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UK financial regulators have fined Wise’s chief executive Kristo Käärmann £350,000 for breaching conduct rules and failing to notify them of “significant tax issues”, but have cleared him to continue in his job.
The Financial Conduct Authority launched an investigation into Käärmann’s conduct after he was fined by tax authorities in 2021 over a deliberate tax default.
The regulator said on Monday that Käärmann had “failed to appropriately consider the significance of the tax issues and notify the FCA, despite being aware of them for over seven months”.
The fine concludes the probe into Wise, which has become one of the UK’s biggest fintechs, and listed in London in 2021. Shares fell about 2 per cent in morning trading on Monday.
Käärmann’s default related to an outstanding tax bill of £720,495 linked to capital gain on a $10mn share disposal in 2017. He failed to disclose the share disposal to HM Revenue & Customs and pay the tax liability on time, leading to an HMRC fine of £365,651.
Financial regulators subsequently launched a probe into Käärmann’s disclosure of the fine. The FCA investigated because Käärmann’s status as an “approved person” means the regulator must deem him “fit and proper” to do his job.
In its final notice, the FCA said Käärmann had explained during the probe that he “did not believe that he needed to inform [the authority] of the tax issues because his dealings with [HMRC] were in his view a personal matter” and therefore “not relevant” to his fitness and propriety.
“We, and the public, expect high standards from leaders of financial firms, including being frank and open,” said Therese Chambers, the FCA’s joint executive director of enforcement and oversight.
“It should have been obvious to Mr Käärmann that he needed to tell us about these issues which were highly relevant to our assessment of his fitness and propriety,” she added.
Käärmann, whose fine was reduced from £500,000 because of early settlement, said: “After several years and full co-operation with the FCA, we have brought this process to a close. I remain focused on delivering the mission for Wise.”
The watchdog said it only found out about the HMRC fine in 2021 after a journalist contacted the regulator for comment when Käärmann’s name was published by tax authorities on a public list of defaulters.
The FCA found that Käärmann’s overall approach to the disclosure had been “careless, as opposed to deliberate or reckless”.
Former Barclays chief executive Jes Staley was found to have breached the same disclosure rule last year. But the FCA considered Staley’s rule-breaking to be more serious. It fined Staley £1.8mn and banned him from holding a senior position in the financial services industry after he allegedly misled the watchdog about his past relationship with the deceased sex offender Jeffrey Epstein.
Wise noted that the FCA had not made any adverse findings regarding Käärmann’s “continued fitness and propriety to perform his current roles at Wise, nor found that he acted with a lack of integrity”.
The fintech’s chair David Wells said the board had “conducted its own investigation and assessed that Kristo remained fit and proper to continue in his roles at Wise”. The company “required him to take remedial actions to ensure that his personal tax affairs are appropriately managed and is satisfied that these actions were taken,” Wells added.
Käärmann launched Wise in 2011 with co-founder Taavet Hinrikus to offer cheaper and faster cross-border transfers, initially between the UK and Estonia. The company was formerly known as TransferWise.
