The Russian Wealth Advisors Forum describes itself as “the leading meeting place” for global experts who advise ultra-high net worth individuals from Russia and the post-Soviet states. The agenda for this year’s gathering in Zürich, due to be held in May, was laser-focused on defending the wealth of the Russian super-rich.
“The world has become a perilous place for the wealthy,” the event’s website fretted. “Governments are hungry for cash. Information on who owns what is flowing around. The rich are in the spotlight, and often a target.”
Presentations, including “The Pandora papers and their effect on the wealthy”, “Tax and immigration”, and whether cryptocurrency was a bankable asset, would be delivered by speakers from top accounting and legal firms, including PwC, EY and Mishcon de Reya.
But as of Thursday morning, the Russian Wealth Advisors Forum was no more. “We are currently in the process of exit from the Russian market, passing all Russian events to a new owner,” the event’s organiser said by email.
Exactly who will be willing to take on such an event now is unclear. Rather than strategising fresh deals and investments, Russia’s billionaires and millionaires are instead frantically relocating their liquid assets out of democratic states, fleeing a tsunami of sanctions from the US, the EU, and to a lesser extent the UK, aimed at pressuring the Putin regime into a ceasefire.
On Wednesday the Biden administration announced the formation of Task Force KleptoCapture to identify and freeze the assets of Russian business people who prospered under the Putin regime. “Oligarchs be warned: we will use every tool to freeze and seize your criminal proceeds,” said Lisa Monaco, the deputy attorney general.
At the same time, western businesses are scrambling to reduce their exposure to the Russian market with the hope of mitigating the blowback from current or further sanctions. In the UK, that has created a host of problems for the consultants, accountants, PR firms and lawyers who represent London’s professional services sector.
The lawyers
London’s defamation lawyers have developed a chequered reputation at home and internationally for threatening journalists with UK court action on behalf of wealthy clients. That distaste has traditionally been countered with the argument that every client is entitled to representation. But after the invasion, at least one libel firm has said it was not accepting Putinist clients.
In a statement published on its website, Carter-Ruck said it was “not working for any Russian individuals, companies or entities seeking to challenge, overturn, frustrate or minimise sanctions”, and that it never had. “Carter-Ruck is not acting for, and will not be acting for, any individual, company or entity associated with the Putin regime,” it said.
“We are not acting for any sanctioned individuals or entities, whether to have sanctions lifted or otherwise,” said a spokesperson for Schillings. “We hope that the government’s sanctions will be an effective tool in foreshortening the Russian regime’s abhorrent war in Ukraine.”
Another libel firm, Harbottle and Lewis, said: “We are not acting for any sanctioned individuals or entities, and we are not engaging and nor have we engaged with the government in relation to the imposition of any sanctions.”
One of the partners at a third firm, Mishcon de Reya, was among those who had been scheduled to speak at the Russian Advisors Wealth Forum before it was pulled. A spokesperson for the firm said he would have withdrawn had the event not been cancelled first.
The spin doctors
The public relations industry also faces a reckoning, with UK government sources briefing that those who continue to represent allies and agents of the Putin regime could expect to pay a price.
In addition to dumping sanctioned clients, “we are also in the process of reviewing all ongoing connections with non-sanctioned Russian entities and, where it is appropriate to withdraw from those matters, we will do so,” said a spokesperson for FTI Consulting. “We will not be taking on any new Russia-controlled clients at this time.”
Asked if it was still representing Oleg Deripaska’s aluminium firm EN+, Billy Clegg, a partner at the PR firm Camarco replied: “We resigned yesterday.”
Andrew Hayes, the managing partner of the PR firm Hudson Sandler, said: “In light of Russia’s invasion of Ukraine, which we utterly condemn, we are stopping all our Russia business.”
Francis Ingham, head of the Public Relations and Communications Association, told Politico that Russia was now “a pariah state”. He continued: “Our members cannot, under any circumstances, support organisations that are on the sanctions list.”
The accountants
Accountancy firms, including the so-called “big four” – PwC, EY, Deloitte and KPMG – have 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 state-owned entities.
Firms do not routinely publish their profits at a country level, although an EY transparency document from 2019 reported revenues of more than 6bn roubles (£41m).
A PwC spokesperson said it deplored “the violation of international law and the Russian aggression against Ukraine”, while EY said it was “evaluating existing and new mandates in light of new sanctions and a rapidly evolving regulatory landscape”.
A spokesperson for Deloitte 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 all of those affected,” said Jonathan Holt, the chief executive of KPMG UK in a statement condemning the invasion on LinkedIn.
Amid the expressions of dismay, substantive commitments to shutter Russian offices or cease working with state-owned Russian entities have been noticeably lacking.
However speaking on condition of anonymity, a senior executive at one of the big four said the firms were necessarily issuing “tortured” statements in order to avoid inciting reprisals against local employees by the Putin regime.
The executive explained that accounting firms were federations of companies associated with a brand, rather than hierarchical structures whereby a Russian subsidiary was “owned” by a western headquarters. As a result accountancy firms global headquarters’ cannot easily instruct their Russian offices to drop certain business, and many, if not most, of their local partners are themselves Russian.
As well as opening the firms up to legal claims for breach of contract, they said, this would risk inciting retaliation against local staff by the Kremlin, which has signalled plans to ban western firms from dumping their clients. But they said it was likely that within a matter of months the various firms’ Russian arms would disaffiliate from the western brands.
“Directionally are people going to have to leave their networks? Probably yes,” they said. “But it has to be done in such a way as to not antagonise the Russian authorities.”
The same executive said the massive array of sanctions levelled against Putinist Russiaafter its invasion of Ukraine had created a legal minefield for western, and particularly American, firms retaining their Russian businesses or subsidiaries.
Multinationals from McDonald’s to Microsoft field Russian subsidiaries, which still need to be reflected on their parent company’s balance sheet, the executive said. There is a legal requirement for all subsidiaries to be audited in order to guarantee the financial integrity of their parent companies.
However, the executive said, it is now unclear whether such accounts can legally be audited by a western firm. Similarly, if Russia proceeds with laws banning western companies from leaving, accountancy firms could be committing criminal or civil offences in Russia if they simply abandon the business.
That leaves accountancy firms stuck between a rock and a hard place, needing to balance their compliance with western sanctions against the risk of reprisal from the Kremlin.
Nonetheless, they said, the direction of travel was clear and it was inevitable that significant drawdown would take place over the coming months. “There is an enormous amount of work going on behind the scenes,” the executive said. “The current status quo is not an option.”
