Background Investigations

Background Investigations

Corporate Policies

Comptroller’s Licensing Manual

Washington, DC
June 2002

Background Investigations

Table of Contents

Introduction.............................................................................................................1
Applicability .........................................................................................................1
Key Policies ..........................................................................................................1
Summary of Process ..............................................................................................1
Specific Requirements...........................................................................................2
Standard Background Checks.........................................................................2
Foreign Nationals’ Background Checks..........................................................3
Background Information Checks on Japanese Nationals .................................3
Optional Background Checks ………………………………..………………….……..4
Fingerprint Cards/IRS Tax Check Waiver........................................................4
Waivers .........................................................................................................4
Adverse Information ......................................................................................5
Change in Bank Control.................................................................................5
Charters and Federal Branches or Agencies....................................................6
Depository Institution Management Interlocks Act (DIMIA) ............................6
Convicted Persons .........................................................................................7
Procedures ..............................................................................................................8
Appendix A: Management Review Guidelines .......................................................10
Appendix B: Joint Statement ..................................................................................12
References...………………………………………………………………………………….……15

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Introduction
This booklet should be used together with other booklets of the Comptroller’s
Licensing Manual. Users of this booklet also should refer to the “General
Policies and Procedures” (GPP) booklet for discussion of general filing
instructions and procedures. Background investigations are performed
routinely on filings discussed in the following booklets: “Change in Bank
Control,” “Changes in Directors and Senior Executive Officers,” “Charters,”
“Conversions,” “Director Waivers,” “Failure Acquisitions,” and “Federal
Branches and Agencies.”

Applicability
This booklet incorporates policies and procedures used by the Comptroller of
the Currency (OCC) to review the background of persons and certain
companies (filers) interested in entering the national banking system,
acquiring control of a national bank, and/or influencing its operations. This
booklet details the standard mandatory checks required for U.S. citizens and
foreign nationals; discusses additional standard mandatory checks for foreign
nationals; and describes other optional background checks for certain
applications, notices, and notices required by Section 914 of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) or 12
CFR 5.51.

Key Policies
For certain corporate filings, the OCC performs background investigations on
persons proposed as organizers, senior executive officers, directors, and
principal shareholders of national banks, or as managers of federal branches
or agencies. Those investigations are conducted to determine if those
proposed have the experience, competence, integrity, character, financial
ability, and willingness to direct and/or lead a bank’s affairs in a safe, sound,
and legal manner. The OCC will scrutinize closely a filer whose previous
experience is tied to a failed or problem financial institution or other situation
that may raise questions about personal or fiduciary integrity. The OCC may
share with other federal financial institution regulators any information
received as a result of its background investigations.

Summary of Process
Whenever a filer seeks entry into the national banking system as an organizer,
senior executive officer, director, or principal shareholder (for example,
proposing to acquire 10 percent or more of the stock) of a proposed new
national bank, or as a manager of a federal branch or agency, the OCC
generally requires that person to submit an Interagency Biographical and
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Financial Report with the appropriate filing. The OCC also generally requires
submitting those reports with the following types of filings: changes in bank
control, changes in directors or senior executive officers when required under
Section 914 of FIRREA or 12 CFR 5.51, conversions, director waivers, and
failure acquisitions. The Interagency Biographical and Financial Report never
is filed as a stand alone document; rather, it is an attachment to other filings
submitted to the OCC.
For charter applications, the standard background checks, except for FBI
fingerprint and IRS tax check waivers, are updated whenever one year lapses
between preliminary conditional and final approval of a filing.
All information in each corporate filing is reviewed and may be verified. Any
material misrepresentation or omission of fact generally will result in
disapproval. The OCC may disapprove a corporate filing and take action
against any filer, including referral for criminal action, if it determines that the
materials submitted were misrepresented or omitted in an attempt to mislead
the OCC.

Specific Requirements
Standard Background Checks
The OCC performs standard background checks through the:
• Credit bureaus.
• Drug Enforcement Administration.
• Federal Bureau of Investigation (FBI) (fingerprint check requests).
• Federal and state regulators of banks or other entities.
• Internal Revenue Service (IRS) Tax Check Program.
• United States Customs Service.
• LEXIS-NEXIS.
LEXIS-NEXIS is an on-line service that contains a compilation of data on
legal, news, and business information. A number of databases on
LEXIS are checked in a background investigation, including the docket
library which shows sanctions by banking and securities agencies.
Other areas reviewed include Liens, Assets, and Insolvency.

