The Financial Conduct Authority (FCA) has fined Kristo Käärmann, the CEO and co-founder of money transfer service Wise, £350,000 for not disclosing his failure to pay taxes.
The penalty brings to a close years of regulatory complications stemming from a 2017 share sale by Käärmann. This netted him $10 million but also resulted in tax liabilities.
Tax Issues and Regulatory Action
The FCA said Käärmann did not inform the regulator about a penalty from HM Revenue and Customs (HMRC).
This resulted in Käärmann being publicly listed on the government’s “name and shame” register, which highlights individuals who deliberately default on tax payments.
This list is often populated by smaller businesses and sole traders, making Käärmann’s appearance particularly notable. The FCA’s ruling puts an end to a saga that began after Käärmann’s share sale in 2017.
The tax bill for the transaction amounted to £720,495, which Käärmann did not initially declare.
HMRC subsequently fined him £366,000, citing his failure to respond to notifications sent via post. Käärmann attributed the oversight to his travel schedule at the time.
Upon realizing the issue in early 2021, Käärmann promptly paid the outstanding tax amount.
However, further complications arose when he neglected to inform the FCA about the tax penalty. This is a regulatory requirement given Wise is overseen by the authority for its share dealing and electronic money services.
FCA’s Assessment and Fine Reduction
The FCA has the power to declare a director unfit to lead a regulated business. However, it deemed Käärmann’s actions to be “careless, as opposed to deliberate or reckless,” thus avoiding harsher measures.
Käärmann received a 30 percent reduction on the initial £500,000 fine for his cooperation during the investigation.
David Wells, the chair of Wise, expressed his support for Käärmann and stated that the company had thoroughly reviewed the CEO’s personal tax matters to ensure full compliance.
He said he now considers the matter resolved.
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A Rising Tech Star with Lingering Issues
Käärmann’s journey began when he was working in London for an accountancy firm.
Frustrated by the high fees charged for transferring money to his home country, Estonia, he collaborated with Taavet Hinrikus to establish a peer-to-peer money transfer system.
The startup, initially named TransferWise, gained rapid traction and became one of the darlings of the London tech scene.
In 2021, Wise went public, making Käärmann and Hinrikus billionaires.
The company is now valued at £7.5 billion, with Käärmann’s net worth estimated to be £1.7 billion, primarily due to his 18 percent stake in the company.
Closing the Chapter
Reflecting on the end of this regulatory ordeal, Käärmann commented, “After several years and full cooperation with the FCA, we have brought this process to a close. I remain focused on delivering the mission for Wise and achieving our long-term vision for being ‘the’ network for the world’s money.”
With the matter now seemingly closed, Käärmann and Wise are set to continue focusing on the company’s ambitious vision and ongoing growth in the financial technology sector.
