Wise CEO and co-founder Kristo Kaarmann.
British financial technology giant Wise allowed an individual 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 (OFSI).
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.
A Wise spokesperson wasn’t immediately available for comment when contacted by CNBC.
It’s one of a rare number of cases of publicly disclosed breaches by a fintech companies. 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 next month. Wise Chief Technology Officer Harsh Sinha will take over temporarily in his absence.
Jefferies analysts said that management shakeup 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 chairman.
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.
WATCH: CNBC’s Interview with Wise CEO Kristo Kaarmann