The UK financial regulator is investigating the co-founder of payments company Wise after he failed to pay his taxes.
Kristo Käärmann was placed on HM Revenue and Customs’ list of willful tax defaulters in September 2021, after failing to comply with his tax obligations. He failed to pay £720,495 for the 2017-18 tax year and was fined £366,000, the tax authority said.
Wise said on Monday that the Financial Conduct Authority (FCA) had “opened an investigation into the regulatory obligations and standards to which Kristo is subject”, after sharing details of its own investigation.
Wise, formerly known as TransferWise, is one of London’s largest financial technology, or fintech, companies after its shares floated on the London Stock Exchange in July 2021, in a boost for the City.
Käärmann and his co-founder, Taavet Hinrikus, started Wise in 2011 after the former struggled to transfer money from a UK bank account to an account in their native Estonia without paying exorbitant fees.
The regulator has the power to decide that Käärmann is not a fit and suitable person to be a senior executive of an investment firm – a role he fills because Wise offers equity trading as well as international payments .
Käärmann and Hinrikus became paper billionaires for several months after the IPO, which initially valued the company at almost £9 billion. Its value peaked at nearly £12billion in September, but has since fallen back to around £4billion, amid concerns over growing competition in cross-border payments and the widespread abandonment of technology companies to rapidly growing by investors around the world.
Käärmann owns 19% of Wise shares, a stake worth around £740m, while Hinrikus owns 9%, valued at around £350m.
David Wells, Wise’s chairman, said: “The board takes Kristo’s default and FCA’s investigation very seriously. After reviewing the matter late last year, the board demanded that Kristo take corrective action, including appointing professional tax advisers to ensure his personal tax matters are properly handled.
“The Board has also shared details of its own findings, assessments and actions with FCA and will cooperate fully with FCA as and when required, while continuing to support Kristo in his role as CEO.”