The Russian Wealth Advisors Forum describes itself as “the main meeting place” for global experts advising high net worth individuals from Russia and post-Soviet states. The agenda for this year’s rally in Zurich, which was to be held in May, focused on defending the wealth of Russia’s super-rich.
“The world has become a perilous place for the rich,” the event’s website worried. “Governments are greedy for money. Information about who owns what is circulating. The rich are in the spotlight, and often a target.
Presentations, including “The Pandora Papers and Their Effect on the Wealthy”, “Taxation and Immigration”, and If Cryptocurrency Was a Bankable Asset, would be presented by speakers from major accounting and legal firms, including PwC, EY and Mishcon de Reya.
But as of Thursday morning, the Russian Forum of Wealth Advisors was no more. “We are currently in the process of exiting the Russian market, transferring all Russian events to new ownership,” the event organizer said via email.
It is not clear who will be ready to undertake such an event. Rather than planning new deals and investments, Russian billionaires and millionaires are frantically moving their cash out of democratic states, fleeing a tsunami of sanctions from the US, EU and, to a lesser extent, the Kingdom. United, aimed at putting pressure on the Putin regime. in a ceasefire.
On Wednesday, the Biden administration announced the formation of KleptoCapture Working Group to identify and freeze the assets of Russian businessmen who prospered under Putin’s regime. “Oligarchs, be warned: we will use every tool to freeze and seize your criminal proceeds,” said Lisa Monaco, deputy attorney general.
At the same time, Western companies are scrambling to reduce their exposure to the Russian market in hopes of mitigating the backlash from current or future sanctions. In the UK, this has created a host of problems for consultants, accountants, PR firms and lawyers who represent London’s professional services industry.
London libel lawyers have developed a checkered reputation at home and abroad for threatening journalists with legal action in the UK on behalf of wealthy clients. This distaste has traditionally been countered by the argument that every client has a right to representation. But after the invasion, at least one smear firm said it was not accepting Putinist clients.
In one declaration posted on his website, Carter-Ruck said he “did not work for any Russian individual, company or entity seeking to challenge, rescind, thwart or minimize sanctions”, and that he had never done so. “Carter-Ruck does not and will not act for any person, company or entity associated with Putin’s regime,” he said.
“We do not act for any sanctioned person or entity, whether to have sanctions lifted or otherwise,” a spokesperson for Schillings said. “We hope government sanctions will be an effective tool to shorten the Russian regime’s horrible war in Ukraine.”
Another defamation firm, Harbottle and Lewis, said: ‘We do not act for any sanctioned person or entity, nor do we engage and have not engaged in any dialogue with the government in relation to the imposition of sanctions.”
A partner in a third firm, Mishcon de Reya, was among those scheduled to speak at the Russian Advisors Wealth Forum before his withdrawal. A company spokesperson said he would have pulled out had the event not been canceled first.
The spin doctors
The PR industry is also facing a settling of scores, with UK government sources saying those who continue to portray allies and operatives of Putin’s regime could expect to pay the price.
In addition to dropping sanctioned customers, “we are also in the process of reviewing all ongoing connections with non-sanctioned Russian entities and, if it is appropriate to remove ourselves from these matters, we will do so,” said a spokesperson for FTI Consulting. “We will not be accepting new Russian-controlled customers at this time.”
Asked if he was still representing Oleg Deripaska’s aluminum company EN+, Billy Clegg, a partner at PR firm Camarco, said: “We quit yesterday.”
Andrew Hayes, the managing partner of public relations firm Hudson Sandler, said: “In light of Russia’s invasion of Ukraine, which we totally condemn, we are halting all our activities in Russia.”
Francis Ingham, Director of the Public Relations and Communications Association, says Politico that Russia was now “a pariah state”. He continued, “Our members cannot support organizations that are on the sanctions list in any way.”
Accounting firms, including the so-called ‘big four’ – PwC, EY, Deloitte and KPMG – issued statements expressing shock at the Russian invasion. Together they employ more than 13,000 people in the country and audit the accounts and balance sheets of private and public entities.
Companies do not systematically publish their profits at the national level, although an EY transparency document from 2019 reported revenues of more than 6 billion rubles (£41 million).
A PwC spokesperson said it deplored “the violation of international law and Russian aggression against Ukraine”, while EY said it was “assessing existing and new mandates in light of new sanctions and a rapidly changing regulatory landscape”.
A Deloitte spokesman said: “Russia’s invasion of this sovereign nation is an indefensible act of aggression that echoes the darkest days in European history.”
“It has been devastating to watch the tragic events in Ukraine unfold and my thoughts are with everyone affected,” said Jonathan Holt, Managing Director of KPMG UK in A declaration condemning the invasion on LinkedIn.
Amid expressions of dismay, substantial pledges to close Russian offices or stop working with Russian state entities have been sorely lacking.
However, speaking on condition of anonymity, a senior executive at one of the Big Four said companies necessarily release ‘tortured’ statements to avoid inciting retaliation against local employees by the regime. Putin.
The executive explained that the accounting firms were federations of branded companies, rather than hierarchical structures in which a Russian subsidiary was “owned” by a Western head office. As a result, the global headquarters of accounting firms cannot easily order their Russian offices to drop certain activities, and many, if not most, of their local partners are themselves Russians.
As well as opening companies up to legal action for breach of contract, they said, it would risk inciting retaliation against local staff by the Kremlin, which has announced plans to ban Western companies from get rid of their customers. But they said it was likely that within months the Russian branches of the various companies would disaffiliate from Western brands.
“Directionally, are people going to have to leave their networks? Probably yes,” they said. “But this must be done in a way that does not upset the Russian authorities.”
The same leader said the massive array of sanctions imposed on Putinist Russia after its invasion of Ukraine had created a legal minefield for Western, and particularly American, companies retaining their Russian operations or subsidiaries.
Multinationals, from McDonald’s to Microsoft, have Russian subsidiaries, which have yet to be reflected in their parent company’s balance sheet, the executive said. There is a legal requirement for all subsidiaries to be audited to ensure the financial integrity of their parent companies.
However, the executive said, it is now unclear whether these accounts can legally be audited by a Western company. Likewise, if Russia passes laws prohibiting Western companies from leaving, accounting firms could commit criminal or civil offenses in Russia if they simply abandon the business.
That leaves accounting firms caught between a rock and a hard place, having to balance their compliance with Western sanctions against the risk of retaliation from the Kremlin.
Nonetheless, they said, the direction of travel was clear and it was inevitable that a major pullback would take place over the next few months. “There’s an awful lot of work going on behind the scenes,” the executive said. “The current status quo is not an option.”