Digital banking startup Mercury said it’s no longer serving U.S.-domiciled customers with business and residential addresses from certain countries, including Ukraine, the company confirmed to TechCrunch. The company later revised the terms, saying the information in its help pages that said its banning founders with Ukrainian passports was an “error.”
“The accounts being offboarded were identified based on business and residential addresses given to us during onboarding and regular KYC/KYB refreshes, as well as frequent location of account activity (via IP addresses),” a Mercury spokesperson told TechCrunch.
Mercury 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.”
Mercury told TechCrunch in April that it was investing in its risk and compliance teams. In an apparent response to that federal scrutiny and as part of the company’s “ongoing commitment to compliance,” the spokesperson said Monday that it recently updated its eligibility requirements and notified certain customers that it could “no longer support them due to either the address(es) they provided or the locations where we recorded frequent account activity.”
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.”
But the spokesperson also admitted to TechCrunch that it did, initially, say that it was banning founders with Ukrainian passports and later revised that, calling it an “error.”
“We made an error in our help center article which incorrectly said we could not support founders with a Ukrainian passport,” the spokesperson told TechCrunch.
Mysko told TechCrunch that she wrote to Mercury CEO Immad Akhund via LinkedIn and email, asking him to explain the situation. Mysko said she’s now concerned that this situation is not restricted to just Mercury and is worried that it’s emblematic of “a problem in the whole banking system where banks don’t differentiate Ukraine from Russia.”
The FDIC told TechCrunch that fintechs like Mercury are not under its direct jurisdiction but did not answer our questions on whether its guidance on Ukraine had changed.
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.
Two Nigerian founders living in the U.S. narrated similar experiences to TechCrunch. According to the founders, who asked not to be named, Mercury will close their accounts in the next 30 days despite their startups being domiciled in the U.S.
It was initially unclear if Mercury is using passports, rather than local addresses, in making such decisions, however, the company has since provided comment that “Passports were not considered in these offboarding decisions.”
In an updated policy, Mercury said, “If you are domiciled outside of one of these countries, please reach out to [email protected] for assistance in opening your account.”
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.
Regarding the recent development, Benjamin Dada, a fintech partnerships expert from Nigeria, told TechCrunch: “But a customer from Nigeria is not on the same level as a customer from Iran or North Korea, risk-wise. Because they’ve failed to put in place the right compliance infrastructure which gets their banking partners, and the partner bank’s regulators comfortable, they are having to do a bulk pruning of their customer base to show that they are now more conservative in customer onboarding.”
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.
“This isn’t the first time African businesses have been threatened with service disruption by the likes of Mercury, Wise. For us, Africa was on the table from the get-go from partnership to compliance, and not slotted in at the end of the conversation,” Raenest co-founder Richard Oyome told TechCrunch.
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.”
Mercury responded to Mahaniok’s post with the same statement it sent TechCrunch about why it has changed its policy regarding Ukraine.
Meanwhile, Mercury competitor Brex is helping venture-backed Ukrainian founders who lost their accounts. Account holders get a 50,000-point sign-up bonus after depositing $500,000 into a Brex business account and an additional 25,000-point sign-up bonus after spending $10,000 via their Brex card.
Additional reporting by Rebecca Szkutak.
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Updated to include information on Brex and additional comment from Mercury.
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