Filenews 9 March 2022 - by TheanoThiopoulou
It is with concern that the four large - multinational - accounting companies are watching the "divorce" from their activities in Russia, as part of the sanctions after the Russian invasion of Ukraine. The sector of companies' operations in Cyprus and the possibility of being hit by the sanctions imposed by both the European and the US authorities could not be absent from the concerns.
The weekend was particularly intense, following the decision of the so-called Big Four to suspend their operations in Russia, heightening concerns about wider impacts on the industry. The start was made by the audit firms KPMG and PwC, followed by EY (formerly Ernst & Young) and Deloitte. It is recalled that PwC and KPMG had announced the decisions on Sunday night, citing the actions of the Russian government in Ukraine. This was followed by Deloitte, which announced on Monday afternoon that it would separate its activities in Russia and Belarus from its global network and that it would cease to operate in those countries. This was followed by EY, which is expected to suspend the work of its 4,700 employees in Russia.
These moves could not go unnoticed in Cyprus. Almost immediately, teleconferences of the companies' executives began in order to evaluate the situation and to calculate the impact that their turnover and clientele may suffer at a Cypriot level from the sanctions submitted by the European and US authorities. It is not only the hoarseness of sanctions but also the impact of the capital control imposed by the Russian authorities on the export of capital, affecting remittances for payments that companies from Russia can make to other countries, including Cyprus. This measure comes on top of the exclusion of certain banks from the Swift system, a move that blocks transactions with companies or even individuals.
"F" contacted the major audit firms but at this stage not all were ready for an initial assessment of the side effects that can be caused in Cyprus by the sanctions that have been submitted.
Pieri Markou, Deloitte's managing director in Cyprus, noted to "F" that due to the closure of the firm's operations in Russia, practical problems arise, due to common systems that may exist and we should see, he said, how the internal procedures are affected.
According to reports by the FT, the Big Four are structured as networks of local partnerships, with most of the profits maintained in each country, meaning that their Russian activities will continue to exist as autonomous entities with new names.
On this point, Mr Markou clarified that it remains to be seen, after Deloitte's departure from Russia, what form of cooperation there will be with the new office, for clients who are not subject to sanctions. In relation to the part of the work in Cyprus and whether the sanctions will have an impact, Mr. Markou notes that to a certain extent the work of the audit firms here will also be affected, but it is too early to see to what extent. Even if the ceasefire talks between Russia and Ukraine go ahead, he added, it will take some time to lift the restrictions, stressing that the situation that has been caused affects not only the audit services, but also lawyers and other supporting professions.
Scenarios for the situation
On Sunday night, KPMG's decision to withdraw the network from Russia and Belarus was also announced. According to an announcement by the firm's office in Nicosia, following a communication between "F" and him, "although it is expected that there will be repercussions on the professional services sector due to this decision, the exact magnitude of the impact cannot be estimated today, as it depends on factors such as the duration of the war, the time horizon needed for any return to normality, the extent of any new sanctions that may be imposed, as well as the practical difficulties that may arise along the way. The firm is studying and developing various scenarios for dealing with the new situation.
