British financial technology giant Wise allowed a person on the Russian sanctions list to withdraw money, a U.K. government body said Thursday.
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 recent measures and designations in response to the Russian invasion of Ukraine in February 2022, targeting a number of recent banks and wealthy individuals.
According to the OFSI, Wise reported a suspected sanctions breach on June 30, 2022. The money withdrawal was made out of a Wise business account held by an organization owned by an unnamed designated person, using a bank card held of their name. On the time, the corporate 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, a person was added to the list of sanction-designated individuals 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 now not send or receive any funds via this account. During our review of this account, nonetheless, we learned that a business debit card related to the account was used to make a £250 ATM withdrawal on the identical day,” the spokesperson added.
The Wise spokesperson said the corporate “voluntarily reported this ATM withdrawal to OFSI, undertook a direct review of our processes and implemented the essential internal system changes to prevent this sort 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 among a rare variety 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 chosen person, with out a license.”
Wise is one among the U.K.’s most successful fintech corporations, boasting a market cap of £6.56 billion. Wise shares were down 0.5% Thursday.
Though the sum of money involved within the sanctions violation is small, it is a black eye for one among Britain’s fintech darlings and highlights the industry’s ongoing struggle to prevent sanctions breaches following the Ukraine war.
The federal government didn’t effective Wise for the breach. The OFSI said it “doesn’t 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 on to his removal as a director on 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 might be a mid-term positive development for Wise’s stock, which has underperformed the broader European payments and fintech sector currently. The analysts speculate that Sinha could assume the CEO role permanently, with Kaarmann becoming executive chair.
Such a move “would allow Kaarmann to give attention to a broader role to drive the business, while leaving Sinha, who gained experience at PayPal and eBay, to the each day execution,” Jefferies analysts said.
Wise has not indicated that Kaarmann plans to step down as CEO permanently.
WATCH: CNBC’s Interview with Wise CEO Kristo Kaarmann