Banks cannot hire the way most employers do. A retail chain can weigh a theft conviction against how long ago it happened and decide the risk is acceptable. An insured depository institution does not always get that discretion. Section 19 of the Federal Deposit Insurance Act, codified at 12 U.S.C. 1829, flatly bars certain people from working at or otherwise participating in the affairs of an FDIC insured bank unless the FDIC itself grants written consent first. Getting this wrong is not a compliance footnote. It can mean an unauthorized person sitting in a role the law says they cannot hold, and a bank that has to unwind the hire.
What Section 19 actually prohibits
Section 19 prohibits a person who has been convicted of any criminal offense involving dishonesty, breach of trust, or money laundering, or who has agreed to enter a pretrial diversion or similar program in connection with a prosecution for such an offense, from becoming or continuing as an institution affiliated party of an insured depository institution, from owning or controlling one, or from otherwise participating in its affairs, without the prior written consent of the FDIC. The FDIC’s Section 19 guidance and the implementing regulation at 12 CFR 303.220 spell out what counts as a covered offense and when a written application for consent is required.
The prohibition covers more than tellers and branch staff. It reaches directors, officers, employees, and anyone who participates in the conduct of an insured institution’s affairs, including certain contractors and consultants doing bank work. A bank that lets a covered person work in any of those capacities without FDIC consent has itself violated the statute, separate from whatever the individual did.
The reasonable, documented inquiry banks must run
Because the prohibition is automatic and does not depend on the bank knowing about a conviction, institutions are expected to make a reasonable, documented inquiry before hiring or placing someone in a covered role. In practice that means a criminal history check that goes back far enough and wide enough to surface convictions and pretrial diversion entries for offenses involving dishonesty, breach of trust, or money laundering, plus a process for reviewing what comes back against the statute’s categories. This is the piece of the puzzle a financial industry background check is built around: pulling criminal records at the county, state, and federal level so a bank’s HR and compliance teams have something concrete to evaluate rather than relying on self disclosure alone.
An applicant who discloses a covered offense, or whose background check turns one up, does not automatically get an offer pulled. The bank’s compliance function has to determine whether the offense falls under Section 19 at all, whether one of the statute’s exceptions applies, and whether an application to the FDIC is required before the person can start in that role. The FDIC’s Section 19 application instructions walk through what that filing requires and how long the FDIC generally takes to act on it.
The Fair Hiring in Banking Act changed the math
For years, Section 19’s reach was criticized as too broad, catching decades old shoplifting charges and minor offenses that had nothing to do with a person’s fitness to work in a bank. The Fair Hiring in Banking Act, signed into law in December 2022, amended Section 19 to narrow that reach, and the FDIC’s final rule implementing the changes took effect October 1, 2024. The Federal Register notice for the final rule lays out the amended standards in full.
Three changes matter most for hiring teams:
| Category | What changed |
|---|---|
| De minimis offenses | A narrow set of low level offenses, including small dollar theft, use of a fake ID, shoplifting, trespass, or fare evasion, no longer require an application if a set waiting period has passed and no other covered offense is on the person’s record. |
| Expunged or sealed records | Convictions and pretrial diversion entries that have been expunged, sealed, or dismissed, along with most youthful offender adjudications, are treated as if they do not trigger the application requirement at all. |
| Older offenses | Certain older, less serious offenses fall outside the application requirement once enough time has passed since the conviction or the completion of a diversion program, rather than following an applicant indefinitely. |
None of this means banks can skip screening. It means the review has to be more precise: an old, minor, or sealed matter that used to force an FDIC application may not anymore, but the bank still has to identify it, classify it correctly, and document why no application was needed. Getting that classification wrong in either direction, treating a covered offense as exempt or forcing an application that was not required, creates its own problems. A background check program built around Section 19, the SAFE Act, and FINRA has to be paired with a compliance workflow that actually applies the updated categories correctly.
NMLS and the SAFE Act for mortgage roles
Any bank employee who acts as a mortgage loan originator has a second layer of screening on top of Section 19. The Secure and Fair Enforcement for Mortgage Licensing Act requires federal registration or state licensing through the Nationwide Mortgage Licensing System, and that process includes fingerprint based national criminal history checks run through the FBI. The implementing regulation, Regulation G, is codified at 12 CFR Part 1007, and the CFPB’s SAFE Act resource page lays out what covered institutions and their loan originators are expected to do.
