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Digital banking startup Mercury abruptly shuttered service for startups in Ukraine, Nigeria, other countries
Reading Time: 3 minutesMercury made headlines earlier this year when it was caught up in federal scrutiny through one of its partners, Choice Bank, around the practice of allowing foreign companies to open accounts.
The FDIC was ‘concerned’ that Choice ‘had opened Mercury accounts in legally risky countries,’ the Information reported. Officials also reportedly chastised Choice for letting overseas Mercury customers ‘open thousands of accounts using questionable methods to prove they had a presence in the U.S.’
Some of those countries on the will-not-support list are not surprising: North Korea, Iran, Libya, Russia. (A full list can be found here.) But Ukraine is also now on the list, a country that was known for its robust-and-growing startup community, particularly before Russia invaded.
Mercury said its change in policy only applies to founders living in the country, not founders living in the U.S. with a Ukrainian passport, responding to an earlier report by Ukrainian founder Alyona Mysko, CEO and founder of Fuelfinance. Mysko posted on LinkedIn on Monday that Mercury closed her company’s bank account ‘because I hold a Ukrainian passport!’
A Mercury spokesperson said that it does, and continues to, support founders with Ukrainian passports located in the United States but changed its policy to no longer support ‘companies with founders located in Ukraine.’
Mercury explains why it banned Ukraine
Mercury explained its decision to include Ukraine in its list of banned countries by saying it has become ‘too complex’ to support the country, given current U.S. sanctions programs.
‘While Ukraine is not comprehensively sanctioned, several regions of Ukraine are sanctioned. We previously applied a region-based model to support as many customers in Ukraine as possible; however supporting this policy while also upholding our rigorous standards on compliance has become increasingly complex,’ a Mercury spokesperson said, and promised to ‘revisit’ the policy in the future.
When asked what Fuelfinance was doing for a bank account, Mysko said the company secured a second bank account at Chase following the decline of Silicon Valley Bank in March 2023.
She also referred to a similar X post by Ukraine-based Lemon.io CEO Aleksandr Volodarsky from Monday that referenced Mercury, saying, ‘As a founder, you are going to eat s*** all the time,’ he wrote. ‘Today on my menu is @mercury throwing customers under the bus. As a founder to founder, @immad, thanks, dude, that’s some tasty s***.’
Mysko said she received a response from Mercury, but the startup is not going to reinstate her company as a customer. Mercury co-founder Jason Zhang also responded to her via email, which she posted on LinkedIn, and said he agreed how unfair this situation is to founders in Ukraine; however, ‘it’s an unfortunate reality that we can’t support founders located in Ukraine right now.’
He went on to say that the company doesn’t put Ukraine ‘in the same category as Russia.’ He also said that in managing Mercury’s compliance and risk, and the U.S. sanctions against regions of Ukraine, ‘there are commonalities in the controls and systems we have to put in place.’
Nigerian founders in the U.S. were also impacted
Ukraine is not the only country impacted. Mercury has also included Croatia and Nigeria on its list.
For the founders in Nigeria, this isn’t their first rodeo with Mercury. In 2022, Mercury restricted almost 30 accounts linked to tech startups in Nigeria and other African countries, most of which had already gone through U.S.-based accelerators, including Y Combinator and Techstars.
Nigeria and some affected countries on Mercury’s list, including Croatia, are on the Financial Action Task Force (FATF) ‘grey list,’ which means they’re subject to additional scrutiny because of deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing.
African fintechs, including Raenest, Verto and Leatherback, that provide U.S. accounts to businesses will look to seize this opportunity and take in some of the affected customers.
Geek Ventures managing partner Ihar Mahaniok also posted on X, advising founders with Mercury accounts to open another account just in case. And to founders in general, ‘We do not recommend opening an account in Mercury; they have proven they are not a reliable bank. Thankfully, there are plenty of better options around.’
Additional reporting by Rebecca Szkutak.
Reference: https://techcrunch.com/2024/07/23/mercury-bank-fintech-sanctions-ukraine-nigeria/
Ref: techcrunch
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