The ‘Cyprus Confidential‘ investigative report released today underscores the role of PWC and other Western service providers in supporting Russian oligarchs in hiding wealth and facilitating their access to resources, contributing to the sustainability of President Putin’s war efforts.
Leaked documents obtained by the International Consortium of Investigative Journalists have unveiled the extent to which PWC Cyprus aided Russian oligarchs Alexander Abramov and Alexander Frolov in avoiding sanctions, further highlighting concerns about financial transparency amid Russia’s war in Ukraine.
The damning documents, spanning from the mid-1990s to 2022, indicate that PWC Cyprus serviced at least 62 shell companies and trusts controlled or owned by the oligarchs. These entities were used to structure their holdings, including their association with Evraz PLC, a Russian steelmaker crucial to Moscow’s military operations in Ukraine.
One particular incident occurred on March 1, 2022, when PwC Cyprus received an urgent request from the oligarchs to transfer $100 million between two shell companies, both controlled by them. The funds originated from Evraz PLC, which produces 97% of the rails used by Russia’s military to transport equipment and troops to the Ukrainian front lines.
The United Kingdom, recognising the strategic significance of Evraz to the Russian government, later imposed sanctions on the company, prohibiting any business transactions with it by UK citizens and businesses. Additionally, sanctions were extended to Abramov and Frolov themselves, described as part of the “cabal of selected elite” supporting Russian President Vladimir Putin’s war efforts.
Zoe Reiter, co-founder of the Anti-Corruption Data Collective, expressed concern, stating, “This looks like a classic structure used for money laundering and possibly worse. Anyone at PwC should know that.”
Despite repeated attempts to reach Abramov and Frolov for comment, they remained unresponsive.
The investigation also reveals that PwC Cyprus engaged in similar activities for Russian clients even before the 2022 invasion of Ukraine. Twelve Russians were already under sanctions worldwide due to their involvement in the illegal annexation of Crimea and military aggression in Donbas.
PWC, in response to the allegations, emphasised that it had complied with EU and United Nations sanctions and had severed ties with 60 clients due to its new Russia-related sanctions policy. Mike Davies, a PwC spokesperson, said, “PwC’s internal standards are reviewed and updated to reflect both lessons learned and changing circumstances.”
The Cyprus office of PWC, in its fiscal 2023 annual report, acknowledged a “significant contraction” in business related to implementing the global sanctions policy. In a notable move, PWC withdrew from its Russian affiliate shortly after the invasion of Ukraine, declaring that it would cease working with Russian entities or individuals subject to sanctions.
However, critics argue that professional service providers like PwC continue to enable the Russian elite to evade sanctions and maintain opaque financial networks. Western governments have imposed sanctions on Russian entities and individuals, but loopholes exist that allow service providers to engage with these clients legally.
“With its Russian clients, PwC Cyprus has further amplified its importance through companies started by former PwC employees,” the ICIJ report writes.
Abacus Ltd. was set up by former PwC Cyprus executives in 2001 and went on to work for Russians who were later sanctioned.
Another PwC Cyprus partner left the firm six years later to form Cypcodirect.
A few months after Russia invaded Ukraine and PwC withdrew from Russia, three more PwC Cyprus partners departed to set up Kiteserve Ltd. Operating partly out of PwC’s office building in Limassol, Kiteserve’s strategy is to “take on work from Russia-linked clients that the Big Four accountants will no longer touch,” the Financial Times reported at the time.
“Kiteserve’s operations are in full compliance with the laws and regulations of Cyprus, EU and of our regulator, the Institute of Certified Public Accountants of Cyprus,” Managing Partner Theo Parperis said in a written statement. “Kiteserve adheres fully to the sanctions imposed by the UN and EU, that are legally binding for Cyprus, as well as to the US and UK sanctions.”
Casey Michel, director of the Combatting Kleptocracy Program at the Human Rights Foundation, raised concerns about the accountancy industry, stating, “They’re perfectly within their rights to keep doing this work, but it points to the rot at the heart of the accountancy industry.”
Read the full report here.
