The founder of the money transfer service Wise has been fined £350,000 for failing to inform the City regulator that he had failed to pay his taxes.
The Financial Conduct Authority (FCA) said on Monday that the Wise chief executive, Kristo Käärmann, had failed to notify it of a fine from HM Revenue and Customs that resulted in his appearance on a public “name and shame” list of people who had deliberately defaulted on tax payments – alongside a host of takeaway restaurants and sole traders.
The ruling puts an end to several years of repercussions from a 2017 share sale by Käärmann that netted him $10m, but also led to a series of regulatory difficulties.
The idea for Wise, formerly TransferWise, started when Käärmann was working in London for an accountancy company and faced rip-off fees to transfer his bonus payment to his native Estonia. He came to an arrangement with an acquaintance, Taavet Hinrikus, to match transactions in accounts on both countries, avoiding the steep bank fees.
The startup quickly gained momentum, and Wise grew to be a darling of the London tech scene. Its float in 2021 made the co-founders billionaires, and the company is valued at £7.5bn. Käärmann’s net worth was estimated this year to be £1.7bn by the Sunday Times, mostly from his 18% Wise stake.
The FCA had the power to rule that Käärmann is not a fit and proper director of regulated businesses, but it said it considered his actions “careless, as opposed to deliberate or reckless”.
Käärmann was included on the name and shame list after failing to declare a $10m share sale in September 2017 resulting in a £720,495 tax liability.
HMRC fined him £366,000 after he failed to open two letters telling him about the liability, blaming his travel schedule. Käärmann immediately paid up when he realised in February 2021, but troubles did not end there: he then failed to inform the FCA about the tax ruling.
The regulator found out in September 2021 when a journalist contacted the regulator for comment on the default. Wise is regulated by the FCA because of its businesses offering share dealing and electronic money.
Käärmann received a 30% discount on the original £500,000 fine for agreeing to cooperate at an early stage.
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Käärmann said: “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.”
David Wells, the chair of Wise, said he now considered the matter closed, and that the company had made sure that Käärmann’s personal tax affairs were in order.