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On July 14, 2026, a split 9th U.S. Circuit Court of Appeals panel affirmed a preliminary injunction barring enforcement of the Financial Crime Enforcement Network’s (FinCEN) border geographic targeting order (GTO), the rule requiring money service businesses (MSBs) along the U.S.-Mexico border to file currency transaction reports on cash transactions as low as $200. Writing for the majority, U.S. Circuit Judge Lucy H. Koh concluded that Novedades y Servicios Inc. and its owner, Esperanza Gomez Escobar, had shown a likelihood of irreparable harm from both the compliance burden and the loss of customers wary of the GTO’s reporting demands. U.S. Circuit Judge Kenneth K. Lee dissented, arguing that the record lacked the financial specifics needed to support an injunction of this scope.

The ruling strikes squarely at one of the Trump administration’s signature anti-money-laundering initiatives: using FinCEN’s geographic targeting authority to choke off cartel-linked cash flows crossing the southwest border. For banks, MSBs, and other financial institutions operating near that border or handling correspondent relationships with border-area businesses, this decision is not an academic footnote. It is a live signal about how far regulators can push emergency AML tools before courts push back.

What the GTO Was Trying to Do

FinCEN issued the border GTO in March 2025, and it took effect the following month across 30 ZIP codes spanning southern Texas and California. The order targeted currency exchanges, remittance providers, and other MSBs, lowering the existing $10,000 threshold for currency transaction reports (CTRs) to just $200 for covered cash transactions. The administration framed the order as a direct tool for detecting and disrupting drug trafficking proceeds moving across the border, consistent with its broader campaign against cartel money laundering.

That framing matters as the GTO was not a generic AML measure. It was a targeted instrument built to squeeze the cash-intensive layering techniques cartels use to move drug proceeds through small, high-volume MSBs before those funds enter the broader financial system. Koh’s opinion did not dispute that policy objective. Instead, the majority found that FinCEN pursued it the wrong way.

Why the Panel Sided Against FinCEN

The 9th Circuit’s core holding rests on administrative law, not AML policy. The panel agreed with the district court that Novedades is likely to succeed on its Administrative Procedure Act claim because the GTO functioned as a de facto legislative rule that required notice-and-comment rulemaking, which FinCEN skipped. The panel also found the order likely arbitrary and capricious because FinCEN failed to account for the compliance costs it imposed on regulated businesses.

The irreparable harm findings were fact-intensive and, as Lee’s dissent noted, thin on hard numbers. Novedades alleged it would need between 14.8 and 17.26 hours per day just to file the required CTRs, an unsustainable burden for a business that typically staffs one person per shift. The business also lost 50% to 60% of its customers during the one week the GTO was briefly in effect in the Southern District of California, a decline Koh attributed to customer confusion and reluctance to hand over personal information, particularly when a competing MSB unburdened by the GTO sat just five minutes away. Lee countered that the majority accepted these claims without a meaningful review of revenue, costs, or mitigation options such as software or price increases. That dissent leaves the door open for FinCEN to argue, in this case or the next, that a better-supported record could survive judicial scrutiny.

The Enforcement Backdrop: Cartels Remain Squarely in the Crosshairs

This is not a signal that the administration is retreating from cartel-focused AML enforcement. Rather, it is a signal that one of the administration’s tools, issued without notice and comment, faces real procedural limits. The policy pivot toward using FinCEN’s emergency authorities to disrupt cartel finance is not going away. Only the method is under judicial pressure.

Financial institutions should expect FinCEN to respond in one of two directions: either replace the GTO with a properly noticed rule that builds a stronger cost-benefit record, or lean harder on existing tools that do not require new rulemaking, such as targeted Section 314(a) information requests, special measures under Section 311, and heightened SAR expectations for institutions with border-adjacent exposure. Novedades characterized FinCEN as having a “history of ratcheting financial surveillance up, in a manner that is practically unchecked.” Regulators are unlikely to view that critique as a reason to slow down; they are more likely to view it as a roadmap for building a more defensible rule.

Practical Takeaways for Banks and Financial Institutions

The practical significance for compliance officers and BSA/AML teams is concrete, even for institutions outside the 30 GTO ZIP codes. Consider the following:

  • Review your exposure to border-adjacent MSBs and correspondent relationships now, since any institution processing transactions for businesses near the southwest border should reassess whether its own risk rating and monitoring thresholds already capture the cartel-linked typologies the GTO was designed to catch, regardless of whether the order itself survives.
  • Do not treat this injunction as a reason to lower vigilance, because the underlying enforcement priority, disrupting cartel cash flows, remains fully intact and is likely to reappear in a revised rule or through parallel supervisory guidance.
  • Document your cost-benefit analysis for any internal AML control tied to border cash transactions, since Lee’s dissent shows that courts want hard numbers, not vague assertions, and FinCEN will need the same discipline if it wants its next order to hold up.
  • Monitor the parallel Texas litigation, since a preliminary injunction also has been entered there on similar grounds, and a split among district or circuit courts could shape how quickly FinCEN moves to a formal rulemaking.
  • Prepare for a revised GTO or formal rule rather than assuming the issue is closed, since FinCEN has strong policy and political incentive to reissue targeted cash-reporting requirements once it can show it weighed compliance costs.

The Bottom Line

The 9th Circuit did not question the legitimacy of targeting cartel money laundering. It questioned FinCEN’s process for doing so, without notice and comment or weighing the costs to regulated businesses. That distinction matters enormously for financial institutions trying to anticipate the next move. Enforcement priorities are not retreating; the rulemaking playbook is being rewritten in real time. Institutions with border-area exposure should treat this decision as a preview, not a reprieve, and calibrate their AML programs accordingly. The compliance case for staying ahead of a reissued GTO is clear. The enforcement case for waiting until it arrives will be even clearer.