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The Cyprus wing of PwC has seen a break-off, following the Big Four company’s decision not to cater to Russian clients amid the country’s invasion of Ukraine. A trio of the firm’s former partners have exited to launch Kiteserve.
Under pressure to sever ties with Russia’s government, several of the world’s largest professional services firms have closed their offices in the country in the last year. PwC was among the top consulting brands to cease trading in Russia, as well as cutting off clients from the nation, in a bid to distance the firm from ties with the establishment.
But PwC’s “sanctioned anywhere, sanctioned everywhere” approach to Russian clients since shortly after the beginning of the war goes beyond what is legally required of the company. The approach had a particularly large impact on PwC in Cyprus, given the extensive links between the two countries – thinning the firm’s roster of clients and prompting the trio of partners to quit and launch Kiteserve.
About half of Kiteserve’s clients have a Russian connection, according to The Telegraph. However, speaking to the newspaper, managing partner Theo Parperis insisted that Kitserve is “very selective”, and could have taken on “four times more work if we wanted”.
Claiming the consulting firm still observed EU, US and UK sanctions, Parperis added, “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 are very selective.”
Parperis also argued that while roughly 50% of Kiteserve’s clients have links to Russia, his firm should not be “singled out”, as the clients are also “serviced by Western banks, by Western lawyers”. At the same time, he stated that the firm’s work relates mostly to assets in the West, rather than in Russia, and that the number of Russian linked clients would reduce over time.
Operating in the same audit, tax and advisory space as PwC, Kiteserve will not voluntarily observe sanctions imposed by countries such as Australia and Canada, meaning it is able to take on clients the ‘sanctioned anywhere’ policy of PwC blocks. It also provides services to entities hit with EU sanctions when permitted under a derogation, but it is understood that this accounts for a “small percentage” of its overall clientele.
PwC has been swift to distance itself from its former employees. Kiteserve’s founders struck a deal with the Big Four group to buy themselves out of restrictions on hiring PwC Cyprus staff (roughly 20 PwC staff have since inception moved to the new brand), while also avoiding the usual five-year non-compete on former partners selling audit, tax or compliance services.
The value of the carve-out was not disclosed, though PwC noted 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”. Meanwhile, PwC Cyprus has pivoted its remaining business, and is already finding new work in a ‘bounceback’ strategy aimed at weaning it from firms which are linked to Russia.
Kiteserve is currently operating from PwC’s offices in Nicosia and Limassol – with PwC subletting to Kiteserve while it negotiates a transfer of the leases. Beyond that, PwC hastened to add that “Kiteserve is fully independent of PwC Cyprus and is not a member of the PwC network,” and beside these “arm’s length agreements,” there were no agreements with the company, nor “any economic interest” in the new business.
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