A federal judge issues a ruling on cash reporting regulations.
A federal judge has issued a ruling to stop the enforcement of a controversial cash reporting requirement for money service businesses along the Mexican border. This decision follows a lawsuit from a San Diego business owner who claimed the rule negatively impacted her operations by forcing businesses to monitor customers without probable cause. The rule, introduced to combat money laundering, affected businesses in California and Texas and has raised questions about government oversight versus the rights of local businesses.
California – A federal judge has issued a ruling halting the enforcement of a controversial cash reporting requirement for money service businesses located along the Mexican border. U.S. District Judge Janis Sammartino in San Diego has temporarily stopped the government from enforcing the requirement, which mandated check cashers and currency exchangers in Southern California to report cash transactions exceeding $200.
The decision impacts businesses in San Diego and Imperial Counties and follows a lawsuit filed by Esperanza Gomez, who owns a money transferring business in San Diego. Gomez’s lawsuit argues that the reporting requirement places an undue burden on business owners and compels them to monitor their customers without probable cause. She reported a significant decline in her customer base—between 50% to 60%—during the week the rule was in effect.
The rule, implemented by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in March, was designed to combat money laundering and target financial transactions linked to Mexican drug cartels. Businesses across 30 ZIP codes in California and Texas were intended to be subjected to this requirement. Gomez’s experience is echoed by other businesses, including Western Union, which halted cash transfers over $200 due to the regulation’s enforcement.
In addition to Gomez’s lawsuit in California, her attorneys are also involved in a parallel case in Texas federal court challenging the same reporting requirement. In that case, a separate judge ordered FinCEN to cease enforcement of the rule against ten small money service businesses also impacted by the regulation.
Robert Johnson, who represents Gomez and the plaintiffs in Texas, has emphasized the detrimental impact of the cash reporting requirement on local businesses. He has argued that records presented by the federal government do not provide substantial evidence supporting the need for such wide-reaching surveillance on financial transactions. Johnson specifically criticized the $200 cash threshold as an unconstitutional general warrant under the Fourth Amendment.
In its defense, the federal government maintains that the cash reporting rule is a legitimate measure tailored to a designated 180-day period in specific high-activity ZIP codes. Katherine Parker, an attorney with the Department of Justice, acknowledged that the rule could potentially harm businesses but defended its purpose in preventing illicit financial activities.
Judge Sammartino’s ruling has raised concerns about the legitimacy of the government’s enforcement practices, pointing out inconsistencies in the administration’s documentation regarding the order’s intended outcomes. The suspension of the rule’s enforcement in Southern California is viewed by many as a significant development in the ongoing legal battle over financial regulations aimed at combating crime in the region.
The outcome of the lawsuits and the future of the reporting requirement remain uncertain; however, the immediate impact has already been felt by businesses that depend on customer transactions and financial services in the affected areas. The suspended rule has opened up a renewed dialogue about balancing governmental oversight aimed at combating crime with the rights and operational needs of local businesses.
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