UK financial regulators have imposed a £350,000 fine on Wise’s chief executive, Kristo Käärmann, for violating conduct rules and failing to report “significant tax issues.” Despite this, he has been cleared to continue his role. The Financial Conduct Authority (FCA) initiated an investigation into Käärmann after tax authorities fined him in 2021 for a deliberate tax default.
The regulator stated that Käärmann neglected to appropriately consider the significance of the tax issues and failed to notify the FCA, although he had been aware of them for over seven months. The default involved an outstanding tax bill of £720,495 related to capital gains from a $10 million share sale in 2017, which Käärmann did not disclose to HM Revenue & Customs and failed to pay on time. This resulted in an HMRC fine of £365,651.
Subsequently, financial regulators launched an inquiry into Käärmann’s disclosure of the fine. The investigation was carried out because Käärmann’s status as an “approved person” requires the FCA to assess his fitness and propriety for his role. In its final notice, the FCA reported Käärmann as explaining that he did not believe it was necessary to inform the authority about the tax issues since he considered them a personal matter, unrelated to his professional integrity.
Therese Chambers, the FCA’s joint executive director of enforcement and oversight, emphasized the expectation of high standards from financial firm leaders, highlighting the necessity for transparency. According to Chambers, it should have been clear to Käärmann that he needed to disclose the issues, which were crucial for evaluating his suitability for the position.
Käärmann’s fine was reduced from £500,000 due to early settlement. He expressed his commitment to focusing on Wise’s mission following the closure of the process with the FCA after a protracted period and full cooperation. The FCA only became aware of the HMRC fine in 2021 after journalists inquired about it when Käärmann’s name appeared on a public list of defaulters.
The FCA concluded that Käärmann’s approach to disclosure was “careless” rather than deliberate or reckless. In contrast, former Barclays chief executive Jes Staley breached the same disclosure rule last year, but the FCA deemed his violation more severe. Staley was fined £1.8 million and banned from senior industry roles for allegedly misleading the regulator about his relationship with Jeffrey Epstein.
Wise stated that the FCA did not find any adverse conclusions regarding Käärmann’s fitness and propriety for his current roles at Wise, nor did it find that he acted without integrity. The fintech’s chair, David Wells, remarked that the board conducted its own investigation, deemed Käärmann fit to continue his roles, and required him to take corrective actions to manage his personal tax affairs. Wells confirmed these actions were satisfactorily completed.
Käärmann, along with Taavet Hinrikus, founded Wise in 2011 to provide cheaper and faster cross-border transfers, initially between the UK and Estonia. Formerly known as TransferWise, the company has become one of the UK’s largest fintechs and went public in London in 2021.