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• Financial Crimes Enforcement Network (FinCEN)/SARS Report.
The FinCEN is an interagency database of persons named in Suspicious
Activity Reports (SARS). Those persons are believed to have participated
in known or suspected criminal violations, or suspicious transactions
related to potential money laundering offenses or Bank Secrecy Act
violations.
• Enforcement Action Report System (EARS).
The EARS is an OCC system that contains historical criminal referral
information, and information on persons who have been subject to
administrative enforcement actions (for example, civil money penalties
and removals), change in bank control, and notice of new director and
senior executive officer declinations by the federal banking regulatory
agencies.
EARS maintains financial institution regulatory agencies’ records when the
filers have been involved with financial institutions under another
agency’s jurisdiction (for example, the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board (FRB), the Office of Thrift
Supervision (OTS), or the National Credit Union Administration (NCUA)).

Foreign Nationals’ Background Checks
The OCC performs additional background checks on foreign nationals
seeking entry into the national banking system. Those standard foreign
national background checks are performed to obtain information similar to
that compiled on U.S. citizens and are conducted in cooperation with the:
• Central Intelligence Agency (CIA).
• Interpol.
• U.S. Department of State.
• U.S. Immigration and Naturalization Service.
The OCC requests the submission of its Foreign Certification document to
local officials in the person’s home country, so that they may attest to that
person’s integrity and financial capacity.

Background Information Checks on Japanese Nationals
The OCC and the Banking Inspection Department at the Ministry of Finance
of Japan have agreed to certain procedures for background information
checks (or police certificates) on Japanese nationals entering the U.S. banking
market. The procedures require each person seeking entry into the national
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banking system to obtain his or her own record. Licensing staff should
provide the background check request letter to each involved person. In turn,
those people will present this letter to the National Police Agency, which will
provide a written response to the person in a sealed envelope. The Japanese
national will forward the sealed envelope to the OCC.

Optional Background Checks
The OCC will pursue additional background checks when deemed
appropriate. Such checks may include, but are not limited to, requests for
background information from the:
•

CIA.

•

Commodity Futures Trading Commission (CFTC).

•

Federal, state, and local law enforcement agencies.

•

FBI (name check requests).

•

Federal Trade Commission.

•

Interpol.

•

Local court records.

•

National Association of Securities Dealers (NASD).

•

Newspapers and periodicals.

•

Securities Exchange Commission (SEC).

•

U.S. Immigration and Naturalization Service.

•

U.S. Department of State.

Fingerprint Cards/IRS Tax Check Waiver
To proceed with background checks, persons seeking entry into the national
banking system must complete certain forms. Fingerprint cards and IRS Tax
Check Waiver forms should be obtained from the appropriate OCC district
office and completed. The fingerprint cards can be completed at the local
police or law enforcement office where fingerprinting services are available.

Waivers
The OCC, in individual cases, may waive the standard background checks, if
the performance of the check would be redundant or would not serve the
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OCC’s purposes for background investigations. However, Licensing staff will
document all background check waivers, including the rationale for the
waiver.
The OCC routinely may waive background checks for filers, if the filer is
serving as a director or a senior (or executive) officer of an “eligible”
depository institution,1 the institution’s current regulatory agency reports no
adverse information, and a search on EARS and the FinCEN databases reveal
no derogatory information.
If the OCC is ready to approve an application for which it has not received
responses on all of its background check inquiries and there is no reason to
believe that any detrimental information will be forthcoming from the
unanswered inquiries, the OCC may approve the application by inserting the
following reminder into the approval letter:
Background checks requested by the OCC have not been received yet
from (insert appropriate number) source(s). While we have decided
not to delay action pending receipt of these responses, continued
service of the affected individual(s) will be dependent on satisfactory
completion of the background investigation process.

Adverse Information
If the background investigation provides adverse information on a filer, the
OCC must notify and allow the filer to complete, correct, or challenge the
information prior to the OCC making a decision. The filer will be instructed
to refer to 28 CFR 16.34 for specific guidance and to provide the OCC with a
written response within 15 days of receipt of the OCC’s notification.

