Geographic Targeting Orders
Novedades y Servicios Inc. v. Financial Crimes Enforcement Network
Date: July 13, 2026
Issue: Whether the Southern District of California erred by issuing a preliminary injunction enjoining FinCEN from enforcing a Geographic Targeting Order (GTO).
Case Summary: In a 2-1 decision, a Ninth Circuit panel affirmed a preliminary injunction that prevents FinCEN from enforcing a GTO in the Southern District of California.
Under the Bank Secrecy Act (BSA), FinCEN issues Geographic Targeting Orders requiring certain financial institutions and businesses in designated geographic areas to maintain records and report transactions exceeding a specified monetary threshold.
In April 2025, Novedades y Servicios Inc., a small money services business, and its owner, Esperanza Gomez Escobar (Plaintiffs), sued FinCEN to block enforcement of its GTO. On March 14, 2025, FinCEN issued a “Border GTO” applicable to certain money services businesses along the U.S.-Mexico border. The order required covered businesses in designated ZIP codes in California and Texas to file Currency Transaction Reports (CTRs) on transactions exceeding $200 but below $10,000, collect customers’ identifying information, and comply with additional recordkeeping requirements. FinCEN warned that businesses that failed to comply could face significant civil and criminal penalties. In their complaint, Plaintiffs alleged FinCEN violated the Administrative Procedure Act (APA) and the Fourth Amendment by issuing the Border GTO.
After the Border GTO took effect, Plaintiffs sought emergency relief to block its enforcement. Judge Janis Sammartino of the Southern District of California first granted a temporary restraining order and later issued a preliminary injunction after finding that Plaintiffs were likely to succeed on their claims that FinCEN exceeded its statutory authority, failed to follow required notice-and-comment procedures, and acted arbitrarily and capriciously under the APA. The court also concluded Plaintiffs had shown a likelihood of irreparable harm because the GTO threatened their business, and it limited the injunction to covered money services businesses in the Southern District of California. FinCEN appealed the district court’s decision.
On appeal, the panel affirmed the preliminary injunction after ruling that Plaintiffs were likely to succeed on the merits of their claims. The panel concluded FinCEN likely exceeded its authority under Section 5326 of the BSA because the Border GTO operated as a rule of general applicability rather than an individualized order. The panel reasoned that Section 5326 authorizes FinCEN to issue only case-specific orders, not broad policy measures that apply prospectively to an entire class of regulated businesses.
The panel also concluded that FinCEN likely violated the APA. Noting that FinCEN should have followed the APA’s notice-and-comment rulemaking procedures before issuing the Border GTO, the panel explained FinCEN adopted it as a de facto rule. Along with this, the panel concluded FinCEN likely acted arbitrarily and capriciously by failing to consider the compliance costs imposed on regulated businesses before issuing the Border GTO. Finally, the panel determined that a draft “March XX Memo” did not cure that defect because the administrative record did not show that FinCEN relied on the memorandum when it adopted the Border GTO.
Next, the panel determined that Plaintiffs were likely to suffer irreparable harm absent an injunction. According to the panel, the Border GTO imposed compliance burdens that threatened Plaintiffs’ ability to remain in business by forcing it to hire additional staff it could not afford. Moreover, the Border GTO caused immediate harm to Plaintiffs’ customer relationships and goodwill, because customers feared providing personal information and instead took their business to money services businesses outside the covered area. The panel emphasized Plaintiffs lost 50%-60% of affected customers during the short period the Border GTO remained in effect and held that this evidence supported the district court’s finding of irreparable harm.
The panel also concluded that the balance of equities and public interest favored issuing the preliminary injunction. The panel found that the Border GTO threatened to put Plaintiffs, a small business operated by a single owner, out of business and deprive its owner of her livelihood. By contrast, the panel determined that FinCEN failed to show that temporarily blocking the Border GTO would significantly hinder its law enforcement or national security efforts because it did not explain why it could not rely on other investigative tools.
Finally, the panel upheld the scope of the preliminary injunction, rejecting FinCEN’s argument that the district court should have limited the injunction to the named Plaintiffs. The panel ruled that the APA authorizes courts to postpone the effective date of unlawful agency action, concluding the district court properly exercised its discretion by enjoining enforcement of the Border GTO throughout the Southern District of California.
In dissent, Judge Kenneth Lee argued the district court improperly found irreparable harm based largely on broad assertions about the financial burden of complying with the Border GTO. He contended that Plaintiffs failed to quantify the actual cost of compliance or show that those costs threatened the business’s survival. Judge Lee also emphasized that the district court did not adequately consider whether affected businesses could offset those costs by increasing revenue or adopting other measures to comply with the Border GTO.
Bottom Line: The Ninth Circuit affirmed the preliminary injunction blocking FinCEN’s Border GTO, ruling that Plaintiffs were likely to succeed on their APA claims and that the balance of the equities, public interest, and threat of irreparable harm supported injunctive relief.
Document: Opinion
