Signed Bill Relaxes Employment Restrictions in the Banking Industry

Part of the defense spending bill signed by President Biden in December, 2022 includes provisional language which eases the constraints on hiring applicants with criminal records in the finance sector.

Section 5705 (Fair Hiring in Banking Act) of Title LVII of the fiscal year 2023 National Defense Authorization Act (NDAA) (starting at page 1017) amends Section 19 to create further exceptions regarding employment eligibility for candidates with criminal records applying for positions in the banking and finance industry. This change is currently in effect and will be implemented by the FDIC this year.

Section 19 generally prohibits an individual convicted of a crime involving "dishonesty or a breach of trust or money laundering" or an individual who "has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense" from working in banking unless the individual has obtained written consent from the FDIC. Additionally, Section 19 requires that financial institutions conduct criminal background checks on applicants, regardless of state or local law limitations associated with how criminal histories are considered when hiring an applicant.

The Fair Hiring in Banking Act includes provisions that a waiver is now not required if the individual:

  • committed the offense more than seven years prior
  • was incarcerated as a result of the offense and five years has lapsed since the individual was released
  • committed the offense before the age of 21 and at least thirty months has lapsed since sentencing occurred

Provisions also allow the FDIC to exempt other "de minimis" (low significance) offenses. These need to be established by rule and those rules must include that the offense "was punishable by a term of three years or less." Exemptions for other lesser offenses may also be identified by the FDIC if at least one year has passed since conviction. Examples of such lesser offenses may include use of a fake ID, shoplifting or driving with an expired license.

It is important to note that the FDIC is required to perform an "individualized assessment" when reviewing applicants that have criminal convictions. This assessment must take "into account evidence of rehabilitation, the applicant's age at the time of the conviction or program entry, the time that has elapsed since conviction or program entry and the relationship of individual's offense to the responsibilities of the applicable position." The FDIC is also required to consider several other factors such as employment history, letters of recommendation and the completion of any substance abuse or job preparation programs.

Employers operating in the finance and banking industry should review the amended section of the act in its entirety and adjust internal policies accordingly to ensure future compliance.

While clear guidance by the FDIC has not yet been established, a detailed White Paper on this topic is forthcoming by Business Information Group that will provide a deeper dive into best practices for employers in the financial services industry. In the meantime, please reach out to your BIG Account Manager or Sales Executive if you have any questions about the ramifications of this bill on your employment screening protocol.

Posted: January 30, 2023

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