfactory to the institution to determine if the applicant is prohibited under section 19, but the applicant may not work for, be employed by, or otherwise participate in the affairs of the IDI until the IDI has determined that the applicant is not prohibited under section 19 (including persons who have had a consent application approved).

(c) If there is a conviction or program entry covered by the prohibitions of section 19, an application under this subpart must be filed seeking the FDIC's consent in order to become, or to continue as, an IAP; to own or control, directly or indirectly, an IDI; or to otherwise participate, directly or indirectly, in the affairs of the IDI. The application must be filed, and consented to, prior to serving in any of the foregoing capacities unless such application is not required under the subsequent provisions of this subpart. The purpose of an application is to provide the applicant an opportunity to demonstrate that, notwithstanding the prohibition, a person is fit to participate in the conduct of the affairs of an IDI without posing a risk to its safety and soundness or impairing public confidence in that institution. The burden is upon the applicant to establish that the application warrants approval.

(a) Persons covered by section 19 include IAPs, as defined by 12 U.S.C. 1813(u), and others who are participants in the conduct of the affairs of an IDI. Therefore, all directors, officers, and employees of an IDI who fall within the scope of section 19, including de facto employees, as determined by the FDIC based upon generally applicable standards of employment law, will also be subject to section 19. Whether other persons are covered by section 19 depends upon their degree of influence or control over the management or affairs of an IDI. For example, section 19 would apply to directors and officers of affiliates, subsidiaries, or joint ventures of an IDI if they participate in the affairs of the IDI or are in a position to influence or control the management or affairs of the IDI. Typically, an independent contractor does not have a relationship with the IDI other than the activity for which the institution has contracted. However, an independent contractor who also influences or controls the management or affairs of the IDI would be covered by section 19.

(b) The term person, for purposes of section 19, means an individual and does not include a corporation, firm, or other business entity.

(c) Individuals who file an application with the FDIC under the provisions of section 19 who also seek to participate in the affairs of a bank holding company or savings and loan holding company may have to comply with any filing requirements of the Board of the Governors of the Federal Reserve System under 12 U.S.C. 1829(d) and (e). Conversely, an individual who works at a bank holding company or savings and loan holding company who would like to participate in the affairs of an IDI or be in a position to influence or control the management or affairs of an IDI must file an application with the FDIC under this subpart.

(d) Section 19 specifically prohibits a person subject to its provisions from owning or controlling, directly or indirectly, an IDI. The terms control, ownership, and acting in concert under section 19 have the meaning given to those terms in subpart E of this part (including the rebuttable presumptions stated in subpart E of this part).

(1) A person will be deemed to exercise “control” if that person—

(i) Has the ability to direct the management or policies of an IDI;

(ii) Has the power to vote 25 percent or more of the voting shares of an IDI; or

(iii) Has the power to vote 10 percent of the voting shares of an IDI if—

(A) No other person owns, controls, or has the power to vote more shares; or

(B) The institution has registered securities under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l).

(2) Under this paragraph (d), a person will be deemed to “own” an IDI if that person owns—

(i) 25 percent or more of the institution's voting stock; or

(ii) 10 percent of the voting shares if—

(A) No other person owns more; or

(B) The institution has registered securities under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l).

(3) The standards in this paragraph (d) would also apply to an individual acting in concert with others so as to have such ownership or control. Absent the FDIC's consent, persons subject to the prohibitions of section 19 must divest their control or ownership of shares above the foregoing limits.

(a) Categories of Covered Offenses. The conviction or program entry must be for a criminal offense involving dishonesty, breach of trust, or money laundering.

