Ninth Circuit affirms injunction against FinCEN Border GTO, holding it is likely a rule requiring notice-and-comment rulemaking

On July 13, 2026, a divided Ninth Circuit panel in Novedades y Servicios, Inc. v. Financial Crimes Enforcement Network affirmed a preliminary injunction barring the government from enforcing the March 2025 Southwest Border Geographic Targeting Order (Border GTO), issued by the Financial Crimes Enforcement Network (FinCEN), against all covered money services businesses (MSBs) in the Southern District of California.¹ The decision is significant for MSBs, FinTech companies, banks, and other financial institutions because it establishes that FinCEN cannot use its GTO authority under 31 U.S.C. § 5326 to impose broad, category-wide reporting obligations without following the notice-and-comment rulemaking procedures of the Administrative Procedure Act (APA). Although the ruling is preliminary and the injunction is geographically limited, the court’s reasoning casts doubt on the validity of FinCEN’s ongoing successor GTOs and provides a roadmap for challenging similar regulatory actions.

Background

On March 14, 2025, FinCEN issued a GTO requiring every MSB in 30 specified ZIP codes across five Texas and two California counties to file a currency transaction report (CTR) for any cash transaction of more than $200 but less than $10,000 – a dramatic reduction from the longstanding $10,000 reporting threshold.² The covered ZIP codes collectively encompass an area with more than one million residents, they are noncontiguous, and some are surrounded by ZIP codes the order left untouched. Penalties for noncompliance are severe: civil fines of up to $71,545 per willful violation, criminal penalties (including fines of up to $250,000 and imprisonment of up to five years), and civil penalties of $1,430, even for negligent violations.

The Bank Secrecy Act gives the US Department of the Treasury two paths to require this kind of reporting. Under Section 5313, it may act by regulation, which requires notice-and-comment rulemaking.³ Alternatively, under Section 5326, it may act by “order” – commonly referred to as a GTO – upon a finding of “reasonable grounds” that additional recordkeeping or reporting is necessary to carry out the purposes of the Bank Secrecy Act. GTOs are capped at 180 days unless renewed and are presumptively confidential.⁴ Notably, FinCEN published the Border GTO in the Federal Register, departing from both Section 5326’s confidentiality presumption and Treasury’s own stated expectation that GTOs would be delivered only to individually identified institutions.

Plaintiff Novedades y Servicios, Inc. is a small, single-owner MSB in San Diego that provides money transfers, money orders, and check cashing. Its owner, Esperanza Gomez Escobar, filed suit in the Southern District of California on April 15, 2025, arguing that the Border GTO violated the APA and the Fourth Amendment. The district court granted a preliminary injunction on May 15, 2025, and the government appealed.

What the court held

The panel affirmed the preliminary injunction, finding that the plaintiffs were likely to succeed on three APA grounds:⁵

1. The Border GTO is likely a rule, not an order. Courts look to the substance of an agency action, not its label, to determine whether it is an order or a rule. Section 5326 authorizes FinCEN to act only by “order” as that term is understood under the APA. The Ninth Circuit applies a three-factor test: “(1) whether the government action applies to specific individuals or to unnamed and unspecified persons; (2) whether the promulgating agency considers general facts or adjudicates a particular set of disputed facts; and (3) whether the action determines policy issues or resolves specific disputes between particular parties.”⁶ All three factors pointed toward characterizing the Border GTO as a rule.⁷ First, it reached an entire category of businesses – every MSB in an area of more than one million people – rather than any specifically identified business. Second, it rested on general findings about cartel activity along the border, not facts adjudicated against a particular party. Third, it set policy, rather than resolving a dispute between identified parties. The court rejected the government’s arguments that geographic and temporal limitations saved the GTO from rule classification, noting that rules may be geographically and temporally bounded.⁸
2. FinCEN was required to conduct notice-and-comment rulemaking. Because the Border GTO is likely a de facto rule, the APA’s notice-and-comment procedures applied – and FinCEN skipped them entirely.⁹ The court also rejected any suggestion that Section 5326 itself exempts FinCEN from those procedures, noting that Congress knows how to expressly excuse an agency from notice and comment and did not do so here.¹⁰
3. The Border GTO was likely arbitrary and capricious. An agency acts arbitrarily when it fails to consider “an important aspect of the problem,”¹¹ and the Supreme Court has held that cost of compliance is such an aspect.¹² The Federal Register notice accompanying the Border GTO did not mention compliance costs. The government’s sole support was an undated, heavily redacted draft memorandum that was never cleared or approved by authorized FinCEN officials and that the government could not confirm was relied upon before the GTO was issued. The court held that the presumption of regularity was rebutted and declined to treat the memorandum as evidence that FinCEN had contemporaneously considered compliance costs.¹³
4. Irreparable harm occurred. The court affirmed the district court’s finding that Novedades demonstrated a likelihood of irreparable harm. Novedades estimated that compliance would require approximately 14.8 to 17.26 additional hours per day of CTR filing – not accounting for time spent explaining the requirements to customers – and would necessitate hiring at least one full-time employee it could not afford. During the single week the Border GTO was in effect, Novedades lost 50% to 60% of the customers in the store to whom Escobar explained the new requirements, with a competing MSB not covered by the GTO located just a five-minute drive away. The court held that a “threat of extinction,” together with concrete loss of customers and goodwill, establishes irreparable harm even where the underlying injury is economic.
5. The balance of equities favored Novedades. The court weighed the concrete threat the Border GTO poses to Novedades’ existence against the government’s speculative assertions that the GTO will enhance public safety. It noted that “[t]here is generally no public interest in the perpetuation of unlawful agency action” and that the government failed to explain why it could not combat illicit finance through other investigatory and prosecutorial tools at its disposal.
6. One judge dissented. Judge Lee dissented, arguing that Novedades had not presented sufficient evidence of irreparable harm to warrant the “extraordinary remedy” of a preliminary injunction and would have remanded for further factual development on that issue.

