What exactly is the FCA investigating about Kristo Käärmann’s tax records?

·4 min read

It has always been possible to enjoy the comedy aspect to the tale of Kristo Käärmann of Wise and his unpaid tax bill. Here was a near-billionaire co-founder and chief executive of a slick payments company who was apparently too disorganised to respond to HMRC’s reminders, to the point where he copped a £366,000 penalty and got himself publicly identified.

If the board was ever even vaguely amused, it’s not now. It takes matters “very seriously”, said the chair, David Wells. You bet: the Financial Conduct Authority has opened an investigation, which, at the regulator’s usual pace of inquiry, will ensure we’ll still talking about Käärmann’s 2017-18 tax demand in 2023.

One puzzle is what, precisely, the FCA is investigating. The company’s statement referenced “the regulatory obligations and standards to which he [Käärmann] is subject to”, which was slightly odd phrasing. Is the issue Käärmann’s compliance with the “fit and proper” standards under the FCA’s “approved person” regime, or is it a matter of whether additional measures should apply, given what’s happened? Impossible to say.

Also unexplained is why the FCA took so long to act. Perhaps officials were waiting for the findings of Wise’s own investigation, or perhaps they’ve spotted something they want to probe further. Again, one assumes all will be revealed eventually. In the meantime, though, the affair threatens to become a distraction for a company trying to live up to the hoopla that accompanied last year’s £8bn listing.

The valuation is now £4bn, thanks to the wider tech sell-off, and the onus is on Käärmann to show the business model of pinching high-value money-transfer trade from the big banks is intact. He owns 18% of the shares and is the public face of the company, so is virtually untouchable by anybody other than regulators. It is the type of governance situation that tends to make other shareholders nervous. Tuesday’s full-year numbers had better be perfect.

Are record highs at the petrol pump down to price-gouging?

Up like a rocket and down like a feather, says the RAC about the price of fuel. It is paid to represent motorists’ interests, of course, but you can see what it’s getting at: wholesale costs are off their highs, but prices at UK pumps hit a fresh record at the weekend. Is this price-gouging by forecourt retailers in action? Or just the lag effect as the product makes its way from refineries to consumers?

Let us hope the Competition and Markets Authority (CMA) sheds light next week when it unveils the interim findings of an investigation commissioned under orders from the business secretary, Kwasi Kwarteng. The sense that something odd – or new – is happening at the pumps was best explained by Justin King, the former Sainsbury’s chief executive, a couple of weeks ago.

“There is absolutely no doubt that supermarkets are competing less at the moment on the price of fuel than they have done historically,” he said in an interview with Andrew Neil for Tortoise Media. “There isn’t a price war on fuel, and I think there are some reasons for that, but the reality is that fuel today for all supermarkets is more profitable than it has historically been.”

More profitable than ever? If that’s correct, that’s quite a statement, because the supermarkets represent half the fuel market and have always been the price leaders. King’s suggestion was that the tactic of offering cheap fuel to attract grocery shoppers is not as effective as it used to be – perhaps Covid has changed habits. “For whatever reason,” he concluded, “it is the supermarket’s assessment at the moment that they cannot move that shopping basket around by lowering the price of fuel.”

One can’t really call it profiteering, it should be added. Any above-average returns from fuel are probably being redirected into keeping a lid on food prices, which would be a sensible approach in the current climate. The soggy share prices of the quoted chains (Tesco and Sainsbury’s) and sub-par debt valuations seen at the private equity-controlled crew (Asda and Morrisons) do not suggest anyone is enjoying an overall profits bonanza.

But the change in dynamics in the fuel market, if that is what is happening, is definitely worth exploring. Kwarteng was greeted with a chorus of boos from some quarters when he summoned the CMA. There’s nothing to see, said some; the government should cut fuel duty further if it wants to improve the lot of motorists, said others. The tale looks more complicated, as we may soon learn.

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