Fintech innovator Mercury has ceased operations for clients in specific nations, including Ukraine, as confirmed by the company to TechCrunch.
Earlier in the year, Mercury found itself in the spotlight due to regulatory scrutiny faced by Choice Bank, one of its partners. The controversy centered on the bank’s facilitation for international businesses to establish accounts.
“Concerns” were raised by the FDIC over Choice Bank’s decision to open Mercury accounts for entities in countries deemed legally precarious, according to The Information. The report also detailed criticisms towards the bank’s practices of verifying overseas Mercury clients’ U.S. presence.
In response to the federal scrutiny and as a step towards enhancing compliance, Mercury advised TechCrunch in April about its intentions to strengthen its risk and compliance segments. A Mercury representative mentioned on Monday that the firm has refined its eligibility criteria, informing some clients their support would be withdrawn due to the addresses they provided or from where significant account activity was detected.
Among the unsupported countries, names like North Korea, Iran, Libya, and Russia appear unsurprisingly. (A comprehensive list is available here.) Unexpectedly, Ukraine has also been listed, a nation previously celebrated for its dynamic and enlarging startup ecosystem, especially before the Russian invasion.
Mercury clarified that its revised policy affects entrepreneurs residing within Ukraine, excluding those in the U.S. possessing a Ukrainian passport. This clarification came after a public concern raised by Ukrainian entrepreneur Alyona Mysko, CEO and founder of Fuelfinance, who disclosed on LinkedIn about the closure of her company’s account.
The spokesperson affirmed that while Mercury supports U.S.-based founders with Ukrainian passports, it now restricts service to “companies with founders located in Ukraine.”
However, it was admitted to TechCrunch by the spokesperson that an “error” was initially made in messaging, implying a complete ban on Ukrainian passport holders, which was later corrected.
“An incorrect statement was made in our help center, suggesting we couldn’t support founders with a Ukrainian passport,” clarified the spokesperson to TechCrunch.
Mysko informed TechCrunch of her outreach to Mercury’s CEO Immad Akhund for clarifications. She expressed concerns that this issue might reflect a broader systemic problem in banking discriminating against Ukrainian entities in light of Russian involvement.
The FDIC mentioned to TechCrunch that while fintech firms like Mercury fall outside its direct regulatory periphery, no further comments were made regarding Ukraine-specific advisories.
Justification Behind Mercury’s Exclusion of Ukraine
Mercury attributes its decision to exclude Ukraine from its services to the “complex” nature of supporting the country amidst current sanctions by the U.S., despite not all regions being comprehensively sanctioned.
“Prior attempts were made to employ a region-based approach to support as many Ukrainian clients as feasible; nevertheless, adhering to our strict compliance requirements while maintaining this model has grown increasingly difficult,” a Mercury spokesperson explained, also indicating a future policy reassessment.
Following the decline of Silicon Valley Bank in March 2023, Mysko revealed that Fuelfinance secured a new banking partnership with Chase.
Further, Lemon.io CEO Aleksandr Volodarsky and others have shared their frustrations publicly, signaling widespread dissatisfaction among founders affected by Mercury’s policy changes. Mercury has conveyed its stance on these matters, emphasizing continuous evaluation.
In addition U.S.-based Nigerian founders have also experienced comparable challenges with Mercury. After facing restrictions in 2022, Mercury has now cast a wider net including Croatia and Nigeria among others, citing “grey list” classifications by the Financial Action Task Force (FATF).
The ongoing scenario presents an opportunity for African fintechs, such as Raenest, Verto, and Leatherback, aiming to cater to businesses seeking U.S. banking alternatives amidst these developments.
Experts and entrepreneurs alike have criticized Mercury’s approach, cautioning against the reliability of the bank and pointing towards alternative banking solutions.
Compiled with additional insights by Rebecca Szkutak.
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