In March, we wrote about the Department of Treasury's Financial Crimes Enforcement Network (FinCEN) issuing a Geographic Targeting Order (GTO) aimed to combat Mexican-based drug cartels. The GTO signals Treasury's efforts to combat cartel activity by requiring heightened anti-money laundering reporting for money services business (MSBs) along the southwest border. The GTO—which went into effect on April 14, 2025—can be found here. It requires all MSBs—check cashing companies, currency transmitters and foreign exchange dealers, among other financial services businesses—located in 30 ZIP codes across the U.S.-Mexico border in California and Texas to file Currency Transaction Reports (CTRs) with FinCEN at a $200 threshold in connection with cash transactions. FinCEN announced that the purpose of the GTO was to "further combat the illicit activities and money laundering of Mexico-based cartels and other criminal actors along the southwest border" and is one of many examples of the new administration's significant shifts in its approach to criminal enforcement and prosecution of money laundering cases
But two recent challenges successfully—at least temporarily—enjoined the enforcement of the GTO for certain MSBs.
The first challenge came from the Texas Association for Money Services Businesses (TAMSB), a trade group who filed in the Western District of Texas a complaint for declaratory judgment and injunctive relief in a case captioned Texas Association for Money Services Businesses, et al. v. Bondi et al., No. 5:25-cv-00344 (W.D. Tex. Apr. 1, 2025)(with amended complaint filed on April 18, 2025). TAMSB claimed the new over-$200 reporting obligation would be extremely burdensome administratively. For example, TAMSB claimed that one of its members predicted that it will go from filing an average of nine CTRs per week across its dozens of locations in Texas to nearly 50,000 under the GTO. TAMSB further claimed that the administrative burden will be "financially ruinous" or customers will simply take their business elsewhere. The amended complaint alleged that the GTO violated the Administrative Procedures Act (APA) and TAMSB's Fifth Amendment's due process and equal protection guarantees by "depriving [the TAMSB members] of protected property interests without notice" and "targeting . . . particular zip codes."
In granting TAMSB's motion for a temporary restraining order (TRO) on the original complaint, the court found that the TAMSB: (a) demonstrated a substantial likelihood of success on the merits of its claims under the APA and Fifth Amendment; and (b) will suffer irreparable harm absent emergency injunctive relief, including the threat of business closure, reputational injury, and loss of customers and good will. That TRO—which applied only to TAMSB members and not more broadly—expired on April 25, 2025. Briefing on the TAMSB's motion for preliminary injunction is ongoing.
The second challenge came from an MSB operating in San Diego, California and its owner and operator that filed a similar claim for injunctive relief in the Southern District of California in Novedades Y Servicios, Inc. et al v. Financial Crimes Enforcement Network et al., Docket No. 3:25-cv-00886 (S.D. Cal. Apr 15, 2025). On April 22, 2025, the court granted an ex parte motion for a TRO temporarily blocking the GTO. Plaintiffs asserted challenges under the APA and Fifth Amendment but also that the GTO violates the Fourth Amendment and "operates as a general warrant insofar as it was fashioned by law enforcement to sweep up information about otherwise private cash transactions throughout the targeted zip codes" in order for law enforcement to "combat[] Mexican cartels, without any individualized probable cause." Plaintiffs allege that the $200 threshold "results in an unreasonable search because it requires businesses to report information about their customers' ordinary, everyday cash transaction without any individualized suspicion or showing of probable cause." Among other procedural and due process arguments, plaintiffs argue that the GTO will result in "hours of new paperwork daily" and will "impose crushing costs" on the MSB.
In granting the TRO, the court found that: (a) plaintiffs demonstrated a substantial likelihood of success on the merits of their claim that the GTO was unlawfully issued without notice and that the GTO was arbitrary and capricious; (b) that plaintiffs have suffered immediate and irreparable harm, including the threat of business closure and the loss of customers and goodwill; and (c) that the balance of equities favor plaintiffs while not significantly intruding on FinCEN's ability to continue to regulate financial institutions. This TRO too is limited; it applies only to covered businesses (as defined in the GTO) located in the Southern District of California. The court set a hearing for mid-May to hear plaintiffs' motion for preliminary injunction.
These decisions temporarily halt enforcement of the GTO for a limited population of MSBs located in the impacted areas. But they signal that the new administration will need to litigate the legality of the GTO on multiple fronts and engage on multiple legal theories (including allegations of violations of the Fourth and Fifth Amendments and the APA) before the GTO is fully implemented and up and running.
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