Ninth Circuit upholds injunction against FinCEN's order

The Ninth Circuit Court of Appeals has affirmed a preliminary injunction that blocks the Financial Crimes Enforcement Network (FinCEN) from enforcing a Geographic Targeting Order (GTO) that would require money service businesses to file currency transaction reports for cash transactions between $200 and $10,000. This ruling affects businesses along the U.S.-Mexico border and highlights concerns about the regulatory burden on small businesses.

The case, Novedades Y Servicios, Inc. v. Financial Crimes Enforcement Network, was filed under docket number 25-4238. The plaintiffs, Novedades y Servicios, Inc., and its owner, Esperanza Gomez Escobar, argued that the GTO imposed unreasonable reporting requirements that threatened their business operations. The court's decision is significant as it addresses the balance between regulatory measures aimed at preventing financial crimes and the operational realities faced by small businesses.

Background

Novedades y Servicios, Inc. is a small money service business located in San Diego, California. The business primarily provides money transfers, check cashing, and money orders to a customer base that largely consists of low-income individuals who do not use traditional banking services. The owner, Esperanza Gomez Escobar, has stated that the business has never filed a currency transaction report (CTR) in its years of operation, as it has not conducted transactions exceeding $10,000.

In March 2025, FinCEN issued a Border GTO that targeted money service businesses in specific ZIP codes along the southwest border, requiring them to report any cash transactions between $200 and $10,000. This marked a significant reduction from the previous reporting threshold of $10,000. The GTO was intended to combat money laundering and other financial crimes, particularly in areas known for high volumes of cash transactions related to illicit activities.

After the GTO was announced, Novedades experienced a dramatic drop in customer traffic, with estimates indicating a loss of 50-60% of its clientele within the first week of the order's implementation. The plaintiffs filed a lawsuit on April 15, 2025, seeking to prevent the enforcement of the GTO, arguing that it violated the Administrative Procedure Act (APA) and imposed an undue burden on their business.

The Ruling

The Ninth Circuit upheld the district court's preliminary injunction, which had previously blocked the enforcement of the GTO. The court found that the plaintiffs demonstrated a likelihood of success on the merits of their claims against FinCEN. Specifically, the court noted that the Border GTO was likely a rule rather than an order under the APA, meaning it should have undergone a notice and comment rulemaking process before being implemented.

The court ruled, "FinCEN was required to conduct notice and comment rulemaking before issuing the Border GTO because it was a de facto rule; and the Border GTO was likely adopted in an arbitrary and capricious manner because FinCEN entirely failed to consider the cost of compliance to regulated parties, an important aspect of the problem."

The court also found that Novedades faced a substantial threat of irreparable harm, as the new reporting requirements could lead to the business's closure. The ruling emphasized that the balance of equities and the public interest favored the plaintiffs, given the potential harm to their business compared to the government's speculative benefits from the GTO.

Impact

This ruling has significant implications for small businesses operating in regulated industries. It highlights the need for regulatory agencies like FinCEN to consider the practical impacts of their orders on small businesses and to adhere to proper procedural requirements when implementing new regulations. The decision reinforces the importance of transparency and accountability in government actions, particularly when those actions can have severe consequences for individual businesses.

Furthermore, the ruling may set a precedent for other businesses facing similar regulatory burdens. It underscores the necessity for regulatory bodies to engage in thorough analysis and public input when creating rules that affect a broad range of stakeholders.

What's Next

The government may seek to appeal this decision, but details were not available in the court filing regarding any further legal actions. Meanwhile, the case continues to draw attention as the regulatory landscape for money service businesses evolves in response to ongoing concerns about financial crimes.