Ninth Circuit upholds block on FinCEN US-Mexico border cash reporting rule

PASADENA, Calif. (CN) — The Ninth Circuit dealt a blow to the Treasury Department’s efforts to crack down on money laundering along the U.S.-Mexico border Monday, finding the agency likely sidestepped federal rulemaking requirements.

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 a split opinion, the three-judge panel ruled in favor of the San Diego-based check-cashing service Novedades y Servicios, with the majority agreeing a lower court did not err in its decision.

The case goes back to a March 2025 geographic targeting order by 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 any transaction between $200 and $10,000 in an effort to combat money laundering by Mexican cartels. The historical threshold for these currency reports is $10,000.

Novedades y Servicios argued the geographic targeting order would put it out of business. Siding 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 the plaintiffs were likely to win on claims that FinCEN’s new reporting requirements functioned more as a rule rather than an order and therefore bypassed the federal rulemaking process that requires notice and comment. The panel also concluded FinCEN failed to consider the compliance costs the new requirements would impose on the money services businesses that it affected.

Writing for the majority, U.S. Circuit Judge Lucy Koh found the geographic targeting order was arbitrary and capricious.

“The border GTO was likely arbitrary and capricious because FinCEN failed to take into account the cost of compliance to regulated parties when considering whether to issue the border GTO,” Koh, a Joe Biden appointee, wrote. “An agency action is arbitrary and capricious if, inter alia, the agency fails ‘to consider an important aspect of the problem.’ The cost of compliance is an ‘important aspect of the problem’ of whether to take an agency action.”

Novedades y Servicios owner Esperanza Gomez Escobar estimated FinCEN’s new mandates would require between 14 and 17 hours per day to file the reports, which would ultimately require her to hire an additional employee she could not afford. Escobar said 99% of the thousands of monthly transactions at her business would be affected.

Additionally, Koh was unpersuaded by the government’s argument that FinCEN was exempt from the Administrative Procedure Act’s notice and comment requirements because the GTO was an order and not a rule.

“Congress knows how to clearly exempt an agency from notice and comment requirements, and it did not do so here,” wrote Koh, joined in her opinion by U.S. Circuit Judge Ana de Alba, also a Biden appointee.

Attorney Betsy Sanz from the Institute for Justice, representing Esperanza, said that the Ninth Circuit got it right.

“FinCEN’s reporting requirement effectively seeks to monitor every transaction at these businesses,” she wrote in a statement to Courthouse News. “That is a huge invasion of financial privacy, and it created crushing burdens for small businesses like the one owned by Esperanza. FinCEN has a history of ratcheting financial surveillance up, in a manner that is practically unchecked. Today the Ninth Circuit, like every other court that has considered this issue, recognized that the agency overstepped.”

Sanz added that she was hopeful FinCEN will be more respectful of Americans’ rights in the future.

In a dissenting opinion, U.S. Circuit Judge Kenneth Lee hammered on the threat of drug smuggling and money laundering by Mexican cartels in the U.S. He also asserted the plaintiffs did not adequately show irreparable harm.

“To be sure, if a government policy is so onerous to put a plaintiff out of business, it may constitute irreparable harm,” Lee, a Donald Trump appointee, wrote. “In evaluating whether a business will be forced to shut down, we should consider both costs and revenues. … The plaintiffs, however, have offered scant evidence about these basic pillars of economics. Yet the district court accepted the plaintiffs’ assertion that it would go bankrupt. That is clear error.”

Claiming a new government mandate would impose additional business costs is almost never a reason to issue a preliminary injunction, Lee added.

Attorneys and spokespersons from FinCEN did not respond to requests for comment on Monday night.