FCA fines Wise boss £350k for tax omission

Kristo Käärmann, the billionaire co-founder and chief executive of the money transfer company Wise, has been fined £350,000 by the financial regulator over his failure to notify it about “significant tax issues”.
The Financial Conduct Authority (FCA) said that Käärmann had failed to notify the regulator initially about a previous tax issue and fine during an assessment in 2021 of whether he was a “fit and proper” person to run a company.
HM Revenue and Customs fined him £365,651 in February 2021 for deliberately failing to notify them of a capital gains tax liability after he sold shares worth £10 million in 2017. In September 2021 it added him to its public tax defaulters’ list.
“Käärmann failed to appropriately consider the significance of the tax issues and notify the FCA, despite being aware of them for over seven months,” the regulator said.
The authority said that Käärmann had breached its rules of conduct for senior managers. Senior managers “must disclose appropriately any information of which the FCA would reasonably expect notice”.
Käärmann is “an approved person” under the FCA’s senior managers regime. The regulator can fine a manager or prevent them from working in financial services if they are not considered “fit and proper”.
His fine was reduced from a potential £500,000 after he agreed to resolve the matter.
Wise’s shares ended the day down 5½p, or 0.8 per cent, at 729½p after the announcement.
Therese Chambers, joint executive director of enforcement and oversight at the FCA, said: “We, and the public, expect high standards from leaders of financial firms, including being frank and open. It should have been obvious to Mr Käärmann that he needed to tell us about these issues.”
Käärmann, 44, 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 and achieving our long-term vision for being ‘the’ network for the world’s money.”
Ian Weinstein, a partner in white collar defence at Brown Rudnick, the law firm, said the regulator’s decision showed “the breadth of information” it expected to receive from executives and companies.
He said the expectations of the FCA had also been made clear when Jes Staley, the former boss of Barclays, was fined £1.8 million and banned from senior roles owing to his alleged misrepresentation of his relationship with the convicted paedophile Jeffrey Epstein.
Weinstein said: “The finding from HMRC that Käärmann had deliberately failed to notify a significant capital gains liability was not only relevant to the question of his own fitness and propriety but also, given his role as a chief executive of a public company, the reputation of Wise as well. The actions of senior individuals, even outside the strict confines of their role, can affect how the firm that they work for is viewed.”
The FCA’s decision notice outlined that Käärmann was informed that HMRC was performing a compliance check on his tax affairs in a letter on June 25, 2020, but that he did not respond and he was informed of a financial penalty in a letter on November 18, 2020, which he did not open at the time.
Käärmann was told to pay the penalty in a letter on December 24, 2020, and did not open the letter because he was abroad. When he returned from a two-month absence, he opened the letters and “immediately arranged for payment” of the fine.
Yet the technology executive did not bring these matters to the attention of the FCA and the regulator only became aware of the issues when they were contacted by a journalist asking for a comment in September 2021. The FCA said it expected to be informed of “matters that may have an adverse impact” on the reputation of an executive or their company. He also did not disclose the problems to Wise.
The decision notice said: “The [FCA] considers that Mr Käärmann’s approach to his notification of the tax issues was careless, as opposed to deliberate or reckless: he did not appropriately consider the significance of the tax issues and whether a notification to the [FCA] was required, which led to his failure to notify the [FCA] of the tax issues.”
Wise’s board of directors have supported Käärmann, despite the sanction from the financial regulator.
David Wells, the chairman of Wise, said executives had conducted their own investigation into Käärmann’s tax affairs and had requested that he put in place certain measures to ensure these would be “appropriately managed” in future. Wells said the board had concluded that the technology entrepreneur was “fit and proper” to stay in post as chief executive of Wise.
Wells was chief financial officer at Netflix for eight years before standing down in 2019. He joined Wise as a non-executive director in July 2019 and became the money transfer group’s chairman in December 2021.
Clare Gilmartin, the technology executive known for leading Trainline, the transport app, for seven years, is the most senior non-executive on the board of Wise, having joined the group in June 2021.
Ingo Uytdehaage, the co-chief executive of Adyen, a payments platform, is the non-executive who chairs Wise’s audit and risk committee. Elizabeth Chambers, who is also on the board of TSB, joined Wise as an independent non-executive in April 2023, and chairs the group’s remuneration committee. Chambers is an operating partner at Searchlight Capital, a private equity firm based in the United States.
Terri Duhon, who is a non-executive and chairs the risk committee at Morgan Stanley International, joined Wise as a non-executive in January 2022 and she is also a non-executive director and chairs the risk committee at Rathbones Group, the listed wealth manager.
The board also counts Alex Rampell, a partner at Andreessen Horowitz, the venture capital firm, and Tan Hooi Ling, the co-founder of Grab, a ride-hailing and delivery app in Singapore, as non-executives.
Wells said: “Following the inclusion of Kristo’s name on HMRC’s list in September 2021, the board conducted its own investigation and assessed that Kristo remained fit and proper to continue in his roles at Wise.
“The board also required him to take remedial actions to ensure that his personal tax affairs are appropriately managed and is satisfied that these actions were taken. We’re pleased that the FCA’s conclusions are consistent with Wise’s own assessment in 2021 and that the matter is now closed in its entirety.”