Change in Bank Control
The Change in Bank Control Act requires federal banking agencies to prepare
and to retain, as a record of the agency, a report of any investigations it
conducts. Licensing staff uses the Background Investigation Checklist for this
purpose and attaches it to each confidential memorandum.

1

An “eligible” depository institution includes national banks, state banks, or federal or state savings
associations that: 1) are well capitalized as defined in 12 CFR 6.4(b)(1); 2) have composite ratings of
1 or 2 under the Uniform Financial Institutions Rating System; 3) have Community Reinvestment Act,
12 USC 2901 et seq., ratings of “Outstanding” or “Satisfactory”; and 4) are not subject to a cease and
desist order, consent order, formal written agreement, or Prompt Corrective Action directive (see 12
CFR 6, subpart B) or, if subject to any such order, agreement, or directive, is informed in writing by
the OCC that the bank still may be treated as an “eligible bank” for a corporate transaction. The third
(CRA) factor does not apply to an uninsured bank or branch or a special purpose bank covered by 12
CFR 25.11(c)(3).

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Charters and Federal Branches or Agencies
The selection of competent senior executive officers reflects favorably upon
applications. The OCC has developed a tool to assist banks in selecting
management officials (see Appendix A -- Management Review Guidelines).
Directors may use this tool as a guideline for obtaining relevant work
experience about proposed management officials. When an organizing group
for a new bank charter elects not to disclose the proposed CEO’s name at the
time the charter application is filed, the proposed CEO still must complete
and submit the Interagency Biographical and Financial Report. All questions
should be answered, except those that disclose identifying information.
Identifying information generally is considered to include the person’s name,
address, social security number, the name(s) of the financial institution(s)
where the person is employed, other organizations where the person is
affiliated as an officer, and information which, by its nature, would readily
identify the proposed CEO.
When the name of a proposed CEO is treated as confidential in a filing or is
not disclosed at the time of the filing, the background check is performed
after the preliminary approval.
The CEO and all executive officer positions, in a new bank charter or federal
branch or agency, must receive OCC approval prior to employment. Adverse
information about the proposed CEO could reflect negatively on the filing and
cause the OCC to reconsider its preliminary approval.
If a proposed officer requests that his/her present employer(s) not be
contacted, the OCC will determine whether the information is needed and
would be available through alternative sources. The OCC will notify the
proposed officer in advance, if it needs to contact the current employer(s).

Depository Institution Management Interlocks Act (DIMIA)
The OCC may approve an otherwise prohibited interlocking management
relationship, if the interlock would:
•

Improve the provision of credit to low- and moderate-income areas.

•

Increase the competitive position of a minority- or women-owned
institution.

•

Strengthen the management of an institution that has been chartered for
less than two years or one that is in an unsafe or unsound condition.

Banks requesting an exemption should provide information to the OCC to
support the proposed interlock. They should also submit the qualifications of
the proposed management official.
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Convicted Persons
Persons convicted of a crime involving dishonesty, breach of trust, or money
laundering are prohibited, under 12 USC 1829, from participating in the
affairs of an insured depository institution without prior consent of the FDIC.
Additionally, this section provides that conviction for certain enumerated
violations pertaining to financial institution-related crimes precludes the FDIC
for 10 years from considering or consenting to an application filed by a
person convicted of such offense. The OCC consults with the FDIC when a
filer would be subject to 12 USC 1829.

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Procedures
Filing the Request
Licensing Staff
1. Refers filer, if appropriate, to this booklet.
2. Provides information to the filer about additional forms and information
required to conduct background investigations and:
• Distributes to each candidate background investigation forms and
fingerprint cards, as appropriate.
• Instructs the filer, in writing, that the provision of legible fingerprints is
his/her responsibility and is required by the OCC to investigate the
party’s background thoroughly.
• Suggests having fingerprints taken at the local police or law
enforcement office or certain post offices where fingerprinting services
are available.
• Instructs filer to return fingerprint cards to the Licensing staff with the
corporate filing.

Filer
3.

Files appropriate background investigation forms together with the filing
and any applicable filing fees to the OCC.

Licensing Staff
4.

Reviews the background investigation information and forms for
accuracy and completeness.

5.

Performs standard background checks unless waived.