(1) The term criminal offense involving dishonesty—

(i) Means an offense under which an individual, directly or indirectly—

(A) Cheats or defrauds; or

(B) Wrongfully takes property belonging to another in violation of a criminal statute;

(ii) Includes an offense that Federal, State, or local law defines as dishonest, or for which dishonesty is an element of the offense; and

(iii) Does not include—

(A) A misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration; or

(B) An offense involving the possession of controlled substances. At a minimum, this exclusion applies to criminal offenses involving the simple possession of a controlled substance and possession with intent to distribute a controlled substance. This exclusion may also apply to other drug-related offenses depending on the statutory elements of the offenses or from court determinations that the statutory provisions of the offenses do not involve dishonesty, breach of trust, or money laundering, as noted in paragraph (b) of this section. Potential applicants may contact their appropriate FDIC Regional Office if they have questions about whether their offenses are covered under section 19.

(iv) The term offense committed in paragraph (a)(1)(iii)(A) of this section means the last date of the underlying misconduct. In instances with multiple offenses, offense committed means the last date of any of the underlying offenses.

(2) The term breach of trust means a wrongful act, use, misappropriation, or omission with respect to any property or fund that has been committed to a person in a fiduciary or official capacity, or the misuse of one's official or fiduciary position to engage in a wrongful act, use, misappropriation, or omission.

(b) Elements of the offense. Whether a crime involves dishonesty, breach of trust, or money laundering will be determined from the statutory elements of the offense itself or from court determinations that the statutory provisions of the offense involve dishonesty, breach of trust, or money laundering.

(c) Certain older offenses excluded—(1) Exclusions for certain older offenses. Section 19 does not apply to an offense if—

(i) It has been 7 years or more since the offense occurred; or

(ii) The individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration.

(iii) The term offense occurred means the last date of the underlying misconduct. In instances with multiple Covered Offenses, offense occurred means the last date of any of the underlying offenses.

(2) Offenses committed by individuals 21 years of age or younger. For individuals who committed an offense when they were 21 years of age or younger, section 19 does not apply to the offense if it has been more than 30 months since the sentencing occurred. The term sentencing occurred means the date on which a court imposed the sentence (as indicated by the date on the court's sentencing order), not the date on which all conditions of sentencing were completed.

(3) Limitation. This paragraph (c) does not apply to an offense described under 12 U.S.C. 1829(a)(2).

(d) Foreign convictions. Individuals who are convicted of or enter into a pretrial diversion program for a criminal offense involving dishonesty, breach of trust, or money laundering in any foreign jurisdiction are subject to section 19, unless the offense is otherwise excluded by this subpart.

(a) Convictions requiring an application. There must be a conviction of record. Section 19 does not cover arrests or pending cases not brought to trial, unless the person has a program entry as set out in § 303.224. Section 19 does not cover acquittals or any conviction that has been reversed on appeal, unless the reversal was for the purpose of re-sentencing. A conviction with regard to which an appeal is pending requires an application. A conviction for which a pardon has been granted requires an application.

(b) Convictions not requiring an application. When an individual is charged with a Covered Offense and, in the absence of a program entry as set out in § 303.224, is subsequently convicted of an offense that is not a Covered Offense, the conviction is not subject to section 19.

(c) Expungement, dismissal, and sealing. A conviction is not considered a conviction of record and does not require an application if—

(1) There is an order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense, or if a conviction has been otherwise expunged, sealed, or dismissed by operation of law; and

(2) It is intended by the language in the order itself, or in the legislative provisions under which the order was issued, or in other legislative provisions, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record, even if exceptions allow the conviction to be considered for certain character and fitness evaluation purposes.

(d) Youthful offenders. An adjudication by a court against a person as a “youthful offender” (or similar term) under any youth-offender law applicable to minors as defined by State law, or any judgment as a “juvenile delinquent” (or similar term) by any court having jurisdiction over minors as defined by State law, does not require an application. Such an adjudication does not constitute a matter covered under section 19 and is not a conviction or program entry for determining the applicability of § 303.227.

