Australian foreign exchange firm blocks wages to workers in Ukraine

Australian foreign exchange platform OFX has come under fire for abruptly cutting off payments to Ukraine, putting a barrier in front of foreign start-ups paying wages to their staff in the country when they need cash most.

Brad McEvoy, co-founder of loyalty program start-up Kademi, said he was furious at OFX, which was formerly known as OzForex, for blocking payments to his Ukrainian workers when some had been forced to flee their homes.

“You expect a level of integrity, don’t you, from Australian companies, and they have done the exact opposite,” Mr McEvoy said.

The international community has worked in lockstep to introduce some of the most punitive sanctions in history to hobble the Russian economy following the country’s invasion of Ukraine. Focussed on people and companies involved in the war, the sanctions have made the payments environment more complex.

The Australian government has also applied sanctions to regions of Ukraine controlled by Russia and its proxies including Donetsk and Luhansk in the country’s east.

In emails seen by The Sydney Morning Herald and The Age, ASX-listed OFX’s Australia and New Zealand head Michael Judge offered his sympathies to people living through the crisis but confirmed OFX was blocking payments to non-sanctioned areas of Ukraine.

“OFX reasonably expects the number and complexity of sanctions related to Ukrainian destined payments to grow,” Mr Judge wrote last week. Some of its banks had blocked payments into Ukraine too, he said. “The decision [to suspend payments] is temporary, one linked to the heightened level of risk we believe OFX and its clients currently face should any sanctions inadvertently be contravened.”

Kademi, which is based in New Zealand, has several workers in Ukraine, who it had been paying through OFX for years before being barred last week. Mr McEvoy has since paid the staff via another provider, Wise, and other start-ups confirmed their payment services were still operating.

One of Mr McEvoy’s workers has had to flee his home in Kyiv, the capital that is increasingly encircled by Russian forces, sending his family to Poland while staying in Lviv in Ukraine’s west. Another has armed himself and had his younger daughter sheltering in the bathtub to protect her from any bombardments.

A number of OFX customers have posted complaints about payments being blocked to Ukraine on social media. “I just found out that in the time of great need Ukrainian people are being denied any support by your company. I am appalled by the decision [OFX] made not to allow money transfer to Ukraine!” said one customer.

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OFX relies on a network of banking partners to clear its payments for customers around the world. The company said its banking partners in Ukraine had suspended trading in the local currency and other global partners had struggled to get currencies, including US dollars, into the country.

“In this unstable and complex set of conditions, OFX has made the difficult decision to temporarily suspend all payments to Ukraine and Russia until we can be confident that we can process money transfer requests end-to-end into the region,” a company spokeswoman said.

“We will resume service once the integrity and safety of operations through our banking partners are assured and in line with regulation.”

Last week the Australian software giant Atlassian came under fire for issuing a tepid public response to Russia’s invasion of Ukraine, but later adopted a more muscular stance and declared it would strip entities linked to President Vladimir Putin’s war of their licenses.

Former corporate regulator turned consultant Alex Erskine said financial firms had been criticised in the past for making economic decisions to issue simple blanket bans on countries rather than doing risk assessments to comply with sanctions.

However, Mr Erskine said relying on Ukrainian banks would create problems for OFX as the conflict in the country escalates, adding it was impossible to predict how long the payments ban would continue. “If Ukraine is totally overrun by Russia and the Russians become, in effect, in control of the banking system, it might be until the west lifts sanctions on Russia. It’s just all lost in the fog of war at the moment.“

Mr Erskine said economic sanctions had increased the regulatory risk for financial firms operating in the region which may have “unintended consequences” for Ukrainians.

“It’s an unfortunate consequence if it’s good honest Ukrainians who now can’t get their funds. But once you start playing with surrogate capital controls, lots of people are going to get hurt.”