Texas Money Services Businesses Sue to Halt FinCEN's New Border Reporting Rule

A trade association representing Texas money services businesses (MSBs) has launched a legal challenge against a new federal reporting rule, known as a Geographic Targeting Order (GTO), issued by the Financial Crimes Enforcement Network (FinCEN). The GTO, which focuses on disrupting cartel activities, mandates that MSBs operating in 30 zip codes across Texas and California must file Currency Transaction Reports (CTRs) for any cash transaction exceeding $200.

Introduced in March, the GTO aims to combat cartel money laundering activities along the U.S.-Mexico border by increasing oversight on small cash transactions that might otherwise escape regulatory scrutiny. However, the Texas Association for Money Service Businesses has filed a lawsuit in federal court in San Antonio, arguing that the rule is unconstitutional, unfairly discriminatory against certain businesses, and threatens the viability of many MSBs due to the associated costs.

“The administrative burden on the typical MSB will be financially ruinous for these businesses,” the lawsuit stated. The association further contended that the GTO would cause a dramatic surge in the number of CTRs that MSBs must file, potentially overwhelming many small operators with compliance costs and paperwork requirements. “The average number of CTRs for a typical MSB is estimated to increase by several orders of magnitude,” the lawsuit added.

Under the terms of the GTO, MSBs must collect detailed identification information from customers, including a driver’s license number or account number, and vague entries such as “known customer” are explicitly prohibited. Businesses are also required to retain these records, along with filed CTRs, for at least five years after the expiration of the order, which is currently set to end on September 9, though FinCEN has the option to extend it.

In response to the lawsuit, FinCEN filed a counter-motion defending the GTO. The agency argued that the special reporting requirements are critical to addressing “the ongoing threat by cartels,” who they said are actively laundering funds “through the U.S. financial system.” FinCEN emphasized that “money service businesses (MSBs) along the southwest border are particularly vulnerable to this type of abuse.”

Rejecting the Texas MSBs’ claims of economic harm, FinCEN asserted that “the plaintiff’s unsubstantiated and implausible allegations do not support the claim that the GTO will be devastating for money service businesses.”

As the legal battle unfolds, the future of the GTO remains uncertain, but for now, the order remains in effect, placing additional regulatory pressure on small money transmitters operating in regions long plagued by illicit financial activities tied to organized crime.

By fLEXI tEAM