FinCEN Geographic Targeting Order Imposes Additional Recordkeeping And Reporting Requirements

Highlights

• The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) on March 11, 2025, issued a Geographic Targeting Order (the Southwest GTO) to combat the illicit activities and money laundering of Mexico-based cartels, drug traffickers and other criminal actors along the Southwest U.S. border.
• The Southwest GTO requires all money services businesses located in 30 ZIP codes along the Southwest border in California and Texas to file Currency Transaction Reports with FinCEN in connection with cash transactions valued at more than $200.
• U.S. Treasury Secretary Scott Bessent cited deep concerns over significant risks to the U.S. financial system posed by cartels, drug traffickers and other criminal actors along the Southwest border as the basis for the Southwest GTO.

The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) on March 11, 2025, issued a Geographic Targeting Order (the Southwest GTO) as part of a "whole-of-government approach"¹ to leverage all available tools and authorities against the illicit activities and money laundering of criminal organizations along the Southwest U.S. border.

U.S. Treasury Secretary Scott Bessent expressed deep concerns over significant risks posed to the U.S. financial system by cartels, drug traffickers and other criminal actors along the Southwest U.S. border, noting that addressing the flow of deadly drugs into the U.S. is a top priority for the Trump Administration.² On Jan. 20, 2025, President Donald Trump issued Executive Order 14157, establishing a process for designating certain cartels and other organizations as Foreign Terrorist Organizations (FTOs) and/or Specially Designated Global Terrorists (SDGTs). In accordance with the executive order, the U.S. Departments of the Treasury and State designated eight organizations, including six Mexico-based drug cartels, as FTOs and SDGTs. (See Holland & Knight's previous alert, "Trump Administration Announces Designation of International Cartels," Feb. 21, 2025.)

In furtherance of the Treasury Department's efforts to combat illicit finance by these criminal actors, FinCEN Director Andrea Gacki determined that reasonable grounds exist for imposing additional recordkeeping and reporting requirements on certain money services businesses (MSBs)³ at the Southwest U.S. border. Under the Bank Secrecy Act (BSA), when reasonable grounds exist for concluding that additional recordkeeping and reporting requirements are necessary to carry out the purposes of the BSA or to prevent evasions thereof, the Treasury secretary may issue orders imposing such additional requirements on any domestic financial institution or domestic nonfinancial trade or business in a geographic area and on any other person participating in the type of transaction.⁴

Accordingly, FinCEN issued the Southwest GTO to require all MSBs located within 30 designated ZIP codes along the Southwest U.S. border in California and Texas to file Currency Transaction Reports (CTRs) with FinCEN within 15 days following any cash transaction valued at more than $200. Covered currency transactions include deposits, withdrawals, currency exchanges or other payments or transfers by, through or to an MSB. However, an MSB is not required to file a CTR on a transaction between an MSB and a commercial bank.

Importantly, the Southwest GTO does not alter existing obligations of MSBs under the BSA but rather adds to them. For instance, MSBs must continue filing CTRs for transactions of currency above $10,000 and Suspicious Activity Reports (SARs) as necessary. However, while the dollar thresholds for filing SARs remains $2,000 for MSBs,⁵ FinCEN is encouraging the voluntary filing of SARs to report transactions conducted to evade the $200 reporting threshold.⁶

The Southwest GTO is effective beginning 30 days after the order is published in the Federal Register and ending 179 days thereafter (unless it is renewed) and covers the following ZIP codes:

• Imperial County, California. 92231, 92249, 92281 and 92283
• San Diego County, California. 91910, 92101, 92113, 92117, 92126, 92154 and 92173
• Cameron County, Texas. 78520 and 78521
• El Paso County, Texas. 79901, 79902, 79903, 79905, 79907 and 79935
• Hidalgo County, Texas. 78503, 78557, 78572, 78577 and 78596
• Maverick County, Texas. 78852
• Webb County, Texas. 78040, 78041, 78043, 78045 and 78046

Covered MSBs, along with their officers, directors, employees and agents, may face civil or criminal penalties for noncompliance with the Southwest GTO, which requires MSBs to transmit the order to each of its agents within the covered geographic areas, as well as to its CEO or other similarly acting manager.

Customer Identification Requirements

Before concluding a transaction subject to the Southwest GTO, covered MSBs must adhere to certain identification requirements – including recording specific identifying information such as the account number of the credit card or the driver's license number used to verify the identity of the customer – on the CTR.⁷ Merely noting "known customer" or "bank signature card on file" on the CTR is not sufficient. However, MSBs are not required to identify the employees of armored car services.

Record Retention Requirements

Covered MSBs must also retain all reports filed and other records relating to compliance with the Southwest GTO for five years from the last effective date of the order (including any renewals). These records must be stored in a manner accessible within a reasonable time and made available to FinCEN or any other appropriate law enforcement or regulatory agency upon request in accordance with applicable law.

Footnotes

1. See FinCEN Issues Southwest Border Geographic Targeting Order (March 11, 2025).

2. Id.

3. 31 C.F.R. § 1010.100(ff).

4. 31 C.F.R. § 1010.370(a)(1). The authority of the Secretary of the Treasury to issue a GTO has been delegated to the Director of FinCEN. See Treasury Order 180-01 (Jan. 14, 2020).

5. 31 C.F.R. § 1022.320.

6. See Issuance of a Geographic Targeting Order Imposing Additional Recordkeeping and Reporting Requirements on Certain Money Service Businesses Along the Southwest Border.

7. 31 C.F.R. § 1010.312.

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