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Accountants in Cyprus leave PwC to keep clients with ties to Russia

To accept business from clients with Russian ties which the Big Four accounting firms are no longer considering, a group of PwC partners established a breakaway firm in Cyprus.

Almost immediately after Russia's full-fledged invasion of Ukraine in February, PwC has implemented a "sanctioned anywhere, sanctioned everywhere" strategy on a worldwide basis, going above and beyond what is legally needed and expected.

Given the close ties between Russia and Cyprus, this had a particularly significant impact on PwC Cyprus. As a result, the firm's clientele shrank, and three partners left in June to found Kiteserve, a boutique firm with about half of its clients being Russian or having a Russian connection.

Theo Parperis, managing partner of Kiteserve, noted that his company complied with EU, US, and UK sanctions, but added that "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." He claimed that Kiteserve had the option of taking on "four times more work if we wanted."

According to his estimations, roughly 50% of Kitserve's clients are Russian or have a Russian connection, a percentage which he expects will be minimized over time. In addition the effort largely included assets in the west rather than in Russia Parperis argued.

"These clients . . . are serviced also by western banks, by western lawyers," according to Parperis. "So why should we be singled out?"

In contrast to PwC Cyprus, Kiteserve does not willingly adhere to the sanctions put in place by countries like Australia and Canada. When allowed by a derogation, it offers services to entities subject to EU sanctions; nevertheless, this only represents a "small percentage" of Kiteserve's customers, according to Parperis, who also noted that the "majority" of its clients were not targeted by EU, US, or UK sanctions.

The Kiteserve founders made a deal with PwC Cyprus to get over the typical five-year limitation on former partners offering audit, tax, or compliance services as well as employment restrictions placed on them by the Big Four group.

In exchange for letting the departing partners to work for any organization they wanted, PwC Cyprus received a profit from the agreement to drop the limits.

The price of the agreement to lift the non-compete limitations was not made public by either PwC or Kiteserve. According to a person with knowledge of the deal, the money was sent to PwC Cyprus to help defray the upfront expense of providing the leaving partners with their regular retirement payouts. The net payment to the retiring partners is not material to PwC Cyprus or its partners, according to PwC, which also stated that the amounts were "in accordance with normal market practice, or contractual obligations."

The Ukraine crisis, according to Parperis, had pushed plans to strike out alone since he and his co-founders were getting close to PwC's mandatory retirement age.

Kiteserve conducts business from the PwC offices in Nicosia and Limassol, . While it negotiates a transfer of the leases, PwC said the space was separate and was being sublet to Kiteserve on terms identical to PwC's rental agreement. About 20 of Kiteserve's 30 employees were hired from PwC.

According to PwC, "Kiteserve is fully independent of PwC Cyprus and is not a member of the PwC network." According to the statement, "there are no agreements between PwC Cyprus and Kiteserve and the partners do not have any economic interest in each other's respective businesses" aside from the "arm's length" agreements on separation and subletting.

Following the effects of international sanctions, PwC Cyprus said that it has changed its business approach and secured new business as part of a "bounceback" strategy.



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