As sanctions loomed, accounting giant PwC scrambled to keep powerful Russians a step ahead

On March 1, 2022, as Russia was intensifying an invasion that would kill thousands of Ukrainians within weeks, a manager at the accounting firm PwC in Nicosia, Cyprus, sent an urgent message to a colleague: A pair of clients was asking to immediately transfer $100 million between two shell companies they controlled. The source of the money was Evraz PLC, a steelmaker that produces 97% of the rails that Russia’s trains use to move ammunition, military equipment and troops to the front line of its war in Ukraine.

Two months later, the U.K., as part of a campaign to weaken the Russian war effort, declared Moscow-based Evraz “of strategic significance to the government of Russia” and sanctioned it by banning U.K. citizens and businesses from doing business with the company. Before year’s end, the U.K. had also imposed an asset freeze and travel ban on the two PwC clients themselves, describing the men as part of the “cabal of selected elite” that Russian President Vladimir Putin relies on to maintain the industrial complex he has used to invade Ukraine. The PwC clients were Evraz’s longtime leaders: Alexander Abramov and Alexander Frolov. A pair of scientists and self-made billionaires, they navigated the chaos of the Soviet Union’s collapse to emerge atop one of Russia’s largest industrial conglomerates.

Their urgent $100 million transaction request that PwC, headquartered in London and formerly known as PricewaterhouseCoopers, fielded in the first days of the war was part of a broader effort to administer a sprawling network of investments that Abramov and Frolov controlled on at least three continents. The oligarchs’ holdings were routed through legal entities set up in jurisdictions known for attracting the ultra-rich by hiding their fortunes and helping them avoid taxes.

“This looks like a classic structure used for money laundering and possibly worse,” says Zoe Reiter, co-founder of the nonprofit research group Anti-Corruption Data Collective, who reviewed Abramov and Frolov investment records. “Anyone at PwC should know that.”

Abramov and Frolov did not respond to requests for comment. A senior Cypriot lawyer who has worked for them declined to comment, citing client confidentiality.

PwC’s work for the Russian billionaires is part of a global system of enablers who, at a time of war, have undermined Western efforts to hurt Russian oligarchs financially and to sow discontent with Putin in their ranks. Instead, PwC and others have furnished Russia’s president and his financial backers with the means to lay claim to vast amounts of national wealth and pursue their ambitions with virtually no oversight from the Russian people or anyone else.

A review of leaked records and publicly available corporate reports by the International Consortium of Investigative Journalists (ICIJ) shows that PwC Cyprus provided services to at least 62 shell companies and trusts controlled or owned by Abramov and Frolov — some of which the oligarchs used to structure their Evraz holdings. Those findings are part of Cyprus Confidential, an ICIJ investigation into a cache of 3.6 million leaked documents from six Cypriot financial service providers and a Latvian company that sells Cyprus corporate registry data. The records contain a large number of internal company documents involving PwC Cyprus dating back to the mid-1990s, but mostly generated between 2014 and 2022.

Together, the records provide an in-depth look into PwC’s extensive operations in Cyprus. The documents also reveal a striking — and ultimately troubling — willingness to provide accounting, audits and other services to the secret offshore networks controlled by members of Putin’s inner circle and others who have contributed directly to his Ukraine war effort. Since Russia began its assault on Ukraine by invading Crimea in 2014, PwC Cyprus has worked for a Russian-controlled energy firm operating there, the owner of a major Russian military contractor and the family of a Russian military strategist.

The records show that in the weeks after Russia’s full-scale invasion of Ukraine, wealth managers at PwC Cyprus scrambled to help rich Russian clients under imminent threat of sanctions – like the ones imposed on Abramov and Frolov – shift hundreds of millions of dollars between secretive shell companies. Sometimes these transfers involved handing over major assets to family members, a well-known way to evade sanctions. PwC Cyprus appeared careful to avoid doing business with anyone under European Union sanctions, which could have violated the law. However, on at least one occasion the firm appears to have worked with a Russian billionaire to complete a massive asset transfer to a woman who authorities identified as his wife just after the EU imposed sanctions on him. Authorities have declared the asset transfer invalid and launched a criminal investigation.

