Background
In March 2025, FinCEN issued a Geographic Targeting Order (GTO) requiring money services businesses in 30 specified ZIP codes along the Texas and California southwest border to file Currency Transaction Reports for any cash transaction between $200 and $10,000—a significant reduction from the longstanding $10,000 threshold. The order applied to an area with over one million people and covered businesses like Novedades y Servicios, a small San Diego money transfer business that had never previously filed a CTR in its entire operating history because it rarely handled transactions above $10,000.
Novedades’s owner, Esperanza Gomez Escobar, estimated that compliance would require approximately 14 to 17 additional hours of reporting work per day, necessitating the hire of a full-time employee the business could not afford. More critically, during the single week the Border GTO was in effect before a temporary restraining order was issued, Novedades lost 50 to 60 percent of its customer base. Customers expressed fear that providing personal information would place them on criminal lists or result in mistaken identification as criminals, with some explicitly stating they would take their business to money services businesses in non-targeted ZIP codes.
Novedades filed suit on April 15, 2025, challenging the Border GTO on Administrative Procedure Act grounds, arguing it was promulgated without authority and required notice-and-comment rulemaking. The district court granted a preliminary injunction on May 15, 2025, and the government appealed.
The Court’s Holding
The Ninth Circuit affirmed the preliminary injunction, holding that Novedades had demonstrated a likelihood of success on the merits of its APA claims. The court held that the Border GTO was a “rule” under the APA—not an “order”—and therefore exceeded FinCEN’s statutory authority under Section 5326, which authorizes only orders. Applying the three-factor test distinguishing rules from orders, the court found that: (1) the Border GTO applied to unnamed and unspecified money services businesses in a geographic area with over one million people, not to specific identified businesses; (2) FinCEN relied on general facts and policy inferences rather than adjudicating particular disputes; and (3) the Border GTO determined policy issues rather than resolving disputes between particular parties. The government’s argument that labeling something an “order” made it definitionally one was rejected as circular.
The court further held that because the Border GTO was a de facto rule, FinCEN was required to conduct notice-and-comment rulemaking under APA Section 553 before issuance. Additionally, the Border GTO was adopted in an arbitrary and capricious manner because FinCEN entirely failed to consider the compliance costs imposed on regulated parties—an important aspect of the problem that agencies must address. The district court did not clearly err in finding that Novedades faced irreparable harm characterized as a “threat of extinction” given the substantial compliance burden and the actual loss of 50 to 60 percent of its customer base during the order’s brief implementation period. The balance of equities and public interest favored the injunction, weighing concrete harm to Novedades against speculative government assertions about public safety.
Key Takeaways
- Geographic targeting orders imposing requirements on broad, unnamed categories of businesses across large geographic areas constitute “rules” requiring notice-and-comment rulemaking, not “orders” exempt from rulemaking procedures.
- Agencies must affirmatively consider compliance costs when adopting regulations affecting regulated parties; failure to do so renders the action arbitrary and capricious under the APA.
- Preliminary injunctions may issue when regulations impose substantial compliance burdens on small businesses, even absent complete proof of irreparable harm, particularly when actual customer loss is documented.
- Customer privacy concerns and customer reactions to enhanced reporting requirements are relevant to preliminary injunction analysis and may support findings of irreparable harm.
Why It Matters
This decision significantly constrains the government’s ability to expand financial reporting requirements through Geographic Targeting Orders without formal rulemaking procedures. It establishes that FinCEN cannot circumvent APA notice-and-comment requirements by labeling policies as “orders” when they functionally apply broadly to categories of regulated entities. The ruling elevates the importance of compliance-cost analysis in financial regulation, requiring agencies to grapple with the practical effects on regulated parties—particularly small businesses that may lack resources for rapid regulatory adaptation. By protecting Novedades from enforcement of the Border GTO at least in the Southern District of California, the court prevented a significant operational threat to small financial service providers serving unbanked and underbanked communities.
The decision also reflects judicial concern about the chilling effect of expanded identity-verification requirements on low-income customers who fear surveillance or criminal association. Judge Koh’s majority opinion suggests that courts will seriously scrutinize reporting expansions that demonstrably drive away customers from affected businesses, treating such customer flight as probative of irreparable competitive harm. The dissent by Judge Lee—arguing insufficient proof of irreparable harm—signals ongoing debate about preliminary injunction standards in regulatory contexts, but the majority’s approach will likely require greater government justification for rapid, area-wide reporting expansions.