Dear John:

I usually email you with breaking news about a case you’ve read about in our flagship publication, Liberty & Law. But in the last week, we moved so fast on an important challenge to a brand new federal rule that we haven’t even been able to tell you about it before we received today a significant early victory in the case. A federal judge in San Diego issued a temporary restraining order (TRO) this afternoon in our challenge to a newly expanded cash surveillance scheme.

Our case challenges a rule that was issued last month by the current administration that demands detailed information about everyday cash transactions in a targeted area along the southwest border. The order directs check cashers, currency exchanges, and other “money services businesses” in 30 zip codes to report all cash transactions over just $200 to a federal law enforcement called the Financial Crimes Enforcement Network (FinCEN). Before this new rule went into effect, businesses were required to report cash transactions only over $10,000 to the feds. Although ostensibly aimed at fighting cartels, the new reporting requirements will sweep in thousands of innocent people and are burdensome enough to kill many small businesses.

Just like our client, Esperanza Gomez. She runs a small business near the U.S.-Mexico border that provides every day, small-dollar financial services—often for customers without bank accounts. Esperanza helps customers cash checks (often to buy groceries at the store across the way), wire funds (often to family members), and get money orders (used for things like paying the rent).

The reports require detailed information including birth dates, Social Security numbers, and home addresses. It takes 20 minutes to file a single report. In fact, before this rule went into effect, Esperanza never filed a report because no transaction she ever did exceeded $10,000. The new rule promised to crush her in paperwork. Meanwhile, even assuming that criminals are laundering money in $200 increments, those same people could easily take their cash to another zip code. Esperanza cannot move her businesses and faces ruination. 

Esperanza ([link removed] )

“I am happy and grateful for the judge’s decision. This relieves the heavy weight that we were feeling, and this will allow us to continue to work for our customers and our community and will keep our business alive.”

- IJ client Esperanza Gomez

But the Fourth Amendment protects against this kind of generalized surveillance without probable cause or a warrant. And, after an emergency TRO hearing this morning, U.S. District Court Judge Janis Lynn Sammartino agreed, halting for now the implementation of the rule.

Stay tuned for more updates about this case and our clients (including a similar challenge we filed in federal court in Texas). But for now, savor this victory that protects small business owners like Esperanza and curtails executive branch overreach.

Scott

Scott G. Bullock

President and Chief Counsel

Institute for Justice

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