For PwC Cyprus, providing services to Russians who are the subject of Western sanctions is nothing new. Before Russia’s February 2022 invasion of Ukraine, the accounting firm’s client roster included a dozen Russians who were already under sanctions around the world due to their involvement in their government’s illegal 2014 annexation of Crimea and military aggression in Donbas.

After the 2022 invasion, an additional 39 of PwC Cyprus’ Russian clients were hit with sanctions by the EU, U.K., United States or Ukraine because of their close ties to Putin or their prominent roles in economic sectors critical to his regime’s war in Ukraine. Most of the more recent documents in the Cyprus Confidential investigation are dated no later than April 2022, so it’s unclear whether PwC Cyprus has continued to provide services to its many Russian clients who are the subject of Western sanctions.

Citing the need to maintain confidentiality, PwC declined to comment on its business with Abramov, Frolov and other clients. It added that it complied with EU and United Nations sanctions before Russia’s February 2022 invasion and has since severed ties with 60 clients as a result of the company’s new Russia-related sanctions policy. “PwC’s internal standards are reviewed and updated to reflect both lessons learned and changing circumstances,” Mike Davies, a PwC spokesperson, said in a statement, “and we do not hesitate to take action when our standards are not met. Any allegation of non compliance with applicable laws and regulations is taken very seriously, investigated and appropriate action is taken if necessary.”

The firm said its Cyprus office had “pivoted to a new economic model fit for the future, transforming its business” and pointed to the office’s annual report for 2022. PwC Cyprus’ fiscal 2023 annual report, released in September, cited a “significant contraction” in business related to implementing the global sanctions policy.

Not long after the invasion of Ukraine, PwC joined an exodus of Western companies, declaring that it was separating itself from its Russian affiliate.

“PwC member firms outside of Russia are exiting any work for Russian entities or individuals subject to sanctions,” the company said at the time.

They’re perfectly within their rights to keep doing this work — but it points to the rot at the heart of the accountancy industry.
— Casey Michel, Human Rights Foundation

Professional service providers are in some instances permitted to work with such clients, even when their work appears to conflict with Western efforts to slow Russia’s war machine. The U.S. allows lawyers to represent sanctioned entities in court and other government matters. American lobbyists can also obtain licenses to work for them. PwC and other firms face the same restrictions as everyone else when governments impose sanctions on citizens and companies. Often, these sanctions freeze the Russian entity’s assets and prohibit the sanctioning state’s citizens from doing business with them. This means PwC Cyprus is obliged to comply with sanctions imposed by its government and by the EU but not legally required to abide by other Western restrictions.

“They’re perfectly within their rights to keep doing this work,” says Casey Michel, director of the Combatting Kleptocracy Program at the Human Rights Foundation, “but it points to the rot at the heart of the accountancy industry.”

At the center of Russian oligarchs’ secretive financial networks are PwC and other Western service providers that incorporate and maintain trusts and shell companies, recruit individuals to serve as directors, and handle duties such as filing audits and tax returns. Together they form what Northwestern University political science professor Jeffrey Winters describes as the “wealth defense industry.”

“Putin can use it for whatever he needs,” Winters says of the hidden wealth, “and it’s safe to assume he’s using it to sustain his war efforts.”

A shadowy partnership

PwC’s roots go back to the 19th century, when Samuel Lowell Price and William Cooper set up separate accounting practices in London. Over the following decades, they came together and grew through a series of mergers, eventually emerging as PricewaterhouseCoopers and known around the world since 2010 as PwC.

Overseeing this network is Global Chairman Robert E. Moritz. An American who studied at the State University of New York at Oswego, Moritz is a PwC lifer who has run the company since 2016. Its U.K. senior partner, Kevin Ellis, joined in 1984 and has also spent his entire career at PwC. Cyprus chief Philippos Soseilos is a 30-year company veteran.