(a) The term pretrial diversion or similar program (program entry) means a program characterized by a suspension or eventual dismissal or reversal of charges or criminal prosecution upon agreement by the accused to restitution, drug or alcohol rehabilitation, anger management, or community service. Whether the outcome of a case constitutes a program entry is determined by relevant Federal, State, or local law, and, if not so designated under applicable law, then the determination of whether a disposition is a program entry will be made by the FDIC on a case-by-case basis. Program entries prior to November 29, 1990, are not covered by section 19.

(b) When a Covered Offense either is reduced by a program entry to an offense that would otherwise not be covered by section 19 or is dismissed upon successful completion of a program entry, the offense remains a Covered Offense for purposes of section 19. The Covered Offense will require an application unless it is de minimis as provided by § 303.227.

(c) Expungements, dismissals, or sealings of program entries will be treated the same as those for convictions.

(a) The FDIC will accept applications from—

(1) An individual;

(2) An IDI applying on behalf of an individual;

(3) A depository institution holding company applying on behalf of an individual with respect to an IDI subsidiary of the holding company; and

(4) A depository institution holding company applying on behalf of an individual who will work at the holding company but also participate in the affairs of the IDI or who would be in a position to influence or control the management or affairs of the IDI, in accordance with § 303.221(a).

(b) An individual or an institution may file applications at separate times. Under either approach, the application(s) must be filed with the appropriate FDIC Regional Office, as required by this subpart.

Except for situations in which no application is required under section 19 and this subpart, an application must be filed when there is a conviction by a court of competent jurisdiction for a Covered Offense by any adult or minor treated as an adult or when such person has a program entry regarding that offense. Before an application may be filed, all of the sentencing requirements associated with a conviction, or conditions imposed by the program entry, including but not limited to, imprisonment, fines, conditions of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction. The FDIC's application forms as well as additional information concerning section 19 can be accessed from the FDIC's Regional Offices or on the FDIC's website.

(a) In general. The prohibitions of 12 U.S.C. 1829(a) will not apply, and an application will therefore not be required, where all of the following de minimis criteria are met. (Paragraph (b)(4) of this section contains separate exemption criteria from paragraphs (a) through (b)(3) of this section, and an offense that qualifies for exemption under paragraph (b)(4) of this section is excluded from consideration in the criteria of paragraphs (a) through (b)(3) of this section.)

(1) The individual has been convicted of, or has program entries for, no more than two Covered Offenses, including those subject to paragraphs (b)(1) through (3) of this section; and for each Covered Offense, all of the sentencing requirements associated with the conviction, or conditions imposed by the program entry, have been completed (the sentence- or program-completion requirement does not apply under paragraph (b)(2) of this section).

(2) For each Covered Offense, the individual could have been sentenced to a term of confinement in a correctional facility of three years or less and/or a fine of $2,500 or less, and the individual actually served three days or less of jail time for each Covered Offense.

(3) Jail time under paragraph (a)(2) of this section is calculated based on the time an individual spent incarcerated as a punishment or a sanction—not as pretrial detention—and does not include probation or parole where an individual was restricted to a particular jurisdiction or was required to report occasionally to an individual or a specific location. Jail time includes confinement to a psychiatric treatment center in lieu of a jail, prison, or house of correction on mental-competency grounds. The definition is not intended to include either of the following: persons who are restricted to a substance-abuse treatment program facility for part or all of the day; or persons who are ordered to attend outpatient psychiatric treatment.

(4) If there are two convictions or program entries for a Covered Offense, each conviction or program entry was entered at least three years prior to the date an application would otherwise be required, except as provided in paragraph (b)(1) of this section.

(5) Each Covered Offense must not have been committed against an IDI or insured credit union.

(b) Other types of offenses for which the de minimis exemption applies and no application is required—(1) Age of person at time of Covered Offense. If there are two convictions or program entries for a Covered Offense, and the actions that resulted in both convictions or program entries all occurred when the individual was 21 years of age or younger, then the de minimis criteria in paragraph (a)(4) of this section will be met if the convictions or program entries were entered at least 18 months prior to the date an application would otherwise be required. For this reduction in waiting time to apply, the convictions or program entries must meet the other de minimis criteria in paragraph (a) of this section.

