Digital Banking Startups Mercury no longer provides services to customers in some countries, including Ukraine, the company confirmed to TechCrunch.

Mercury made headlines earlier this year when he was involved in federal control through one of its partners, Choice Bank, on 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 allowing overseas Mercury customers to “open thousands of accounts using questionable methods to demonstrate they had a presence in the United States.”

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,” a Mercury spokesperson told TechCrunch on Monday that it recently updated its eligibility requirements and notified some customers that it could no longer “support them due to the address(es) provided or locations where we have seen frequent account activity.”

Some of those countries on the list of those who will not support are not surprising: North Korea, Iran, Libya, Russia. (A full list can be found Here.) But now the list also includes Ukraine, a country that was known for its strong and growing startup communityespecially before the Russian invasion.

Mercury said its policy change applies only to founders living in the country, not to founders living in the U.S. with a Ukrainian passport, responding to an earlier report by the Ukrainian founder Alyona Mysko, CEO and founder of Fuelfinance. Mysko Posted on LinkedIn On Monday Mercury closed his company’s bank account “because I have a Ukrainian passport!”

A Mercury spokesperson said the company supports and continues to support founders with Ukrainian passports residing in the United States, but has changed its policy to no longer support “companies with founders residing in Ukraine.”

But the spokesperson also admitted to TechCrunch that he had initially said he was banning founders with Ukrainian passports and later revised his decision, calling it a “mistake.”

“We made a mistake in our Help Center article, incorrectly stating that we couldn’t support founders with a Ukrainian passport,” the spokesperson told TechCrunch.

Mysko told TechCrunch that she has written to Mercury CEO Immad Akhund via LinkedIn and email, asking him to explain the situation. Mysko said she is now concerned that the situation is not limited to Mercury and is emblematic of “a problem in the entire banking system where banks do not distinguish Ukraine from Russia.”

The FDIC told TechCrunch that fintech companies like Mercury are not under its direct jurisdiction, but did not respond to our questions about any changes in its guidance on Ukraine.

Mercury Explains Why It Banned Ukraine

Mercury explained its decision to include Ukraine on the list of banned countries by saying that it had become “too complex” to support the country, given that current US sanctions programs.

“While Ukraine is not fully sanctioned, several regions of Ukraine are sanctioned. We have previously operated a region-based model to support as many customers in Ukraine as possible; however, supporting this policy while maintaining our rigorous compliance standards has become increasingly complex,” a Mercury spokesperson said, promising to “review” the policy in the future.

When asked what Fuelfinance was doing for a bank account, Mysko said the company got a second bank account at Chase after Silicon Valley Bank declined in March 2023.

He also referred to a similar case post X from Ukraine-based Lemon.io CEO Aleksandr Volodarsky on Monday who referenced Mercury, saying, “As a founder, you will eat sh*t all the time,” he wrote. “Today on my menu is @mercury throwing customers under the bus. From founder to founder, @I’m crazyThanks buddy, that’s tasty stuff.”

Mysko said she received a response from Mercury, but the startup will not reinstate her company as a customer. Mercury co-founder Jason Zhang also responded to her via email, which she Posted on LinkedInand said he agrees that this situation is unfair for founders in Ukraine; however, “it is a sad reality that we cannot support founders in Ukraine at this time.”

He went on to say that the company does not put Ukraine “in the same category as Russia.” He also said that in Mercury’s compliance and risk management and U.S. sanctions against regions of Ukraine, “there are commonalities in the controls and systems that we have to put in place.”

Nigerian founders in the US have also been affected

Ukraine is not the only country affected. Mercury also included Croatia and Nigeria in its list.

Two Nigerian founders living in the US recounted 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 US. It’s unclear whether Mercury is using passports, rather than local addresses, to make these decisions. In an updated policy, Mercury said, “If you are domiciled outside of one of these countries, please contact support@mercury.com for assistance in opening your account.”

For the founders in Nigeria, this is not their first rodeo with Mercury. In 2022, Mercury limited almost 30 accounts connected to tech startups in Nigeria and other African countries, most of which had already been through US-based accelerators, including Y Combinator and Techstars.

Nigeria and some countries on the Mercury list, including Croatia, are present The “grey list” of the Financial Action Task Force (FATF) which means they are subject to additional controls due to deficiencies in their anti-money laundering, counter-terrorism financing and proliferation financing regimes.

Regarding the recent development, Benjamin Dada, a fintech partnership expert from Nigeria, told TechCrunch, “But a client from Nigeria is not at the same level as a client from Iran or North Korea, in terms of risk. Because they failed to put in place the right compliance infrastructure that makes their banking partners and the partner bank regulators comfortable, they are having to do a mass pruning of their client base to demonstrate that they are now more conservative in onboarding clients.”

African fintechs, including Raenest, Verto and Leatherback, which provide US accounts to businesses, will look to seize this opportunity and acquire some of the interested customers.

“This is not the first time that African companies have been threatened with disruption by companies like Mercury and Wise. For us, Africa was on the table from the beginning, from partnership to compliance, and it was not put at the end of the conversation,” Raenest co-founder Richard Oyome told TechCrunch.

Geek Ventures Managing Partner Ihar Mahaniok posted on Xadvising founders with Mercury accounts to open another account just in case. And to founders in general, “We don’t recommend opening an account with Mercury; they have proven to not be a reliable bank. Fortunately, there are much better options out there.”

Mercury responded to Mahaniok’s post with the same statement sent to TechCrunch regarding why it changed its policy towards Ukraine.

Additional information is provided by Rebecca Szkutak.

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