PwC’s tight-knit leadership has made the organization into the world’s second-largest accounting firm, with more than 295,000 employees in 156 countries. It operates not so much as a unified company but like a loose affiliation of independent franchisees offering audit, legal, consulting and tax services.

“The PwC network is not a global partnership, a single firm, or a multinational corporation,” its website explains. “For these reasons, the PwC network consists of firms which are separate legal entities.”

This decentralized structure enables PwC and other accounting firms to tout their global reach while distancing themselves from any trouble that their largely autonomous local units get themselves into, according to Francine McKenna, a PwC and KPMG veteran who writes the accounting newsletter The Dig.

That structure is “very effective in insulating members from legal liability,” McKenna says. “They can take advantage of global branding and marketing on the positive side, but when there’s bad news, they can say that it was a rogue partner.”

PwC Cyprus is the biggest accounting firm on the eastern Mediterranean island. Since a bloody standoff between Greece and Turkey in the 1970s, most of Cyprus has been headed by a democratically elected government that is internationally recognized and became a European Union member in 2004. In the past decade, Russian oligarchs’ close ties to PwC Cyprus have helped transform Russia into Cyprus’ biggest foreign economic player.

Thanks in large part to inflows of Russian money, Cyprus is generally seen as an advanced economy that has outpaced many of its Middle Eastern neighbors. Even in Cyprus’ dusty climate, the BMWs and Porsche SUVs common on its highways are immaculately polished. The hoards of Russian tourists — and their deep wallets — have earned its coastal city of Limassol the nickname “Moscow on the Med.” One Limassol pizza shop offers a $1,050 caviar pizza served with Dom Perignon Champagne. At the city’s marina, known for hosting massive Russian pleasure vessels, you can buy a $418 cigar or take home a diamond necklace for six figures.

Many business leaders thriving in Russia today built their fortunes via close ties to President Putin. For Russia’s ultra-rich, loyalty has yielded a life of extreme luxury known to few on Earth. They live in the rarified world of rambling estates on the French Riviera, private tropical islands and London penthouses. This universe of extreme opulence relies on an industry of financial professionals trained in the craft of hiding fortunes and minimizing taxes.

Often operating from Cyprus and other “secrecy jurisdictions,” which are known for keeping financial information under wraps, firms like PwC help maintain secret trusts and anonymously owned shell companies that obscure questionable sources of income and hide the ownership of yachts, mansions and politically connected payments. (In Cyprus, financial service providers are required to disclose to regulators the identity of the beneficial owners of the companies they administer, but this information is not always publicly accessible.)

Bolstered by these professional service providers who play a kind of shell game with funds, the oligarchs use their control of rich deposits of natural resources and other assets to enrich themselves and faithfully finance president Putin’s priorities — none more urgent than his effort to dominate Ukraine.

Western service providers are the “main instrument for the Russian elite,” says Maria Snegovaya, senior fellow with the Europe, Russia and Eurasia program at the Center for Strategic and International Studies. “They don’t like staying locked in Russia. They like stealing money in Russia and sending it somewhere else.”

In a response to questions from ICIJ partners, a Cyprus Finance Ministry official noted that, even before the February 2022 invasion of Ukraine, Russian deposits in Cyprus’ banking system had dropped to just 4%. He pointed out that a recent International Monetary Fund study also showed diminishing direct investment into Russia by entities established in Cyprus.

Cyprus’s efforts to fight money laundering are documented by the European Union’s advisory group on the topic, and the country “compares favorably within the international community,” ranking within the top 25% internationally, he added.

And at a recent press conference, a Cyprus government spokesman announced stepped-up efforts to coordinate sanctions enforcement internationally and said this demonstrates “the government’s stated intention to show zero tolerance on matters concerning sanctions evasion and law violation, and by extension, to safeguard the country’s name as a reliable financial center, which is considered to be of key importance.”