An individual in the U.K.’s Russia sanctions list was allowed to make a withdrawal of £250 ($316.63) from a business account on Wise, according to the Office of Financial Sanctions Implementation. Wise “made complete disclosures and fully cooperated with OFSI throughout its investigation,” the OFSI said. It’s one of a rare number of cases of publicly disclosed breaches by a fintech company.
The user was allowed to make a withdrawal of £250 ($316.63) from a business account on Wise, according to the Office of Financial Sanctions Implementation.
The British government imposed new measures and designations in response to the Russian invasion of Ukraine in February 2022, targeting a host of new banks and wealthy individuals.
According to the OFSI, Wise reported a suspected sanctions breach on June 30, 2022. The cash withdrawal was made from a Wise business account held by a company owned by an unnamed designated person, using a credit card held in their name. At the time, the company was a customer of Wise.
Wise “made complete disclosures and fully cooperated with OFSI throughout its investigation,” the OFSI said.
Via email, a Wise spokesperson told CNBC: “At Wise, we take the responsibility of complying with all sanctions laws very seriously. We took immediate steps to suspend our services to Russia as soon as sanctions were enacted in response to its invasion of Ukraine.”
“On June 29, 2022, an individual was added to the list of sanction-designated persons under UK regulations. We promptly followed sanctions screening procedures and suspended an account suspected to belong to a business owned by that individual. This meant that the account-holder could no longer send or receive any funds via this account. During our review of this account, however, we learned that a business debit card associated with the account was used to make a £250 ATM withdrawal on the same day,” the spokesperson added.
The Wise spokesperson said the company “voluntarily reported this ATM withdrawal to OFSI, undertook an immediate review of our processes and implemented the necessary internal system changes to prevent this type of transaction going forward.”
“We take this matter very seriously. We remain committed to ensuring that our day-to-day operations are in compliance with all relevant regulatory requirements, and to working openly and collaboratively with our regulators,” they added.
It’s one of a rare number of cases of publicly disclosed breaches by a fintech company. Previously, the OFSI fined U.K. payments firm TransferGo £50,000 for “making funds available to a designated person, without a license.”
Wise is one of the U.K.’s most successful fintech companies, boasting a market cap of £6.56 billion. Wise shares were down 0.5% Thursday.
Though the sum of money involved in the sanctions violation is small, it’s a black eye for one of Britain’s fintech darlings and highlights the industry’s ongoing struggle to prevent sanctions breaches following the Ukraine war.
The government didn’t fine Wise for the breach. The OFSI said it “does not assess the breach as sufficiently serious to impose a monetary penalty on Wise.”
Wise CEO Kristo Kaarmann was previously fined by Her Majesty’s Revenue and Customs for failing to pay his taxes on time.
The missed payment, which Kaarmann eventually covered, could lead to his removal as a director at the firm if financial regulators deem him unfit to run a financial services company, according to Financial Conduct Authority guidelines.
Kaarmann is due to take three months of parental leave starting next month. Wise Chief Technology Officer Harsh Sinha will take over temporarily in his absence.
Jefferies analysts said that management shake-up could be a mid-term positive development for Wise’s stock, which has underperformed the broader European payments and fintech sector lately. The analysts speculate that Sinha could assume the CEO role permanently, with Kaarmann becoming executive chair.
Such a move “would allow Kaarmann to focus on a broader role to drive the business, while leaving Sinha, who gained experience at PayPal and eBay, to the daily execution,” Jefferies analysts said.
Wise has not indicated that Kaarmann plans to step down as CEO permanently.
August 31, 2023 Published by The Financial Crimes.
