In a notable regulatory action, Wise CEO Kristo Käärmann has been fined £350,000 by the Financial Conduct Authority (FCA) following a breach of senior manager conduct rules. The penalty, levied on Käärmann, centers on his delay in notifying the FCA of a tax default, a delay that extended to seven months. This breach is linked to a prior tax issue where Käärmann failed to disclose a capital gains tax liability.
Background of the Tax Default
The situation began in February 2021, when the HM Revenue & Customs (HMRC) imposed a fine of £365,651 on Käärmann for failing to report a capital gains tax liability from the sale of £10 million worth of shares in 2017. As a result of this omission, Käärmann’s name was publicly listed among tax defaulters by HMRC in September 2021, remaining on the list until 2022.
The FCA’s decision to fine Käärmann came after it determined that he breached Senior Management Conduct Rule 4, which mandates that senior managers must “disclose appropriately any information of which the FCA would reasonably expect notice.” His failure to inform the regulator of this tax issue on time raised concerns over his adherence to required standards of openness and responsibility in financial leadership.
FCA’s Stance on the Breach
Therese Chambers, joint executive director of enforcement and oversight at the FCA, commented on the importance of transparency for senior leaders in financial services. “We, and the public, expect high standards from leaders of financial firms, including being frank and open,” Chambers stated. “It should have been obvious to Mr. Käärmann that he needed to tell us about these issues, which were highly relevant to our assessment of his fitness and propriety.”
Wise’s Response
Despite the fine, Wise maintains its confidence in Käärmann’s capability and integrity as CEO. In a statement, Wise clarified that the FCA’s findings did not indicate a lack of integrity on Käärmann’s part or suggest he was unfit for his role. Wise chair David Wells emphasized the board’s commitment to regulatory compliance, revealing that an internal investigation was conducted following Käärmann’s listing on HMRC’s defaulter list.
Wells also confirmed that Käärmann had taken corrective steps to manage his tax affairs properly, aligning with Wise’s standards. “The Board continues to take Wise’s regulatory obligations very seriously,” said Wells. He assured stakeholders that Käärmann had complied with the board’s recommendations to ensure his tax matters were in order.
Industry Implications
This action reflects the FCA’s commitment to enforcing transparency and accountability among leaders in the financial sector, underscoring the high standards expected of senior managers, particularly in a firm as significant as Wise. For companies and their leaders, the message is clear: regulatory bodies will act to uphold integrity and public trust, particularly where timely disclosure of relevant matters is in question.