In a shocking turn of events, digital bank Mercury has announced plans to close the accounts of startups in 13 African countries, leaving many businesses scrambling to find alternatives before the deadline of August 22, 2024. This move, driven by internal compliance changes, has sparked a wave of uncertainty and concern among Africa’s thriving entrepreneurial ecosystem.
This article will cover what it means, who is affected and how to navigate this.
The origin
In 2022, Mercury restricted some accounts of over a dozen tech startups flagging them for unusual activity. In February 2023, Nigeria and South Africa were added to the Grey list of the Financial Action Task Force (FATF). The Grey List is a list of Jurisdictions under Increased Monitoring and required to develop effective AML/CFT/P procedures and regulations. Jurisdictions on this list are to ensure they meet the criteria to avoid being put on the Blacklist which are High-Risk Jurisdictions subject to a Call for Action.
This recent announcement by Mercury has been cited to be from an inability to “support accounts for businesses with associated addresses located in these countries”.
This then leaves Early stage startups with Mercury bank accounts scrambling as the deadline is only a month away.
Who it affects
This account closure by Mercury affects US Incorporated Startups with addresses associated with any of the following countries – Nigeria, , DR Congo, Burundi, Mozambique, Central African Rep, Congo, Sudan, Liberia, Cameroon, Mali,, Somalia, Zimbabwe and South Sudan.
Getting off the GreyList
To get off the GreyList, there are specific criteria for affected countries to abide by. This criteria are to ensure that anti-money laundering, terrorist financing, and proliferation financing laws are not just established but upheld to the letter.
In other words, the FATF is trying to ensure that countries are not spending money sponsoring terrorism, money laundering, etc. In Nigeria, for instance, there are 9 listed criteria for getting off the grey list and some of them are:
- complete its residual ML/TF risk assessment and update its national AML/CFT/P strategy to ensure alignment with other national strategies relevant to high-risk predicate offences;
- enhance formal and informal international cooperation in line with ML/TF risks;
- improve AML/CFT/P risk-based supervision of financial institutions (“FIs”) and DNFBPs and enhance implementation of preventive measures for high-risk sectors;
- ensure that competent authorities have timely access to accurate and upto-date beneficial ownership information on legal persons and applying sanctions for breaches of beneficial ownership obligations;
For the full list of the criteria, see here
The way forward…
The closure of Mercury Bank accounts in these 13 African countries is a stark reminder of the importance of maintaining robust compliance measures. AutoComply by Norebase understands the unique challenges that African businesses face, and we are committed to empowering them to navigate these complex regulatory landscapes, while ensuring a more compliant future (read: no grey list), for African countries.
We do this by offering a comprehensive suite of tools and services that help businesses ensure compliance with local and international regulations, mitigating the risk of account closures and other regulatory issues. In Nigeria for one, AutoComply’s features allow financial institutions to track and file AML/CTF reports with the NFIU across multiple companies with built-in proof of filing receipts.
AutoComply is more than just a compliance tool; it’s a strategic partner for African startups.
Alternative Bank accounts
We partnered with Raenest, a FinTech banking partner that lets companies create US Bank accounts within Africa. This partnership allows African startups to access Raenest’s suite of banking services, including the ability to open US bank accounts with greater ease and speed.
The closure of Mercury Bank accounts is a wake-up call for African startups to prioritize compliance and with solutions like AutoComply, we’re confident that businesses across the continent can navigate these challenges and emerge stronger than ever.
