Kristo Käärmann, one of the two Estonian co-founders of Wise, the London-based fintech company, is under an investigation by the British Financial Conduct Authority over his status as a so-called deliberate tax defaulter.
According to the Times newspaper, the FCA launched an inquiry into the “regulatory obligations and standards” to which Käärmann is subject after Her Majesty’s Revenue and Customs – the British tax authority – issued a £365,651.21 fine over £720,495 of unpaid taxes or duties in the year to April 2018.
The FCA has now launched a formal probe into the regulatory obligations and standards to which he is subject.
“The board takes Kristo’s tax default and the FCA’s investigation very seriously,” David Wells the chairman of Wise, said, according to the Times. “After reviewing the matter late last year, the board required that Kristo take remedial actions, including appointing professional tax advisers to ensure his personal tax matters are appropriately managed.”
The company was launched as TransferWise – a peer-to-peer money transfer startup – in London in early 2011 by Estonians Taavet Hinrikus, Skype’s first employee, and Kristo Käärmann. The firm started with making transfers between the British pound and the euro, over the years expanding to other currencies. In 2014, the British businessman Sir Richard Branson, the founder of Virgin Group, invested US$25 million in the TransferWise.
Questions about Käärmann’s fitness to head a financial institution
By 2019, TransferWise was the most valuable fintech startup in Europe, valued at US$3.5 billion. By July 2020, its value had increased to US$5 billion, making the founders – Käärmann and Hinrikus – the wealthiest Estonians. In 2020, the company made a £30.9 million (US$43 million/€36 million) profit on a revenue of £421 million (US$587 million/€491 million).
In early 2021, TransferWise shortened its name to simply Wise. The company is headquartered in London but retains a sizable office also in Estonia.
In June 2022, both Käärmann and Hinrikus were listed among the 250 richest people in the UK. Käärmann was ranked 198th and Hinrikus 247th.
Käärmann, the current chief executive of Wise, owns 18.2% of the company. The stake is worth £824.5 million.
In 2021, the 41-year-old entrepreneur was placed on a “deliberate tax defaulters’” list by Her Majesty’s Revenue and Customs for failing to pay a historic tax bill for £720,495. He was hit with a £365,651 fine.
The Times says the penalty raised questions about Käärmann’s fitness and properness to head an authorised financial institution.