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In an effort to combat illicit finance activity on the US-Mexico border, the Financial Crimes Enforcement Network (FinCEN) has significantly tightened its cash reporting requirements for covered businesses in Texas and California.
On Tuesday (March 11), FinCEN issued a new Geographic Targeting Order (GTO) that covers money service businesses (MSBs) based in 30 ZIP codes across the two states.
Effective 30 days from the order, these MSBs will need to report all cash transactions of more than $200 to FinCEN.
These reports, known as currency transaction reports (CTRs), must be filed within 15 days of the date of the transaction.
In addition, before executing covered transactions, MSBs are required to verify the identity of the customer presenting the transaction.
For US residents, a name, address, account number (for example, a credit card number), social security or taxpayer identification number must be listed within the CTR.
For non-US residents, verification must be made via a passport, alien identification card or another official document evidencing the customer’s nationality and home address (such as a driver’s licence).
Further, when filing CTRs under the GTO, MSBs must include this identifying information in full.
FinCEN emphasises that generic entries of “known customer” or “bank signature card on file” will not be accepted.
Cash-in-transit employees are exempted from the identity verification requirements, while a full exemption is made for covered transactions between MSBs and commercial banks.
MSBs must retain reports of all covered transactions for a period of five years from the date of the order, and must make such records accessible to FinCEN, or any other regulator or law enforcement agency, upon request.
A drastic change in cash reporting requirements
The GTO will significantly lower the existing threshold above which MSBs are required to file CTRs.
At present, under the Bank Secrecy Act (BSA), all financial institutions are required to file a CTR when a customer makes a cash transaction (or series of transactions) of more than $10,000.
This requirement must be upheld regardless of the purpose or perceived legality of the transaction.
If a customer makes a cash transaction of more than $5,000, and the financial institution believes it to be suspicious, the financial institution must file a suspicious activity report (SAR) to FinCEN.
For MSBs, such as foreign exchange and remittance operators, the existing SARs requirements are even more stringent.
If a customer makes a cash transaction of more than $2,000, and the MSB believes it to be suspicious, the MSB must file a SAR on the transaction to FinCEN.
In the Texas and California GTO, FinCEN also encourages covered MSBs to “voluntarily” file SARs in relation to any cash transaction of more than $200 that appears suspicious.
Legal basis
The GTO was personally authorised by Treasury Secretary Scott Bessent, who is permitted to issue additional reporting requirements to achieve the aims of the BSA.
“Today’s issuance of this GTO underscores our deep concern with the significant risk to the US financial system of the cartels, drug traffickers and other criminal actors along the Southwest border,” said Bessent.
“As part of a whole-of-government approach to combatting the threat, Treasury remains focused on leveraging all our available tools and authorities to better identify and counter these criminal activities.”
The secretary may issue such orders on his own initiative, or at the request of an appropriate federal or state law enforcement official.
Combating drug cartels and stopping the flow of illegal drugs into the US is one of the Trump administration’s highest priorities, said FinCEN.
In January, President Trump issued an executive order creating a process by which certain cartels can be designated as Foreign Terrorist Organizations (FTOs) and/or Specially Designated Global Terrorists (SDGTs).
In February, the Treasury and State Department designated eight organisations, including six major Mexico-based drug cartels, as FTOs and SDGTs.
These designations will allow the US to take further steps to deny individuals and entities associated with these groups access to the US financial system.