6.

If standard background checks are waived, documents the reasons for
the waiver in the official file.

7.

Forwards completed fingerprint cards, Request for Background Checks
(OCC Form 9020-01), and, if appropriate, other background
investigation requests to HQ Licensing (HQ LIC) for processing.

8.

Conducts EARS and FinCEN searches, if appropriate, and determines if:

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•

A regulatory agency has taken any enforcement action or made
criminal referrals against the filer.

•

The filer has been involved in insider abuse.
---

9.

FinCEN.
EARS.

If applicable, forwards the following information to HQ LIC on any
foreign national:
•
•
•
•
•
•
•
•
•
•

Name and any known aliases.
Date and place of birth (country).
Current address.
Current title/position.
Name of employer.
Full name of both parents.
Passport number.
National identification number (if applicable).
List of countries that should be checked.
Relatives working in the home country local government.

10.

Performs optional background checks appropriate to the particular
circumstances.

11.

Notifies by registered/certified mail, any filer for whom adverse
information is received and allows the filer to complete, correct, or
challenge the information prior to the OCC making a decision and
makes appropriate Corporate Activities Information System (CAIS)
entries.

12.

If a specific person in the related filing is denied or objected to, because
of information received in the background investigation, provides this
information to the appropriate portfolio manager of the bank with which
the applicant is affiliated and submits EARS and FinCEN Entry Request
Form to district counsel and makes appropriate CAIS entries.

13.

Refers to the appropriate booklet for processing of application or notice.

14.

For charter applications, updates the standard checks, except for FBI
fingerprint and IRS tax check waivers, if one year lapses between
preliminary conditional and final approval; or, if the opening period
extends beyond 30 days, obtains the concurrence of the LP&S Director
that a second set of background investigation checks need not be
conducted.

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Appendix A: Management Review Guidelines
The OCC has developed these guidelines to assist national bank directors and
organizing national bank directors (board of directors) in their selection of
proposed management officials.
The selecting officials should:
1. Require each proposed executive officer (candidate) to submit
information requested in the Interagency Biographical and Financial
Report, if necessary, to the board of directors for review.
2. Perform a credit check of the candidate, identifying the credit bureaus
or other sources used.
3. Contact the candidate’s references and summarize by name the
comments received.
4. Contact the candidate’s previous employers and summarize by name
and employer the nature of comments provided (for example, positive,
negative, no comment).
5. Prepare or obtain a summary of the candidate’s duties in previous
positions and discuss how that experience relates to the job description
under consideration. Discuss relevant information, such as:
•

Size and type of loan portfolio supervised, loss/earnings record,
and amount of loan approval authority.

•

Personnel administration record, including the number and type
of employees supervised and the candidate’s performance record.

•

Policy development and implementation experience.

•

Asset/liability management strategies employed.

•

Investment strategies employed.

•

Internal control, audit, and management information systems
developed.

6. Describe all terms of employment, including proposed salary, methods
used to determine the amount of salary, employment contract, and
other compensation.

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7. Describe the major duties and responsibilities of the position (if
necessary).
8. If applicable, evaluate and prepare documentation to support an
exemption under the Depository Institution Management Interlocks Act
(DIMIA).
9. If OCC approval is required, submit the following information with the
appropriate request:
•

Board’s written evaluation, reflecting its assessment of the
proposed management official (results from steps 2 through 8).

•

Interagency Biographical and Financial Report (if necessary).

•

If applicable, request for DIMIA exemption.

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Appendix B: Joint Statement
Joint Statement of Guidelines on Conducting Background
Checks and Change in Control Investigations
Date: January 22, 1988
This guideline is issued jointly by the Board of Governors of the Federal
Reserve System, Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Federal Home Loan Bank Board, and the
National Credit Union Administration, hereinafter referred to, collectively, as
“the agencies.”
The agencies routinely perform Federal Bureau of Investigation (FBI) and
other background checks on individuals seeking to enter the depository
institution business through establishment of new depository institutions or
depository institution holding companies, or through changes in control. The
agencies agree on the following guidelines regarding such background
investigations on individuals.
Standard Background Checks
The agencies will perform as necessary the following standard background
checks on all individuals subject to background investigations:
•

FBI General Index Namecheck;

•

United States Custom Service Namecheck;

•

Drug Enforcement Administration Namecheck;

•

Search of internal agency records and of databases to which the
agencies have access;

•

Check records on an interagency basis when an individual has been
involved with institutions under another agency’s regulatory
jurisdiction; and

•

Check with state depository institution regulatory agencies when an
individual has been involved with institutions under a state’s regulatory
jurisdiction.

