Dear John,

This week we had a major argument at a federal appellate court in one of our cases against a federal agency’s massively expanded, warrantless financial surveillance—and I’m excited to report the optimism we feel coming out of the court room!  

As you may recall, we are fighting alongside Esperanza Gomez, Arnoldo Gonzalez, Jr., and other small business owners who are swept up in the Financial Crimes Enforcement Network (FinCEN) thanks to a new federal order from the current administration targeting money services businesses with intrusive financial surveillance.   

Financial businesses of all kinds have long been required to report cash transactions over $10,000 to the federal government, including sensitive customer information like Social Security numbers. But in April, FinCEN lowered the threshold to only $200 for money services businesses near the Southern border. Larger financial institutions, like banks, have the manpower to meet these demands, but small mom-and-pop businesses, like Esperanza's and Arnoldo’s, are unable to keep up. Nearly everyone who cashed a check, exchanged dollars, or bought a money order to pay their rent would get caught in a warrantless financial surveillance dragnet—leaving small business owners drowning in hours of paperwork each day. And for a one-person operation, there are not enough hours in a day to fill out all the necessary paperwork.  

Esperanza Gomez's money services business is one of hundreds threatened by a warrantless financial surveillance scheme.

IJ quickly sued the feds in multiple jurisdictions, securing court orders in all three of our cases to stop this order going into effect and save our clients’ businesses. In response, the federal government tried to get our lawsuits thrown out by raising the threshold to $1,000—while also surveilling even more businesses.   

The onerous reporting rules at first applied only to a Swiss-cheese map of targeted zip codes. Following our initial victories, FinCEN expanded the regulation to include vast swaths of some border states, insisting it can change requirements on a whim and without any justification. FinCEN has never provided evidence that any version of its ever-changing rules has a legitimate connection to fighting crime.    

The Constitution doesn’t allow limitless surveillance with no suspicion of wrongdoing, and this week, a three-judge panel at the 5th Circuit seemed to agree. The judges were incredulous with the government’s arguments, asking why, for example, FinCEN couldn’t require reports for all transactions over $1. There was even outright laughter toward the government (something every attorney dreads to hear from a bench).

IJ is not afraid to go toe-to-toe with any level of government or any administration to protect the Fourth Amendment rights of hardworking small business owners and their customers. We feel confident that the 5th Circuit will not let FinCEN get away with their unconstitutional conduct. Yet regardless of the outcome, we are prepared to fight on for our clients and the hundreds of other small businesses affected by the government’s ridiculous surveillance scheme.   

The court will likely issue a decision in the next few months. Meanwhile, we are pressing forward in our other two cases challenging FinCEN’s outrageous behavior. I look forward to keeping you updated.

Scott

Scott G. Bullock
President and Chief Counsel
Institute for Justice