Inside Mercury’s Stumble From Fintech Hero to Target of the Feds
Mercury rocketed to fame after Silicon Valley Bank’s implosion as a founder-friendly fintech for storing cash. But a rare look inside a meeting with regulators shows their growing concerns with its practices.
The meeting last July between officials from the Federal Deposit Insurance Corp. and executives from Choice Financial Group was tense.
For most of the two-and-a-half hour session, the FDIC officials delivered the results of the agency’s recent examination of Choice, a once sleepy bank based in Fargo, N.D., for possible violations of anti–money-laundering and counterterrorism financing regulations, according to records of the meeting. Their findings weren’t pretty. The FDIC was particularly concerned about one of Choice’s partners: Mercury, a San Francisco–based fintech backed by Andreessen Horowitz, Coatue Management and Sapphire Ventures that relies heavily on Choice and other established banks to power deposits and other transactions for Mercury customers.
The officials told Choice executives they were concerned that the bank had opened Mercury accounts in legally risky countries such as Russia, Pakistan and Myanmar and had facilitated suspicious wire transfers between Saudi Arabian businesses. They scolded Choice for allowing overseas Mercury customers to open thousands of accounts using questionable methods to prove they had a presence in the U.S. And they were peeved that Choice hadn’t vetted a compliance system Mercury was using, which the agency said was flagging a curiously low number of suspicious transactions.
“You can’t let any fintech run the show,” one of the FDIC examiners told the Choice executives.