The agencies may not perform some of the standard background checks if, in
individual circumstances, it is apparent that performance of the check is

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redundant, does not serve the agency’s purpose for the background
investigation, or other reasons.
Discretionary Background Checks
The agencies will pursue any additional background checks they believe are
appropriate to individual circumstances. Such checks may include, but are
not limited to, requests for background information from the Internal Revenue
Service, the Securities and Exchange Commission, the Commodity Futures
Trading Commission, the National Association of Securities Dealers, Interpol,
the Central Intelligence Agency, the U.S. State Department, and state and
local law enforcement agencies.
Background Investigations Requiring Fingerprints
The agencies may obtain fingerprints from individuals if fingerprints are
required to access information necessary for a background investigation.
Fingerprints will be obtained at the discretion of the agencies, and
particularly, if information obtained from the standard and discretionary
checks suggest that further investigation of an individual are warranted.
Documentation of Scope of Background Checks
The agencies will establish procedures for documenting the scope and results
of background investigations in case files.
Background Investigations for Change in Control and/or Holding Company
Notices
The Change in Bank Control Act (12 USC 1817(j)) and the Change in Savings
and Loan Control Act (12 USC 1730(q)) require the agencies to conduct an
investigation of the competence, experience, integrity, and financial ability of
a proposed acquirer, and to make an independent determination of the
accuracy and completeness of any information submitted in a change in
control notice. Accordingly, the agencies will:
•

Investigate the backgrounds of all change in control notice filers in
accordance with the guidelines on background checks contained
herein.

•

Require public notice of a change in control filing and solicit public
comment except in supervisory cases.

•

Obtain copies of all pertinent purchase and sale agreements and
related documents describing the terms and conditions of a proposed
acquisition.

•

Obtain copies of any loan agreements and commitment letters relating
to funds borrowed to make a proposed acquisition.
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•

Obtain copies of any invitations or tenders or advertisements making a
tender offer to stockholders for purchase of their stock to be used in
connection with a proposed acquisition.

•

Obtain a signed financial statement from a proposed acquirer that
includes detailed information on all significant assets and liabilities and
on current and projected cash flow.

The agencies may required any additional information deemed necessary to
make an independent determination of the accuracy and completeness of any
information contained in a change in control notice.
______________________________
/s/ Robert J. Herrmann
Senior Deputy Comptroller for Bank Supervision Policy
Office of the Comptroller of the Currency
_______________________________
/s/ William Taylor
Director, Division of Banking Supervision and Regulation
Board of Governors of the Federal Reserve System
________________________________
/s/ Paul G. Fritts
Director, Division of Bank Supervision
Federal Deposit Insurance Corporation
_________________________________
/s/ Darrell Dochow
Executive Director, Office of Regulatory Policy, Oversight, and Supervision
Federal Home Loan Bank System
__________________________________
/s/ Nicholas Veghts
Director, Department of Supervision, Office of Examination and Insurance
National Credit Union Administration

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References
Background Investigations
Law
Regulations

12 USC 1817(j)(2)(B)
28 CFR 16.34, 20.33, 50.12

Change in Bank Control
Law
Regulation

12 USC 1817(j)
12 CFR 5.50

Changes in Directors and Senior Executive Officers
Law
18 USC 1831i
Regulation
12 CFR 5.51
Civil Money Penalties
Laws
Issuance

12 USC 504, 1818(I); 18 USC 1001, 1007
PPM-5000-7 (Rev.)

Crimes and Penalties
Law

18 USC 1001

Depository Institutions Management Interlocks Act
Laws
12 USC 3201-3208
Regulation
12 CFR 26
Federal Branches and Agencies
Laws
Regulation

12 USC 35, 3101-3111
12 CFR 28

Organization of a National Bank
Law
12 USC 21
Regulation
12 CFR 5.20
Penalty for Unauthorized Participation by Convicted Individual
Law
12 USC 1829

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