San Diego, CA — A California business owner achieved a temporary win in court this week when a federal judge delayed the enforcement of a new financial reporting rule that had dramatically increased her company’s workload and sparked a debate on privacy rights. The rule, introduced by the Financial Crimes Enforcement Network (FinCEN), required detailed reporting of any transaction over $200, a significant drop from the previous $10,000 threshold.
Implemented last week, this requirement was part of a geographic targeting order aimed at combating money laundering and cartel activity primarily along the U.S.-Mexico border. The regulation impacts money services businesses across 30 ZIP codes in California and Texas. These areas include major neighborhoods stretching from the border northwards in San Diego County.
The owner of Novedades y Servicios Plus, Esperanza Gomez, filed a legal challenge against FinCEN and the Treasury Department. Gomez reported that the completion of Currency Transaction Reports (CTRs) for transactions over $200 was severely hampering her operations, noting that such transactions constitute 98% of her business. Gomez highlighted the intrusive nature of the data collection, which requires customers to divulge sensitive personal information like Social Security numbers.
Sharing the sentiments of her clientele, Gomez recounted, “People are generally uncomfortable disclosing their personal information for such small transactions. The requirement feels disproportionate and invasive.”
The legal action taken by Gomez reflects a concern over the broader implications of the order. Her attorney, Katrin Marquez of the Institute for Justice, argued that the order’s requirements raise significant constitutional issues, specifically relating to privacy rights under the Fourth Amendment, which protects against unreasonable searches and seizures.
Marquez elaborated on the potential nationwide impact of this precedent, positing that it could empower the government to implement similar measures elsewhere without individualized suspicion or the necessary legal warrants. “This isn’t just about fighting for privacy here but defending it against potential overreach in other contexts,” Marquez stated.
Although FinCEN has not commented on the restraining order or the ongoing lawsuit, the temporary relief granted by the court halts the enforcement of the new reporting requirements in all affected ZIP codes within San Diego and Imperial counties for up to 28 days.
This court decision provides a momentary reprieve for Gomez and her customers, allowing for business operations without the intrusive data collection previously mandated. “I’m grateful,” expressed Gomez. “My clients can visit my store without the fear of privacy invasion.”
The next hearing in this case is scheduled for May 15, where the judge will consider extending the temporary relief through a preliminary injunction while the lawsuit progresses through the judicial system.
As this legal battle unfolds, it is a reminder of the delicate balance between regulatory efforts to combat crime and the fundamental rights afforded to individuals and businesses.
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