Background
The Bank Secrecy Act has required financial institutions to file Currency Transaction Reports (CTRs) for cash transactions over $10,000 since 1972. A separate 1988 statute, 31 U.S.C. section 5326, allows the Treasury Secretary to issue “geographic targeting orders” (GTOs) requiring specific financial institutions in specific areas to file additional reports, by order rather than through notice-and-comment rulemaking, when the Secretary finds that additional reporting is needed to combat money laundering.
In March 2025, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a “Border GTO” requiring all money services businesses in 30 ZIP codes in five Texas counties and two California counties along the southwest border to file CTRs for any cash transaction between $200 and $10,000 — dramatically expanding the reporting obligation to cover transactions that are 98% smaller than the normal $10,000 threshold. The Border GTO covered a population of over one million people and applied to all unnamed MSBs in those areas (rather than specific named businesses, as GTOs had historically targeted). Violations carried civil penalties of up to $71,545 per transaction and criminal penalties including up to five years in prison.
Novedades y Servicios, Inc., a small San Diego money transfer and check-cashing business owned by Esperanza Gomez Escobar, filed suit one day after the GTO took effect. Novedades estimated that compliance would require an additional 14 or more hours of reporting work per day and the hiring of a full-time employee it could not afford. During the single week the GTO was in effect, Escobar lost 50–60% of the customers to whom she explained the new requirements; many said they feared being placed “on a list with criminals.” The district court granted a preliminary injunction blocking enforcement; the government appealed to the Ninth Circuit.
The Court’s Holding
The Ninth Circuit, in an opinion by Judge Lucy H. Koh joined by Judge Ana de Alba (with Judge Kenneth K. Lee dissenting on one issue), affirmed the preliminary injunction. The majority held that Novedades demonstrated a likelihood of success on three independent APA grounds.
First, the Border GTO was likely a “rule,” not an “order,” under the APA — and therefore could not be issued under the GTO statute without notice-and-comment rulemaking. Unlike traditional GTOs that targeted specific named businesses, the Border GTO applied to all unnamed and unspecified MSBs in 30 ZIP codes housing more than a million people; rested on general policy conclusions rather than adjudication of specific facts about specific businesses; and was published in the Federal Register, the hallmark of legislative rulemaking. GTOs were historically directed to specific named businesses — that is what Congress authorized in section 5326 — and FinCEN’s 1989 implementing rule said as much.
Second, because the Border GTO was a de facto legislative rule, FinCEN was required to conduct notice-and-comment rulemaking under APA section 553 before issuing it — a process it skipped entirely.
Third, the Border GTO was arbitrary and capricious because FinCEN entirely failed to consider the compliance costs its order would impose on regulated parties — an “important aspect of the problem” that an agency must address. FinCEN’s own CTR form estimated 40 minutes per report; Novedades, which processes over a thousand transactions per month, faced an impossible paperwork burden that the agency never grappled with.
On irreparable harm, the majority affirmed the district court’s finding that Novedades faced a “threat of extinction” — 50–60% customer loss in a single week, plus unaffordable compliance costs — sufficient for injunctive relief. Judge Lee dissented on this point alone, arguing the majority relied on blanket assertions of financial burden without demanding enough specificity from the district court.
Key Takeaways
- A “geographic targeting order” under the Bank Secrecy Act that applies to all unnamed businesses in a geographic area — rather than specific named entities — is likely a legislative rule requiring notice-and-comment rulemaking under the APA, not a valid “order.”
- An agency that fails to consider the compliance costs of its regulatory action acts in an arbitrary and capricious manner under the APA, regardless of the claimed law-enforcement justification.
- Small businesses that would face existential financial harm from an agency order — including customer flight and crushing paperwork burdens — may meet the irreparable harm standard for a preliminary injunction.
- The decision limits the government’s ability to use emergency GTO authority to impose broad, quasi-legislative cash-reporting mandates on entire geographic areas without the procedural protections of notice-and-comment rulemaking.
- The injunction’s scope was properly limited to the Southern District of California; MSBs in Texas subject to the same GTO remain in a different legal posture.
Why It Matters
This is one of the most significant financial regulatory decisions to come out of the Ninth Circuit in recent years. The Treasury Department has used geographic targeting orders for decades to investigate money laundering in specific, targeted contexts — requiring particular named businesses to file enhanced reports. What it did here was different in kind: it imposed a sweeping, general-purpose cash-reporting mandate on an entire border region, affecting hundreds of thousands of ordinary transactions by ordinary people who happen to use money services businesses instead of banks. The Ninth Circuit’s ruling that this amounted to legislating by order — without the procedural safeguards of public notice and comment — is a meaningful constraint on executive agencies’ ability to bypass those safeguards in the name of border security.
For California practitioners, the ruling is directly relevant to businesses in San Diego and Imperial counties, which were within the Border GTO’s coverage area. Money services businesses, their banking relationships, and the immigrant communities they serve were all disrupted by the GTO. Beyond the immediate facts, the case has broad implications for any federal agency that attempts to use “order” authority to impose obligations of general applicability — the line between orders (targeted, case-specific) and rules (general, policy-setting) remains a live battleground in administrative law, and this decision leans strongly toward requiring rulemaking for broad-based regulatory mandates.
Read the full opinion (PDF) · Court docket