PwC and KPMG leave Russia and Belarus after the invasion of Ukraine
PwC and KPMG have severed ties with their businesses in Russia and Belarus, becoming the first accounting firms of the Big Four to leave the country since the invasion of Ukraine.
The moves are the largest departures from Russia by global professional services groups since the start of the war in Ukraine last month and are expected to increase pressure on peers Deloitte and EY to follow suit.
“Everyone knows the game is up in terms of being able to retain a network business in Russia,” said an insider at a Big Four firm.
PwC, which operates a global network of local businesses, said it was cutting ties with its Russian member, which has 3,700 partners and employees at 11 locations in the country, as well as its 25-person office in Belarus.
The companies will continue to operate as stand-alone entities with no formal connection to the global brand.
PwC’s newly independent Russian and Belarus operations will be rebranded and free to continue working for local clients as well as serving international companies with operations in the countries, a person with direct knowledge of the deals said.
KPMG said ending its association with its 4,500 people in Russia and Belarus was “incredibly difficult”. “This decision does not concern them, it is a consequence of the actions of the Russian government,” KPMG said in a statement.
He said it was a “values-driven organization that believes in doing the right thing”, adding that it would provide support to employees in countries.
The exits follow Friday’s announcement by consultancy Accenture that it was cutting its 2,300-person Russian business. McKinsey, Boston Consulting Group and Bain & Company halted work for Russian clients, while intermediary accountant Grant Thornton parted ways with its Russian subsidiary.
Leaving Russia was complicated for the Big Four by their structure in federated networks of autonomous national companies, held by the partners of each country.
Conflicting laws had left the Big Four in a difficult position where their Western operations were subject to sanctions if they acted for sanctioned clients in the West, but their Russian partners and staff could be punished by the Kremlin for failing. comply with these sanctions by abandoning the work. Becoming independent will leave Russian companies free to decide what work they undertake.
PwC’s Russian clients include Sberbank, the country’s largest bank, state oil company Gazprom and Russia’s central bank. International clients with operations in the country include Mars, Toyota and Credit Suisse.
Under the new arrangements, Russian companies could continue to carry out the local component of audits or tax work of international clients and receive recommendations from their former international colleagues.
Audits of Russian groups with operations abroad, including public entities, could still be carried out by PwC network firms provided they are not subject to sanctions and have passed an “assessment enhanced risk,” said the person familiar with the matter.
PwC won’t work for Russian clients anywhere in the world if they’re sanctioned by any jurisdiction, the person says, meaning its businesses in the UK and Europe won’t serve clients who are only targeted by American measures, for example.
The process of removing a member company usually takes at least a year, but should be much faster in this case. KPMG said it would strive to finalize his departure within days.
PwC said it would “undertake an orderly transition for the business” and focus on the welfare of its Russian staff.
“Our main objective. . . continue to do everything we can to help our Ukrainian colleagues and support humanitarian efforts to help the Ukrainian people who have been devastated by this invasion,” he added.