Lawyers, spin doctors, and accountants for super-wealthy individuals are struggling to contain their exposure to the Russian market.
The Russian Wealth Advisors Forum is “the most popular gathering place” for global experts who advise ultra-high net worth persons from Russia and the former Soviet republics, according to its website. The purpose of this year’s meeting in Zürich, which is scheduled to take place in May, has been explicit to protect the assets of the Russian ultra-wealthy.
“The wealthy are in increasing danger in today’s world,” the event’s website announced. “Governments seek funds. Information about who owns what is spreading throughout the world. The wealthy are under intense public scrutiny and frequently targeted.”
Speakers from top accounting and legal firms, including PwC, EY, and Mishcon de Reya, would present the following themes: “The Pandora papers and their impact on the wealthy,” “Tax and immigration,” and whether cryptocurrency was a bankable asset.
The Russian Wealth Advisors Forum, on the other hand, had vanished as of Thursday morning. The event’s organizer said in an email that we are now in the process of exiting the Russian market, transferring all Russian events to a new owner.
It’s difficult to pinpoint who would be interested in such an event today. In place of strategizing new arrangements and investments, Russia’s billionaires and millionaires are rushing their liquid assets out of democratic countries. The EU and the US, along with smaller UK authorities, have introduced scorching sanctions against Russia in a bid to force Vladimir Putin’s regime to a ceasefire.
On Wednesday, the Biden administration announced the creation of Task Force KleptoCapture to find and freeze assets belonging to Russian businesspeople who benefited under Putin’s rule. “Oligarchs beware: we will use every tool at our disposal to freeze and seize your criminal profits,” said Deputy Attorney General Lisa Monaco.
At the same time, Western organizations are attempting to minimize their exposure to the Russian market to limit any future consequences. That has created a slew of issues for consultants, accountants, public relations agencies, and attorneys who work in the city’s professional services industry in the United Kingdom.
In the UK, lawyers have a checkered history of threatening journalists with court action on behalf of wealthy clients. The argument that everyone has the right to legal representation has traditionally been used to counter it. But, at least one libel firm has stated that it will no longer take Putinist cases since the invasion.
Carter-Ruck, in a statement posted on its website, said it was “not suitable for any Russian people, organizations, or businesses seeking to challenge, overturn, frustrate, or minimize sanctions.” It also stated that it has never been so. “Carter-Ruck is not acting on behalf of, and will not be acting on behalf of, any individual, company, or entity affiliated with the Putin regime,” the statement added.
“We are not representing any sanctioned individuals or entities, whether to have sanctions lifted or otherwise. We hope that the government’s sanctions will be an effective tool for hastening the Russian regime’s odious war in Ukraine,” said a Schilling’s rep.
“We are not acting for any sanctioned individuals or organizations, and we have not engaged with the government in connection with the imposition of any penalties.” “Harbottle and Lewis Legal LLC”
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 canceled. A spokesperson for the company stated that he would have withdrawn if the event did not get canceled first.
The Spin Doctors
The public relations industry is also facing a crisis, with UK government sources warning that those who continue to represent Putin regime allies and agents may be persecuted.
“We are also in the process of reviewing all ongoing connections with non-sanctioned Russian entities and, where it is appropriate to cease involvement, we will terminate those relationships.” A spokesperson for FTI Consulting further stated that while they will not be taking on any new Russia-controlled clients at this time, “we will be
“We resigned yesterday,” Clegg confirmed when asked if it was still representing Oleg Deripaska’s aluminum firm EN+. “Yes.”
“Following Russia’s invasion of Ukraine, which we condemn, we are halting all our Russian operations, ” explains the PR firm’s managing partner Hudson Sandler.
The head of the Public Relations and Communications Association, Francis Ingham, said to Politico that Russia has become a “pariah state.” He added: “Our members are not permitted to support organizations on the blacklist.”
The Russian invasion has stunned accounting firms, including the so-called “big four” – PwC, EY, Deloitte, and KPMG. They audit the accounts and balance sheets of private and state-owned companies. 11,000+ people are employed by these firms together to audit the financial records of both public and private.
Although there are a few exceptions, most corporations do not publish their earnings countrywide. According to an EY transparency document from 2019, revenues were more than 6 billion roubles.
“We deplore the violation of international law and Russian aggression against Ukraine,” said a PwC spokesperson. “We are evaluating existing and new mandates given new sanctions and a rapidly changing regulatory environment.”
“The invasion of this sovereign nation by the Russian army is an indefensible act of aggression that evokes the darkest days in European history,” said a representative for Deloitte.
“It has been devastating to witness the tragic events in Ukraine play out, and my thoughts are with all those affected,” Jonathan Holt, KPMG UK’s CEO, wrote on LinkedIn.
Amidst the complaints of outrage, serious promises to close Russian offices or cease working with state-owned Russian corporations have been sorely lacking.
A senior executive at one of the big four firms, however on condition of anonymity, said the businesses were compelled to put out “tortured” remarks to avoid provoking reprisals against local staff by Vladimir Putin’s regime.
According to the executive, accounting firms were federations of businesses linked with a brand rather than hierarchical structures in which a Russian subsidiary is “owned” by a western headquarters. Many, if not most, of their local partners are themselves Russian, so it’s difficult for accounting organizations’ global headquarters to issue instructions to their Russian branches to abandon specific enterprises.
Opening firms to legal claims for breach of contract, they warned, would also put the businesses at risk of provoking Kremlin retaliation against local employees. The Kremlin has declared plans to ban western businesses from dumping their customers. They predicted, however, that within a few months the various businesses’ Russian divisions would break ties with their western counterparts.
“People will have to cut off their connections, I believe. Yes, probably so. But it must be done in such a manner that it does not anger the Russian authorities.”
The executive said that the extensive collection of penalties levied against Putinist Russia following its invasion of Ukraine has created a legal minefield for Western, especially American, businesses retaining their Russian companies or subsidiaries.
According to the executive, multinationals from McDonald’s to Microsoft have Russian branches that must yet be shown on their parent company’s balance sheet. All subsidiaries are legally required to be audited to assure the financial integrity of their parents.
However, the executive noted that it is now uncertain whether such accounts may be lawfully audited by a western firm. Similarly, if Russia follows through with a law that bans foreign businesses from leaving, accountancy firms may be committing criminal or civil offenses in Russia if they abandon their operations without consulting the authorities.
Accountants are caught between a rock and a hard place, having to balance their compliance with Western sanctions against the danger of Kremlin retaliation.
Nonetheless, they said, the course of action was apparent and a significant drawdown would most certainly occur in the months ahead. “There’s a lot of activity going on behind the scenes,” the executive added. “The present state of affairs is not an option.”
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