Many African startups were recently left stranded when US bank Mercury announced it would be closing accounts in 13 African countries. While Mercury cited internal changes in account eligibility, the move also comes amid increased scrutiny from US regulators on Anti-Money Laundering (AML) compliance for fintech startups, especially those operating in multiple markets.
Why is Mercury Closing Accounts?
Mercury’s decision is part of a broader trend among financial institutions, both traditional and digital, to reduce their risk appetite, particularly in regions perceived as high-risk.
Speaking to Tech Crunch, a Mercury spokesperson said, “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 the frequent location of account activity (via IP addresses)”.
Though Mercury cites changes in its account eligibility process as the reason for the closures, this article by TechCabal suggests other factors may be at play, including Stricter KYC Scrutiny by Partner Banks and FATF Greylisting. Many of the affected countries are on the Financial Action Task Force (FATF) Greylist, which indicates deficiencies in their anti-money laundering and counter-terrorism financing regulations.
A fintech partnerships expert, Benjamin Dada told Tech Crunch that the decision reflects a broader trend of risk aversion among financial institutions, particularly in light of regulatory scrutiny. He stated, “A customer from Nigeria is not on the same level as a customer from Iran or North Korea, risk-wise.”
What Does This Mean for African Startups?
According to The Big Deal report, Investor funding in Africa crossed the 1 billion dollar mark in July 2024. Most startups prefer to keep their money in dollar accounts to beat local inflation, manage operational costs and pay international employees.
Many founders have expressed their frustration with the incident. One of them, Angel Idisuyi, cofounder of Fintech Creditcliq, shared on social media, that Mercury closed her company accounts even though she lives in the US and her cofounder is a Canadian resident, leaving them with little time to look for alternatives.
While the situation is challenging, it’s important to understand the importance of AML and compliance regulations. These regulations protect financial institutions and legitimate businesses from being used for illegal activities such as money laundering and terrorist financing.
African startups will need to implement stricter customer onboarding processes to verify user identities and closely monitor transactions, especially large or unusual transfers, taking swift action to close accounts deemed high-risk or non-compliant.
How We Can Help
While the closure of Mercury accounts is undoubtedly a setback, it also presents an opportunity for African fintechs to innovate and build a more reputable financial ecosystem that complies with international best practices.
This is why we offer our suite of services designed to help financial services providers stay compliant. They include:
- Comprehensive KYC/AML solutions to help you verify your customers’ identities and mitigate risks associated with money laundering and terrorist financing in 193 countries.
- Transaction Monitoring & Risk Scoring to identify suspicious activity in real-time with our advanced AI-powered tools.
- Compliance Reporting & Support to help you stay up-to-date on regulations and generate the necessary compliance reports.
- Seamless integration with your existing systems for a smooth and efficient workflow.
Don’t wait until your account is flagged or closed. Contact us today. We’ll help you set AML/compliance practices from the start for smooth operations, investor confidence, and business growth.
Click the link below to book a call.
