A few PwC partners have launched a breakaway firm in Cyprus to take on work from Russia-linked clients that the Big Four audit firms will no longer touch, according to the Financial Times.
PwC has operated a “sanctioned anywhere, sanctioned everywhere” policy globally since shortly after Russia’s full-scale invasion of Ukraine in February, going beyond what is legally required.
Given the island’s links with Russia, this affected PwC Cyprus, thinning the firm’s roster of clients and prompting three partners to quit in June and launch Kiteserve, a boutique about half of whose clients have a Russian connection.
Kiteserve managing partner Theo Parperis said his new firm observed EU, US, and UK sanctions.
“The Big Four went well beyond the sanctions imposed by these countries . . . and, effectively, we’re covering that space to a certain extent, but . . . we were very selective,” Parperis told the FT.
He said Kiteserve could have taken on “four times more work if we wanted”.
He estimated that about 50% of Kiteserve’s clients had links to Russia but predicted this would reduce over time.
The work related mostly to assets in the west rather than in Russia, Parperis added.
“These clients . . . are serviced also by western banks, by western lawyers.
“So why should we be singled out?”
Unlike PwC Cyprus, Kiteserve does not voluntarily observe sanctions imposed by countries such as Australia and Canada.
It provides services to entities hit with EU sanctions when permitted under a derogation, though this accounts for only a “small percentage” of Kiteserve’s clientele, said Parperis.
He said the “majority” was not the subject of sanctions by the EU, US or UK.
The Kiteserve founders struck a deal with the Big Four group to buy themselves out of restrictions on hiring PwC Cyprus staff and the usual five-year ban on former partners selling audit, tax, or compliance services.
The deal to waive the restrictions handed PwC Cyprus a gain in return for allowing the departing partners to work for any company they wished.
Neither PwC nor Kiteserve disclosed the deal’s value to remove the non-compete restrictions.
The sum was intended to offset the upfront cost to PwC Cyprus of making normal retirement payouts to the departing partners, said one person with knowledge of the arrangement.
PwC said the amounts were “in accordance with normal market practice, or contractual obligations” and “the net payment to the retiring partners is not material to PwC Cyprus or its partners”.
Parperis said he and his co-founders were close to PwC’s mandatory retirement age, and the Ukraine war had accelerated plans to strike out alone.
Kiteserve operates from PwC offices in Nicosia and Limassol.
PwC said the space was separate and was being sublet to Kiteserve on terms mirroring PwC’s rental contract while it negotiates a transfer of the leases.
Kiteserve hired about 20 of its roughly 30 staff from PwC.
“Kiteserve is fully independent of PwC Cyprus and is not a member of the PwC network,” said PwC.
Apart from the “arm’s length” agreements on separation and subletting “, there are no agreements between PwC Cyprus and Kiteserve and the partners do not have any economic interest in each other’s respective businesses”, it said.
PwC Cyprus said it had pivoted its business and found new work as part of a “bounceback” strategy after the impact of international sanctions. (source Financial Times)