In a shocking turn of events that has sent ripples through the financial sector, Kristo Käärmann, the esteemed CEO of money transfer giant Wise, has been slapped with a staggering £350,000 fine by the Financial Conduct Authority (FCA). The reason? Failing to notify the City regulator about a personal tax payment default that landed him on the infamous HMRC “name and shame” list.
A Costly Oversight
The roots of this scandal trace back to a fateful share sale in 2017, which netted Käärmann a cool $10 million. However, this windfall came with a hefty £720,495 tax liability that the CEO failed to declare. Despite receiving two letters from HMRC alerting him to the oversight, Käärmann, perhaps distracted by his jet-setting lifestyle, neglected to open them. It wasn’t until February 2021 that he finally realized his error and promptly paid up.
The FCA Steps In
But the troubles didn’t end there. Käärmann’s next misstep was failing to inform the FCA about the tax ruling – a serious breach of regulatory protocol. The regulator only found out in September 2021 when a journalist reached out for comment on the default. As Wise is regulated by the FCA due to its share dealing and electronic money businesses, this lack of transparency was a grave concern.
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”.
A Wise Move?
For his part, Käärmann has expressed relief at bringing this drawn-out process to a close, stating: “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.” The chair of Wise, David Wells, considers the matter closed and has assured stakeholders that the company has taken steps to ensure Käärmann’s personal tax affairs are in order.
The Price of Success
The irony of this scandal is not lost on those familiar with Wise’s origin story. The idea for the company was born when Käärmann, then working in London, faced exorbitant fees to transfer his bonus payment to his native Estonia. Along with co-founder Taavet Hinrikus, he devised a system to match transactions across borders, sidestepping steep bank charges. This innovative approach propelled Wise to become a darling of the London tech scene, with a 2021 float making the co-founders billionaires.
The Human Cost of Innovation
While Käärmann’s net worth, estimated at £1.7 billion, is largely tied up in his 18% stake in Wise, the personal toll of this ordeal cannot be overlooked. The stress of regulatory scrutiny and public humiliation is a heavy burden for any leader to bear. It serves as a stark reminder that even the most successful entrepreneurs are not immune to the consequences of their actions, intentional or otherwise.
A Lesson for All
As the dust settles on this high-profile case, it’s clear that the implications extend far beyond one man and one company. It underscores the critical importance of transparency, accountability, and meticulous attention to detail in the world of finance. For those at the helm of regulated businesses, the message is unequivocal: ignorance is no excuse, and the price of non-compliance can be steep.
In the end, while the £350,000 fine may be a drop in the ocean for a billionaire CEO, the reputational damage and the weight of public scrutiny are costs that cannot be so easily quantified. As the financial sector grapples with the fallout of this scandal, one thing is certain: the world will be watching to see how Wise, and its embattled leader, navigate the road ahead.
