Background Checks for Temporary Employees

It depends upon their degree of influence or control. Section 19 of the Federal Deposit Insurance Act (FDIA) and Section(d) of the Federal Credit Union Act (FCUA) govern whether an individual may be employed by a federally insured depository institution or an insured credit union. For example, these institutions are barred from hiring anyone who has been convicted of criminal offenses involving dishonesty or breach of trust, including money laundering.

Section 19 applies only to FDIC-insured institutions, their institution-affiliated parties, and those participating in the affairs of an insured depository institution. All employees of an insured depository institution fall within the scope of Section 19. Also, those deemed to be de facto employees, as determined by the FDIC based upon generally applicable standards of employment law, will be subject to Section 19.

Whether other persons who are not institution-affiliated parties are covered depends upon their degree of influence or control over the management or affairs of an insured institution. For example, in the context of the FDIC’s application of Section 19:

• It would apply to the holding company’s directors and officers to the extent that they have the power to define and direct the management or affairs of the institution.
• Directors and officers of affiliates, subsidiaries, or joint ventures of an insured institution or its holding company will be covered if they participate in the affairs of the insured institution or affairs of the same.

Typically, an independent contractor does not have a relationship with the insured institution other than the activity for which it has been contracted. That said, it is our opinion that every financial services company should have an established background screening policy for third party employees, and it should ideally align closely with the screening policy for permanent employees. Again, we recommend that you seek advice from your legal counsel.

This Q&A originally appeared in Bankers' Hotline. For more information, sample issues, and to subscribe, click here or email bh@bankersonline.com