The CEO of ?3.9 billion ($4.8 billion) fintech firm Wise is being investigated by U.K. regulators after tax authorities found he failed to pay a tax bill worth over ?720,000.
Kristo Kaarmann, who co-founded Wise in 2011, was recently fined ?365,651 by Her Majesty’s Revenue and Customs — the U.K. government department responsible for collecting taxes — for defaulting on the tax bill in 2018.
At the time, a company spokesperson said Kaarmann had submitted his personal tax returns for the 2017/18 tax year late, but has since paid what he owed along with “substantial” late filing penalties.
The U.K.’s Financial Conduct Authority has now opened an investigation into the matter, according to a statement from Wise on Monday. Regulators are looking into whether Kaarmann failed to meet regulatory obligations and standards.
The FCA declined to comment on the investigation.
Wise said its board hired external lawyers to help investigate Kaarmann’s tax violation. The investigation wrapped up in the fourth quarter of 2021 and its findings were shared with the FCA.
David Wells, chair of Wise’s board, said the company’s management takes Kaarmann’s tax default and the FCA probe “very seriously.”
“After reviewing the matter late last year the Board required that Kristo take remedial actions, including appointing professional tax advisors to ensure his personal tax matters are appropriately managed,” Wells said.
“The Board has also shared details of its own findings, assessment and actions with the FCA and will cooperate fully with the FCA as and when they require, while continuing to support Kristo in his role as CEO.”
The probe could have significant ramifications for Wise and its chief executive. Kaarmann could be forced to step down and cease working in the industry if regulators rule that he fails the “fit and proper” test.
A Wise spokesperson declined to comment further on the FCA probe.
Shares of Wise barely moved on the news Monday. The company’s stock has fallen sharply since its July 2021 debut, losing around 57% of its value.
Wise, which competes with the likes of PayPal and Western Union, made a name for itself by tackling hidden fees in foreign exchange and quickly became a darling of the U.K. start-up scene. The company has since branched into other areas of finance, including banking and investments.