Yes, we believe that banks are required to perform some level of background screenings for rehires, as you would for new hires. Both Illinois and federal law prohibit banks from employing individuals who have been convicted of certain crimes, and FDIC regulations require all banks to make a “reasonable inquiry” to ensure they do not hire individuals with such criminal histories.
What is “reasonable” may vary depending on the length of time an applicant has been out of your employ, but we believe you are required to perform some form of screening when re-hiring former employees to ensure they have not been convicted of disqualifying crimes since you last employed them. In the supplementary information published by the FDIC with its final rule establishing this standard, the FDIC stated that what constitutes “a reasonable inquiry will vary from bank to bank, and the FDIC believes that this determination is best left to the business judgments of these institutions.” Consequently, while you are required to make an inquiry into a former employee’s background before rehiring, the extent of the inquiry is a business decision for your bank.
In addition to the requirement to conduct a reasonable inquiry, background screenings will help you to avoid violations of Illinois and federal laws that prohibit banks from employing individuals with certain criminal convictions. The Illinois Banking Act prohibits state banks from employing individuals who have been convicted of a felony or any criminal offense relating to dishonesty or breach of trust without the prior written consent of the Illinois Department of Financial and Professional Regulation. Similarly, the Federal Deposit Insurance Act prohibits any person who has been convicted of any criminal offense involving dishonesty, a breach of trust, or money laundering — or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense — from participating, directly or indirectly, in the conduct of the affairs of an insured depository institution without the prior written consent of the FDIC.
For resources related to our guidance, please see:
- Illinois Banking Act, 205 ILCS 5/16.5 (“Except with the prior written consent of the Commissioner, no State bank shall knowingly employ or otherwise permit an individual to serve as an officer, director, employee, or agent of the State bank if the individual has been convicted of a felony or of any criminal offense relating to dishonesty or breach of trust.”)
- Federal Deposit Insurance Act, 12 USC 1829(a)(1) (“Except with the prior written consent of the Corporation
(A) any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense, may not
- (i) become, or continue as, an institution-affiliated party with respect to any insured depository institution;
- (ii) own or control, directly or indirectly, any insured depository institution; or
- (iii) otherwise participate, directly or indirectly, in the conduct of the affairs of any insured depository institution; and
(B) any insured depository institution may not permit any person referred to in subparagraph (A) to engage in any conduct or continue any relationship prohibited under such subparagraph.”)
- FDIC Section 19 Regulations, 12 CFR 303.220(b) (“IDIs [Insured depository institutions] should . . . make a reasonable inquiry regarding an applicant’s history to ensure that a person who has a conviction or program entry covered by the provisions of 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 and to determine if the applicant is barred under section 19, but the job 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 barred under section 19.”)
- Final Rule, Incorporation of Existing Statement of Policy Regarding Requests for Participation in the Affairs of an Insured Depository Institution by Convicted Individuals, 85 Fed. Reg. 51312, 51317 (August 20, 2020) (“Two commenters asked that the FDIC clarify what constitutes a ‘reasonable inquiry’ for a bank background check. The FDIC declines to adopt this proposal. The procedures that constitute a reasonable inquiry will vary from bank to bank, and the FDIC believes that this determination is best left to the business judgments of these institutions.”)