The Ninth Circuit upheld a preliminary injunction blocking FinCEN’s border money reporting order, finding that the agency likely violated federal regulatory requirements when it lowered the reporting threshold to combat money laundering by cartels.
PASADENA, Calif. (CN) – The Ninth Circuit dealt a blow to the Treasury Department’s efforts to crack down on money laundering along the US-Mexico border on Monday, revealing that the agency is likely to sidestep federal rulemaking requests.
The decision upholds a federal judge’s ruling that blocked the federal government from enforcing a cash transaction reporting requirement for money services businesses along the border. In one divided opinionthree-judge panel ruled in favor of San Diego-based check cashing service Novedades y Servicios, with the majority agreeing that a lower court did not err in its ruling.
The case goes back to a March 2025 geo-targeting order from the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, that required money services businesses in 30 ZIP codes in California and Texas to file currency reports for every transaction between $200 and $10,000 in an effort to combat Mexican money laundering. The historical threshold for these currency reports is $10,000.
News and Services argued that the geographic targeting order would put it out of business. Sided with the plaintiff, U.S. District Judge Janis Sammartino, a George W. Bush appointee, ordered a preliminary injunction against FinCEN in May 2025.
The panel agreed, finding that the plaintiffs were likely to prevail on claims that FinCEN’s new reporting requirements functioned more as a rule than an order and therefore bypassed the federal rulemaking process that requires notice and comment. The panel also concluded that FinCEN failed to consider the compliance costs that the new requirements would impose on the money services businesses it affected.
Writing for the majority, US District Judge Lucy Koh found the geo-targeting order to be arbitrary and capricious.
“The border GTO is likely to be arbitrary and capricious because FinCEN did not consider the cost of compliance with regulated parties when considering whether to issue the border GTO,” Koh, a Joe Biden appointee. has written. “An agency action is arbitrary and capricious if, among other things, the agency fails to “consider a significant aspect of the problem.” The cost of compliance is a “significant aspect of the problem” if agency action is to be taken.
Novedades y Servicios owner Esperanza Gomez Escobar estimated that FinCEN’s new mandates would require 14 to 17 hours a day to file the reports, which would eventually require her to hire an additional employee that she could not afford. Escobar said 99% of the thousands of monthly transactions in her business would be affected.
Additionally, Koh was unpersuaded by the government’s argument that FinCEN was exempt from the notice and comment requirements of the Administrative Procedure Act because the GTO was an order rather than a rule.
“Congress knows how to clearly exempt an agency from notice and comment requirements, and it did not do so here,” Koh wrote, along with her opinion from U.S. District Judge Ana de Alba, also a Biden appointee.
Attorney Betsy Sanz of the Institute for Justice, who represents Esperanza, said the Ninth Circuit was right.
“FinCEN’s reporting requirement effectively seeks to monitor every transaction at these businesses,” she wrote in a statement to Courthouse News. “This is a major invasion of financial privacy and created an overwhelming burden on small businesses like the one owned by Esperanza. FinCEN has a history of increasing financial surveillance in a virtually unchecked manner. Today the Ninth Circuit, like every other court that has heard this case, found that the agency oversaw it.”
Sanz added that she hoped FinCEN would be more respectful of Americans’ rights in the future.
In a dissenting opinion, U.S. District Judge Kenneth Lee struck down the threat of drug smuggling and money laundering from Mexican cartels in the US He also asserted that the plaintiffs have not adequately shown irreparable harm.
“To be sure, if a government policy is so difficult to put a plaintiff out of business, it could do irreparable harm,” wrote Lee, an appointee of Donald Trump. “In evaluating whether a business will be forced to close, we must consider costs and revenues. … Plaintiffs, however, have offered scant evidence of these economic fundamentals. However, the district court accepted plaintiffs’ contention that it would go bankrupt. This is plain error.”
Claiming a new government mandate would impose additional costs on business is almost never a reason to issue a preliminary injunction, Lee added.
Attorneys and spokespeople from FinCEN did not respond to requests for comment Monday night.
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