Banking and Finance Law Daily Wrap Up, BANK SECRECY ACT—9th Cir.: Court affirms injunction against FinCEN southwest border GTO, (Jul 14, 2026)

By Shashi Kant, BALLB, LLM

The panel held that FinCEN’s border geographic targeting order likely functioned as a rule, required notice and comment, and failed to consider compliance costs.

The U.S. Court of Appeals for the Ninth Circuit affirmed a preliminary injunction barring enforcement of a Financial Crimes Enforcement Network (FinCEN) geographic targeting order (GTO) against covered money services businesses in the Southern District of California. The order required money services businesses in specified ZIP codes along the southwest border to file currency transaction reports for cash transactions between $200 and $10,000. The panel held that the plaintiffs were likely to succeed on Administrative Procedure Act claims that the order was a rule rather than an order, required notice-and-comment rulemaking, and was adopted in an arbitrary and capricious manner. Judge Kenneth K. Lee dissented (Novedades y Servicios, Inc. v. Financial Crimes Enforcement Network , No. 25-4238 (9th Cir. July 13, 2026)).

Border GTO. FinCEN issued the GTO, referred to by the court as the Border GTO, on Mar. 14, 2025. The order applied to all money services businesses located in 30 ZIP codes within five Texas counties and two California counties. It required those businesses to file currency transaction reports for cash transactions of more than $200 and less than $10,000 and to comply with customer-identification requirements. The order lowered the longstanding $10,000 reporting threshold for covered transactions. FinCEN said the order was intended to combat illicit activity and money laundering along the southwest border involving Mexico-based drug cartels, drug traffickers, and other criminal actors (see Banking and Finance Law Daily, Mar. 12, 2025).

Novedades y Servicios, Inc., a small San Diego money services business, and its owner, Esperanza Gomez Escobar, sued FinCEN, the Treasury Department, and federal officials. Novedades provides money transfers, money orders, and check-cashing services. According to the court, the business had never filed a currency transaction report before the Border GTO because it had never completed a cash transaction over $10,000.

Rule or order. The panel held that the plaintiffs were likely to succeed on their claim that the Border GTO was a rule, not an order, under the Administrative Procedure Act. Section 5326 of the Bank Secrecy Act allows the Treasury Secretary to require reports by “order” when reasonable grounds exist for additional recordkeeping and reporting requirements. The court concluded that the Border GTO likely crossed the line into rulemaking. It applied to all unnamed and unspecified money services businesses in 30 ZIP codes with a population of more than one million, rather than to specific businesses. It rested on general facts about illicit finance and border-area risks rather than an adjudication of disputed facts involving particular parties. It also determined policy issues rather than resolving a specific dispute.

The panel rejected the government’s argument that the agency’s label controlled. The court said it must look to the contents of the agency action, not the agency’s self-serving label. It also said the government’s reading would allow FinCEN to bypass the separate statutory authority for regulations requiring currency transaction reports by simply calling broad reporting requirements an order.

Notice and comment. Because the Border GTO was likely a rule, the panel held that FinCEN was likely required to follow notice-and-comment procedures. The government did not dispute that the Border GTO did not undergo those procedures, but argued that it was an order. The panel rejected that argument for the same reason it found the Border GTO likely to be a de facto rule. The court also declined to read Section 5326 as excusing FinCEN from Administrative Procedure Act procedures. The panel said Congress knows how to expressly exempt agency action from notice and comment, and nothing in Section 5326 gave FinCEN express permission to dispense with those procedures.

Arbitrary and capricious review. The panel further held that the plaintiffs were likely to succeed on their claim that FinCEN acted arbitrarily and capriciously. The court said FinCEN failed to consider the cost of compliance to regulated money services businesses, which was an important aspect of the problem. The statement accompanying publication of the Border GTO did not discuss compliance costs or the burden on regulated businesses. The government relied on an internal FinCEN “March XX Memo,” but the panel said the district court did not clearly err in finding no clear indication that the agency considered the memo before issuing the order. The memo appeared to be in draft form, lacked a final date, contained redline edits, left approval dates blank, and was heavily redacted. The government also did not provide the district court with a clear assurance that FinCEN relied on the memo before issuing the Border GTO.

Irreparable harm. The panel held that the district court did not clearly err in finding likely irreparable harm. Novedades typically maintained one person on duty at a time and estimated that compliance would require 14 to 17 additional hours of reporting work per day. The business used an estimate of about 25 minutes per currency transaction report, while the report form itself estimated an average burden of 40 minutes per response. The court also relied on customer loss and goodwill evidence. During the week the Border GTO was in effect, Novedades lost about 50 to 60 percent of the customers in the store to whom Escobar explained the new reporting requirements. Customers expressed skepticism and fear about providing personal information, and some said they planned to use money services businesses in unaffected ZIP codes, including one located about a five-minute drive from Novedades.

Scope and dissent. The panel held that the district court did not abuse its discretion in finding that the balance of equities and public interest favored the plaintiffs. The district court weighed the concrete threat to Novedades’s existence and Escobar’s livelihood against the government’s assertions about public safety. The panel also held that the district court did not abuse its discretion by limiting the preliminary injunction to the Southern District of California.

The case is No. 25-4238.

Attorneys: Andrew Ward (Institute for Justice) for Novedades y Servicios, Inc. and Esperanza Gomez Escobar. Simon Gregory Jerome, U.S. Department of Justice, for Financial Crimes Enforcement Network, Andrea Gacki, U.S. Department of the Treasury, Scott Bessent and Pamela Bondi.

Companies: Novedades y Servicios, Inc.; Financial Crimes Enforcement Network; U.S. Department of the Treasury

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