Border Businesses Sound Alarm Over Draconian Money Transfer Regulations

Last month, the federal government introduced a new regulation requiring money service businesses in 30 ZIP codes across the Southwest to report any transactions exceeding $200 to federal authorities. This initiative, according to the Financial Crimes Enforcement Network (FinCEN), aims to combat money laundering and other financial operations linked to Mexican drug cartels.

However, a small money transfer company in San Diego has filed a lawsuit against this mandate, arguing that the rule imposes burdensome paperwork and mandates customer surveillance without any concrete evidence of wrongdoing. Esperanza Gomez Escobar, owner of Novedades y Servicios, expressed concerns about privacy, stating, “Esperanza wants to keep her private life private. She has a right as an American to her privacy.”

Gomez Escobar explains her business serves the local community by facilitating legal transactions, such as cashing payroll checks and sending money to family members. Previously, establishments like hers were only required to gather customer information for transactions over $3,000 and report cash dealings above $10,000 using a Currency Transaction Report.

With the new rules, Gomez Escobar fears operational viability. Her typical customer transactions range from $300 to $450, and completing the required reports can take about 24 minutes each. This could necessitate hiring additional staff, which poses a significant financial challenge for her small business.

Among the 30 designated ZIP codes, 19 are located in Texas and 11 in California, impacting around 1.2 million residents. Critics argue that the rule’s geographical limitations are impractical. Robert Johnson from the Institute for Justice noted that criminals could easily circumvent the regulations by traveling to nearby areas not subject to the same scrutiny.

“Burying legitimate businesses in mountains of paperwork isn’t a legitimate way to fight crime,” stated Betsy Sanz, another attorney representing Gomez Escobar. She emphasized that collecting vast amounts of data from innocent citizens is unwarranted, especially absent any suspicion of illegal activity.

The lawsuit contends that the order infringes on the Fourth Amendment by acting as a general warrant, which is unconstitutional without an individualized suspicion or probable cause. Johnson reiterated, “If the government wants to investigate a crime, they have to get a warrant. They haven’t stated probable cause, which violates the Fourth Amendment.”

Gomez Escobar also argues the rule conflicts with the Fifth Amendment by coercing businesses into acting as government agents in gathering customer information. Furthermore, she claims the order undermines the Constitution’s nondelegation doctrine, which restricts policy-making powers to the legislature rather than to executive agencies.

As an American citizen, Gomez Escobar uses her business to send money to family in Mexico, yet now feels threatened both as a business owner and as an individual. She fears being falsely implicated in criminal activities. “Esperanza also fears that the government will make a mistake and come after her with no basis,” she wrote.

Representatives from FinCEN have yet to respond to inquiries regarding the lawsuit.