A felony conviction involving fraud, dishonesty, breach of trust, or money laundering can bar someone from mortgage loan originator registration outright, which overlaps heavily with the categories Section 19 already covers. For a bank standing up or expanding a mortgage lending desk, the practical takeaway is that criminal history screening has to satisfy both frameworks at once, not just whichever one HR happens to think of first.
Credit unions run on a parallel rule, not the same one
Credit unions are not covered by Section 19 because they are not FDIC insured depository institutions. Instead, federally insured credit unions answer to Section 205(d) of the Federal Credit Union Act, which prohibits a person convicted of, or who entered a pretrial diversion program for, an offense involving dishonesty or breach of trust from working at or participating in the affairs of an insured credit union without NCUA consent. The implementing regulation at 12 CFR 752.1 and NCUA’s Section 205(d) compliance page track the same Fair Hiring in Banking Act amendments that reshaped Section 19, including de minimis exceptions and treatment of expunged or sealed records.
For a hiring team that staffs both a bank and a credit union, or works across the two, the standards look alike but are not interchangeable. An FDIC consent does not cover a credit union role, and an NCUA consent does not cover a bank role. Each requires its own application to its own regulator.
How the FCRA layers on top
Section 19 and Section 205(d) tell a bank or credit union who it legally cannot place in certain roles. Neither statute overrides the separate obligations that apply whenever an employer uses a third party background check to make a hiring decision. If a bank orders a criminal history report through a consumer reporting agency, the Fair Credit Reporting Act still requires a standalone disclosure, written authorization, and a proper pre-adverse and adverse action process before the bank can act on what the report shows. A Section 19 covered offense does not excuse skipping those steps. The two frameworks run side by side, and a bank has to satisfy both at once: correctly classifying the offense under Section 19 and following FCRA procedure for how the applicant is notified and given a chance to respond.
Building a program that actually holds up
A defensible bank hiring program generally includes a criminal history check broad enough to catch dishonesty, breach of trust, and money laundering offenses at the county and federal level, a documented process for classifying each hit against the current Section 19 or Section 205(d) categories, a clear path for filing an FDIC or NCUA application when one is actually required, and FCRA compliant disclosure and adverse action steps layered on top. For institutions building or auditing that process, an employment background check pulled from primary court and record sources gives compliance staff something they can actually classify, rather than a self reported answer on an application form.
Frequently asked questions
Does Section 19 apply to part time or contract workers at a bank?
It can. The statute reaches anyone participating in the conduct of an insured institution’s affairs, which is not limited to full time employees. Contractors and consultants performing bank functions can fall under the same prohibition, so the classification question has to be asked for any covered role, not just traditional hires.
Can a bank hire someone with a covered offense while an FDIC application is pending?
No. The consent has to be granted before the person begins working in or participating in the affairs of the institution in a covered capacity. Starting someone before consent is granted puts the bank itself in violation, separate from the individual’s own history.
Does an expunged conviction still need to be disclosed on a bank job application?
Whether it needs to be disclosed depends on state law and the specific application language, which vary. Under the amended Section 19 framework, an expunged, sealed, or dismissed record generally does not trigger the FDIC application requirement on its own, but the bank still needs a documented process for identifying and classifying it correctly.
Is a Section 19 check the same as a FINRA fingerprint check?
No. Section 19 is a banking specific prohibition tied to FDIC insurance status. FINRA fingerprinting and registration requirements apply to securities industry roles and run under separate rules. A bank employee who also handles securities activity can be subject to both.
Does the Fair Hiring in Banking Act eliminate the need for background checks?
No. It narrows which offenses require an FDIC or NCUA application and shortens how long some older or minor offenses matter, but it does not remove the underlying requirement that institutions make a reasonable, documented inquiry into an applicant’s criminal history before placing them in a covered role.
This article is general information, not legal advice. Section 19 and Section 205(d) classifications depend on the specific facts of an applicant’s record and current regulatory text, and banks and credit unions should confirm application requirements with qualified counsel or directly with the FDIC or NCUA before making a hiring decision.
