• Thursday, June 13, 2024
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Russia-Ukraine Conflict: EY joins PwC and KPMG to exit Russia

Russia-Ukraine Conflict: EY joins PwC and KPMG to exit Russia

EY has joined its ‘Big-Four’ counterparts as the company suspended its 4,700-person business in Russia, thus becoming the third of the Big Four accounting firms to announce a divorce from its operations in the country since the invasion of Ukraine.

PwC and KPMG had announced similar moves earlier, citing the Russian government actions in Ukraine. The other Big Four firm, Deloitte, said last week that it was reviewing its “business and presence in Russia”.

The withdrawals are the most significant exits of professional services firms from the country since the conflict in Ukraine began last month.

“In light of the escalating war, the EY global organisation will no longer serve any Russian government clients, state-owned enterprises or sanctioned entities and individuals anywhere in the world,” EY indicated in a statement on Monday.

The firm said it had begun a restructuring to separate its Russian member from the group. “This is not something we take lightly,” it said, calling the decision “heartbreaking” and the war “shocking and abhorrent”.

Read also: Russia – Ukraine conflict: New Zealand to expand sanctions

EY’s Russian staff account for a little over 1.5 per cent of its global workforce of 312,000. It also employs 700 people in Ukraine.

Between them, EY, KPMG and PwC had more than 12,000 staff and partners in Russia.

The Big Four are structured as networks of locally owned partnerships with most of the profits retained in each country, meaning that their Russian operations will continue to exist as stand-alone entities under new names.

The newly independent firms will be free to work for both domestic and international clients. They are not bound by western sanctions imposed on hundreds of Russian companies and individuals.

Remaining in the Big Four networks posed potential problems for the Russian firms because they faced criminal punishment if they dropped clients in order to comply with the western sanctions by which their international colleagues were bound. Auditors in the country also face significant penalties if they resign from contracts with state-owned entities, said people in the industry.

The Big Four, which provide tax and consulting advice as well as accounting and audit services, are generally free to refer work to independent firms in countries where they do not have a presence.

Accountants and consultants that have announced they will pull back from Russia are likely to face scrutiny this week over the details of their plans.

Consultants McKinsey and Boston Consulting Group announced last week that they were suspending work for Russian clients but said they would continue work on some existing projects in the country and have kept their Moscow offices open.

Also on Monday, international law firm Norton Rose Fulbright said it was exiting Russia. The firm, which has 50 lawyers based in the country, said it was “closing its Moscow office as quickly as it can” and was not “accepting any further instructions from businesses, entities or individuals connected with the current Russian regime, irrespective of whether they are sanctioned or not”.

“We would donate the profits to appropriate humanitarian and charitable causes in any case where it could not immediately exit Russian mandates,” the firm added.