Millionaire Wise chief under investigation over tax failure Business

Financial regulators have launched an official investigation into the millionaire co-founder of money transfer group Wise after he defaulted on a £720,495 tax bill.

The Financial Conduct Authority is investigating whether Wise chief executive Kristo Käärmann breached the standards required to run a large financial organization after failing to submit proper tax returns in the 2017-2018 tax year .

The Telegraph has revealed that Mr Käärmann was fined £365,651 for HMRC’s failings last year. This sanction suggested that he had either handed in incorrect documents, failed to inform HMRC of his situation, or committed wrongdoing in relation to VAT or excise.

HMRC raised concerns about Mr Käärmann’s tax affairs when it published his name in a list of defaulters who were dealt with through civil action rather than criminal proceedings.

Mr Käärmann was featured alongside a curry house in Derby and an adult entertainment venue in Worcester.

News of the FCA investigation came just a day before Wise announced its annual results.

Wise’s board said it was cooperating fully with the investigation and had also turned over the findings of its own investigation into Mr Käärmann’s tax affairs to the authorities. Last year, the company hired outside attorneys to look into the defaults.

David Wells, chairman of Wise, said the company ordered Mr Käärmann to hire tax advisers after the council concluded its investigation in the last quarter of 2021.

“The board takes Kristo’s default and FCA’s investigation very seriously,” Wells said.

“After reviewing the matter late last year, the board of directors required Kristo to take corrective action, including appointing professional tax advisers to ensure that 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 needed, while continuing to support Kristo in his role as CEO.”

The FCA declined to comment.

Mr Käärmann is a multi-millionaire thanks to his 19% stake in Wise, valuing it on paper at around £740m, a jump from last year’s pre-float estimate of £229m . Wise itself has a market capitalization of £3.82 billion.

In September last year, a spokesman for Wise’s chief executive suggested he had filed his personal tax returns late ‘despite sufficient reminders from HMRC’, adding that the billionaire ‘has since spent more than time keeping his personal administrator in order”.

The money transfer company’s share price was broadly flat on Monday at 373p after a brief dip to 365p on the open.

Mr. Käärmann’s failure to immediately pay his tax dues erased 2.5% from Wise’s share price when it was first publicly disclosed in September 2021. This marked the start of a long decline in the value of the company.

The drop largely followed the continued plunge in tech stock prices in the first half of this year, driven by weakening consumer demand as shutdowns end and tech companies face funding costs. higher as interest rates rise.

Wise was one of London’s most valuable issues last year, opening at £8bn in July 2021 and providing a stark contrast to Deliveroo’s flop. The food delivery company saw its market value plummet by a quarter just a week after its £7.6billion IPO last March.

Formerly known as TransferWise, Wise’s business model grew out of Mr. Käärmann and co-founder Taavet Hinrikus’ struggles with cross-border money transfers. Mr Käärmann, who worked in the UK, found it costly to send money back to his native Estonia. He and Mr. Hinrikus, an early Skype employee, came up with the idea of ​​matching euro transactions between the latter’s Estonian bank account and the former’s British pound-denominated account.

By avoiding cross-currency transactions, they were able to achieve significant savings, which gave rise to the idea that became Wise.

The pair founded by Wise in London in 2010 and attracted backers including Sir Richard Branson, who was an early investor.

The company now claims it has over 13 million users transferring around £6 billion a month.

HMRC publishes its list of defaulting individuals and businesses every three or four months, which is how Mr Käärmann’s problems first emerged.