The City regulator fined Wise’s founder £350,000 after he failed to notify them that he hadn’t paid his taxes.
The Financial Conduct Authority (FCA), said that on Monday, Wise’s chief executive Kristo Kaarmann had failed to inform it about a fine imposed by HM Revenue and Customs, which resulted in his appearance on a “name and shame list” of people who deliberately defaulted on their tax payments – alongside a number of takeaway restaurants and solo traders.
The ruling ends several years of negative repercussions resulting from Kaarmann’s 2017 share sale, which netted him $10m but also caused a number of regulatory problems.
Kaarmann, who worked in London as an accountant for a company, faced outrageous fees when he tried to send his bonus to his native Estonia. He made an agreement with Taavet Hirikus to match the transactions between accounts in both countries to avoid steep bank fees.
Wise quickly grew in popularity and became a darling on the London tech scene. The company’s valuation is £7.5bn. Its 2021 float made its co-founders millionaires. The Sunday Times estimated Kaarmann’s worth at £1.7bn this year, mainly due to his 18% Wise share.
The FCA could have ruled that Kaarmann was not a suitable director for regulated businesses. However, it said his actions were “careless” and not deliberate or reckless.
Kaarmann has been included in the “name and shame” list for failing to declare an $10m share transaction in September 2017, resulting in a £720.495 tax liability.
HMRC fined him £366,000 for failing to open two letters informing him of the liability. He blamed his travel schedule. Kaarmann paid immediately when he realized in February 2021. But the troubles didn’t end there. He did not inform the FCA of the tax ruling.
In September 2021, a journalist who contacted the regulator to ask for a comment about the default informed the regulator. Wise’s businesses that offer share trading and electronic money are regulated by FCA.
Kaarmann was given a 30% reduction on the original fine of £500,000 for cooperating at an early stage.
Kaarmann stated: “After many years of full cooperation with FCA, this process has come to an end.
“I am committed to achieving the mission of Wise, and our long-term goal of becoming ‘the’ global network for money.”
David Wells said that he considered the matter to be closed and that Wise had ensured that Kaarmann’s personal tax affairs are in order.
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