(2) Convictions or program entries for insufficient funds checks. The prohibitions of 12 U.S.C. 1829(a) will not apply, and an application will therefore not be required, as to convictions or program entries of record based on the writing of “bad” or insufficient funds check(s) if the following conditions apply:

(i) The aggregate total face value of all “bad” or insufficient funds check(s) cited across all the conviction(s) or program entry(ies) for “bad” or insufficient funds checks is $2,000 or less;

(ii) No IDI or insured credit union was a payee on any of the “bad” or insufficient funds checks that were the basis of the conviction(s) or program entry(ies); and

(iii) The individual has no more than one other de minimis offense under this section.

(3) Convictions or program entries for small-dollar, simple theft. The prohibitions of 12 U.S.C. 1829(a) will not apply, and an application will therefore not be required, as to convictions or program entries based on the simple theft of goods, services, or currency (or other monetary instrument) if the following conditions apply:

(i) The value of the currency, goods, or services taken was $1,000 or less;

(ii) The theft was not committed against an IDI or insured credit union;

(iii) The individual has no more than one other offense that is considered exempt under this section; and

(iv) If there are two offenses—each of which, by itself, is considered exempt under this section—each conviction or program entry was entered at least three years prior to the date an application would otherwise be required, or at least 18 months prior to the date an application would otherwise be required if the actions that resulted in the conviction or program entry all occurred when the individual was 21 years of age or younger.

(v) Simple theft excludes burglary, forgery, robbery, identity theft, and fraud.

(4) Convictions or program entries for using fake identification, shoplifting, trespassing, fare evasion, or driving with an expired license or tag. The prohibitions of 12 U.S.C. 1829(a) will not apply, and an application will therefore not be required, as to the following offenses, if one year or more has passed since the applicable conviction or program entry: using fake identification; shoplifting; trespassing; fare evasion; and driving with an expired license or tag.

(c) Non-qualifying convictions or program entries. No conviction or program entry for a violation of the title 18 sections set out in 12 U.S.C. 1829(a)(2) can qualify under any of the de minimis exemptions set out in this section.

Forms and instructions should be obtained from the FDIC's Regional Offices or on the FDIC's website (www.fdic.gov), and the application(s) must be filed with the appropriate FDIC Regional Office. An application may be filed by an individual or by an IDI or depository institution holding company on behalf of an individual, or by both. The appropriate Regional Office for an institution-sponsored application is the office covering the state where the institution's home office is located. The appropriate Regional Office for an application filed by an individual is the office covering the state where the person resides. States covered by each FDIC Regional Office can be located on the FDIC's website.

(a) Criminal-history records. In reviewing an application, the FDIC will—

(1) Primarily rely on the criminal history record provided by the Federal Bureau of Investigation (rap sheet); and

(2) Provide such record to the subject of the application to review for accuracy. The FDIC will make reasonable efforts to communicate with the subject of the application within 15 calendar days of receipt of this record from the Federal Bureau of Investigation to inform the individual that the FDIC will be providing them with a copy of the report and to verify the individual's contact information. The FDIC will make reasonable efforts to send the report to the individual within 5 business days of successful verification of the individual's contact information. If the individual believes that there are any inaccuracies in the report, the FDIC will direct the individual to an appropriate contact at the Federal Bureau of Investigation where the individual can seek corrections to the report.

(b) Certified copies. The FDIC will not require an applicant to provide certified copies of criminal history records unless the FDIC determines that there is a clear and compelling justification to require additional information to verify the accuracy of the criminal history record provided by the Federal Bureau of Investigation.

(c) Ultimate determinations. The ultimate determinations in assessing an application are whether the person has demonstrated their fitness to participate in the conduct of the affairs of an IDI, and whether the affiliation, ownership, control, or participation by the person in the conduct of the affairs of the institution may constitute a threat to the safety and soundness of the institution or the interests of its depositors or threaten to impair public confidence in the institution.

