Digital banking startup Mercury has halted services for customers in specific countries, including Ukraine. The decision follows federal scrutiny linked to one of its partners, Choice Bank, over concerns about allowing foreign companies to open accounts.
The Federal Deposit Insurance Corporation (FDIC) raised alarms about Choice opening Mercury accounts in legally risky countries and criticized the methods used by overseas Mercury customers to establish a U.S. presence.
In response to these issues, Mercury has updated its eligibility requirements, notifying certain customers that it can no longer support them due to their provided addresses or frequent account activity locations. Countries affected include North Korea, Iran, Libya, Russia, and now Ukraine, which previously had a growing startup community.
The policy change affects founders living in Ukraine but not those living in the U.S. with a Ukrainian passport. Mercury initially stated it would ban founders with Ukrainian passports but later revised this as an error. The company explained that supporting Ukraine had become too complex due to U.S. sanctions programs.
The Federal Deposit Insurance Corporation (FDIC) stated that fintechs like Mercury do not fall under its direct jurisdiction, providing no comment on whether its guidance on Ukraine had changed.
Mercury’s decision stems from the complexities of managing compliance amid U.S. sanctions on certain Ukrainian regions. The company plans to revisit the policy in the future.
This issue is not unique to Ukraine. Mercury has also stopped serving customers in Croatia and Nigeria, affecting Nigerian founders living in the U.S. Mercury’s decision to include these countries follows their placement on the Financial Action Task Force (FATF) “grey list,” indicating they require extra scrutiny due to issues in countering money laundering and terrorist financing.
African fintechs like Raenest, Verto, and Leatherback, which provide U.S. accounts to businesses, are expected to accommodate some of the affected customers. Raenest co-founder Richard Oyome highlighted that their services had considered African markets from the outset, unlike Mercury.
Additionally, competitor Brex offers support to Ukrainian founders affected by the policy change, providing incentives for opening business accounts with them.