Practical implications for financial services clients

FinCEN’s GTO authority has enforceable limits. Novedades establishes that the label on a FinCEN action does not control its legal character. A GTO that applies prospectively to an open-ended category of regulated entities based on general policy findings – rather than targeting specific, identified businesses based on particularized facts – functions as a rule and must comply with APA rulemaking requirements. This reasoning may extend beyond MSBs to any financial institution or nonfinancial trade or business subject to a GTO under Section 5326. As a published Ninth Circuit decision, Novedades is binding precedent within the circuit and persuasive authority elsewhere.

Agencies must document their consideration of compliance costs. The decision reinforces that FinCEN – and by extension other agencies imposing reporting obligations on financial institutions – must give meaningful, contemporaneous consideration to the practical costs of compliance. Undated draft memoranda, incomplete clearance records, and post hoc justifications will not satisfy this requirement.¹⁴

Scope of relief under the APA remains broad. The injunction protects all covered MSBs in the Southern District of California – not just the named plaintiffs – though it does not extend nationwide. The panel relied on APA Section 705 as authority for district-wide relief and held that the Supreme Court’s decision in Trump v. CASA, Inc., 606 U.S. 831 (2025), does not narrow the scope of injunctive relief available under the APA. Businesses in other districts subject to FinCEN GTOs are not currently protected by this injunction but may bring independent challenges.

Regulated entities should preserve evidence of compliance burdens. The majority opinion credited Novedades’ contemporaneous evidence of transaction volumes, per-report filing time, staffing constraints, and customer attrition. Financial institutions contemplating challenges to future FinCEN reporting mandates should preserve similar documentation, including records of customer loss, estimated per-transaction compliance time, technology costs, and the availability of nearby competitors not subject to the same requirements.

The regulatory landscape remains in flux. The court affirmed only a preliminary injunction; the litigation continues. FinCEN has issued two successor GTOs since March 2025. The current (third) GTO is effective through September 2, 2026, applies a $1,000 reporting floor (up from $200) and extends coverage to specified areas in Arizona, California, New Mexico, and Texas.¹⁵ Each successor GTO exempts MSBs protected by injunctions against the original Border GTO for as long as those injunctions remain in force. MSBs, FinTech companies, banks, and other financial institutions operating in covered border areas should monitor both the ongoing litigation and the evolving terms of these orders and assess whether the reasoning in Novedades supports challenges to obligations imposed on their operations.

If you have questions about this decision or its implications for your operations, please contact your regular McDermott Will & Schulte lawyer or one of the authors listed below.

¹ Novedades Y Servicios, Inc. v. FinCEN (9th Cir. July 13, 2026). The Southern District of California is comprised of San Diego County and Imperial County.
² Novedades y Servicios at p. 6.
³ 31 U.S.C. § 5313.
⁴ 31 U.S.C. § 5326.
⁵ Novedades y Servicios at p. 18.
⁶ Novedades y Servicios at p. 20 (citing Gallo v. U.S. Dist. Ct. for Dist. of Ariz. (9^th Cir. 2003)).
⁷ Novedades y Servicios at p. 20-24.
⁸ Novedades y Servicios at p. 20-21.
⁹ Novedades y Servicios at p. 24-25.
¹⁰ Novedades y Servicios at p. 25.
¹¹ Novedades y Servicios at p. 26.
¹² Novedades y Servicios at p. 26 (citing Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co. (U.S. 1983); Michigan v. EPA (U.S. 2015)).
¹³ Novedades y Servicios at p. 26-29.
¹⁴ Novedades y Servicios at p. 26.
¹⁵ Federal Register: Geographic Targeting Order Imposing Recordkeeping and Reporting Requirements on Certain Money Services Businesses Along the Southwest Border, Federal Register: Geographic Targeting Order Imposing Recordkeeping and Reporting Requirements on Certain Money Services Businesses Along the Southwest Border.