(d) Individualized assessment. When evaluating applications, the FDIC will conduct an individualized assessment that will consider:

(1) Whether the conviction or program entry is subject to section 19, and the specific nature and circumstances of the offense;

(2) Whether the participation directly or indirectly by the person in any manner in the conduct of the affairs of the IDI constitutes a threat to the safety and soundness of the institution or the interests of its depositors or threatens to impair public confidence in the institution;

(3) Evidence of rehabilitation, including the person's age at the time of the conviction or program entry, the time that has elapsed since the conviction or program entry, and the relationship of the individual's offense to the responsibilities of the applicable position;

(4) The individual's employment history, letters of recommendation, certificates documenting participation in substance-abuse programs, successful participation in job preparation and educational programs, and other relevant evidence;

(5) The ability of management of the IDI to supervise and control the person's activities;

(6) The level of ownership or control the person will have of an IDI;

(7) The applicability of the IDI's fidelity bond coverage to the person; and

(8) Any additional factors in the specific case that appear relevant to the application or the individual including, but not limited to, the opinion or position of the primary Federal or State regulator.

(e) No re-consideration of guilt. The question of whether a person, who was convicted of a crime or who agreed to a program entry, was guilty of that crime will not be at issue in a proceeding under this subpart or under 12 CFR part 308, subpart M.

(f) Factors considered for enumerated offenses. The foregoing factors will also be applied by the FDIC to determine whether the interests of justice are served in seeking an exception in the appropriate court when an application is made to terminate the ten-year ban prior to its expiration date under 12 U.S.C. 1829(a)(2) for certain Federal offenses.

(g) Mandatory conditions of approval. All approvals and orders will be subject to the condition that the person be covered by a fidelity bond to the same extent as others in similar positions. If the FDIC has approved an application filed by an individual and has issued a consent order, the individual must disclose the presence of the conviction(s) or program entry(ies) to all IDIs in the affairs of which they wish to participate.

(h) Institution-sponsored applications: work at same employer. When deemed appropriate by the FDIC, institution-sponsored applications are to allow the individual to work for the same employer (without restrictions on the location) and across positions, except that the prior consent of the FDIC (which may require a new application) will be required for any proposed significant changes in the individual's security-related duties or responsibilities, such as promotion to an officer or other positions that the employer determines will require higher security screening credentials.

(i) Work at a different employer after certain approvals. In situations in which an approval has been granted for a person to participate in the affairs of a particular IDI and the person subsequently seeks to participate at another IDI, another application must be submitted and approved by the FDIC prior to the person participating in the affairs of the other IDI.

(a) The FDIC will inform the applicant in writing that the application has been denied and summarize or cite the relevant considerations specified in § 303.229.

(b) The denial will also notify the applicant that a written request for a hearing (or a request for written submissions in lieu of a hearing) under 12 CFR part 308, subpart M, may be filed with the FDIC Executive Secretary within 60 days after the denial. For institution-sponsored applications, either the institution or the subject individual (or both, as a consolidated request) may file such a written request. A request must include the relief desired, the grounds supporting the request for relief, and any supporting evidence.

(a) An application under section 19 must be made in writing and may not be made less than one year following the issuance of a decision denying an application under section 19. If the original denial is subject to a request for a hearing or written submissions in lieu of a hearing, then the subsequent application may be filed at any time more than one year after the decision of the FDIC Board of Directors, or its designee, denying the application. Unless with the passage of time the individual is no longer subject to section 19, the prohibition against participating in the affairs of an IDI under section 19 will continue until the individual has been granted consent in writing to participate in the affairs of an IDI by the Board of Directors or its designee.

(b) An institution-sponsored application is not subject to the one-year waiting period if the application—

(1) Follows the denial of an individual application; or

(2) Follows the denial of an institution-sponsored application and the subsequent application is sponsored by a different institution or is for a different position.