Federal Court Enjoins Ruinous Financial Surveillance of California Money Services Businesses
SAN DIEGO—Today a San Diego federal court ordered the federal government to halt a targeted financial surveillance rule aimed at California money services businesses (MSBs). The preliminary injunction ordered by District Court Judge Janis Sammartino follows an earlier temporary restraining order that similarly covered MSBs in the state.
In April, San Diego small business owner Esperanza Gomez teamed up with the Institute for Justice (IJ) to sue the Financial Crimes Enforcement Network (FinCEN) over its order requiring certain businesses in targeted ZIP codes to report all cash transactions above $200. The normal reporting requirement is for cash transactions over $10,000.
“I am very grateful for the decision, and relieved,” said Esperanza. “I was so worried about what would happen if the rule went into effect. I’m doing this not just for me but for the community.”
This is the second federal court to issue a preliminary injunction against the rule this week. In Texas, IJ is representing Arnoldo Gonzalez, Jr., operator of a small MSB in Laredo, in an existing lawsuit filed by the Texas Association for Money Services Businesses. The order in Texas covered only the 10 businesses named in the lawsuit.
“Two federal judges have now found this order unlawful,” said IJ Senior Attorney Rob Johnson. “Yet there are still companies in Texas that are being forced to comply with it. We will keep fighting until the government’s unconstitutional surveillance order is shut down nationwide.”
For Esperanza, there are literally not enough hours in the day to complete the required paperwork, since it would take her 30 hours to file reports for the number of transactions she used to process daily. While the rule was in effect she was also losing customers who were understandably reluctant to hand over personal information.
Esperanza’s business provides check cashing, money transfers, and money orders—services that are vital to working class customers, many of whom do not have bank accounts. Customers cash pay checks, send money to family, and take out money orders for things like paying the rent. The 30 targeted ZIP codes are located in Texas and California—with many near El Paso and San Diego—and cover an area with a population of over a million people.
The lawsuit argues the order violates the Fourth Amendment’s prohibition of unreasonable searches. One of the foundational reasons for the creation of the amendment was to prevent the government from being able to acquire “general warrants”—wide-ranging warrants that failed to provide probable cause that a crime was being committed.
