PwC Cyprus moved £1bn for Russian tycoon on day he was put under sanctions

One of the world’s biggest accountancy firms helped Russia’s “richest” oligarch attempt to transfer £1bn in a public company on the day he was placed under EU sanctions, leaked documents suggest. The disclosure raises serious questions about the role played by PwC Cyprus in a potential sanctions breach.

Details of the blue-chip accountant’s work for the Kremlin-connected tycoon have emerged as part of the Cyprus Confidential project – a cache of 3.6m offshore records leaked to the International Consortium of Investigative Journalists (ICIJ) and Germany’s Paper Trail Media, which shared access with the Guardian and other media partners.

The files contain emails in which PwC Cyprus staff discuss attempting to transfer about a third of the shares in Tui, Europe’s largest travel company, to the life partner of the steel, mining and banking tycoon Alexei Mordashov. The move shines a light on the services that blue-chip advisers performed for wealthy Russian clients, amid a debate about the timings of when EU sanctions become fully active.

Since the invasion of Ukraine, western governments have imposed the largest ever package of sanctions against Russia and its business elite, and attention is now turning to ensuring those restrictions are enforced.

A spokesperson for the Cyprus ministry of finance said: “We are aware of Tui share transfers and a criminal investigation is being carried out.” A government spokesperson confirmed the investigation was “ongoing” and being conducted by the “responsible authorities” in Cyprus. He declined to give any further details.

PwC said it was unaware of any criminal investigation. In response to information in the leaked files, a spokesperson for the accounting firm said: “Any allegation of non-compliance with applicable laws and regulations is taken very seriously, investigated and appropriate action is taken if necessary.”

The controversy represents the latest embarrassment for the embattled accounting firm. In June, the group was criticised by the EU for its “central role” in assisting Russian oligarchs with their investments in the west in recent years, while its Australian business is embroiled in an ongoing tax scandal.

Russia’s ‘richest person’

PwC Cyprus is part of the PwC network, a series of locally owned companies operating under collective standards in return for using the accounting group’s brand.

For years, Cyprus has acted as a gateway for Russian fortunes into Europe, with the PwC partnership in Nicosia seeming to have profited from that flow of business. An analysis of the files suggests that 39 PwC Cyprus clients were named on sanctions lists last year by the US, the UK, the EU or Ukraine after the 2022 invasion. PwC Cyprus says it has since terminated relationships with 150 “client groups”.

Before March 2022 the firm’s high net worth clientele included Mordashov, who in 2021 was named by the business magazine Forbes as Russia’s “richest person” with a fortune of $29bn. On the day Russia invaded, he was one of 36 business leaders who met Vladimir Putin at the Kremlin, according to the EU.

Three days after the invasion, on Sunday 27 February, Europe’s foreign ministers gathered by video conference to agree a fresh round of sanctions. On the same day, the EU’s most senior diplomat, Josep Borrell, said the latest sanctions were imminent, that they would be targeted at oligarchs, and were likely to be active before the start of business the next day.

On Monday 28 February, at 6.38pm central European time, documents suggest, a PwC Cyprus employee used a Mordashov company email address to send a message to a colleague, concerning the sale of a huge chunk of the tycoon’s stake in Tui to his partner, Marina Mordashova. The communications involved staff at a Cypriot offshore services provider which appeared to manage a number of Mordashov companies.

The holding equated to about £1bn in shares in the tourism group, which is one of the largest companies listed on the London and Hanover stock exchanges, plus Frankfurt’s electronic exchange Xetra.

Five minutes after that email, another PwC Cyprus employee replied “Approved” before adding, “Price will be finalised in a while.”

The lack of an agreed sale price suggests a deal cannot have been concluded at that point. But just 77 minutes later, the European Council sent out a message of its own, announcing that Mordashov – along with 25 other individuals – had been added to the sanctions list. The press release and sanctions notice described Mordashov as one of “Putin’s elite” who was allegedly “benefiting from his links with Russian decision-makers”.

The exact timing of when those sanctions legally came into force is now under scrutiny.

The Council of the EU, the European Commission and sanctions lawyers have told the Guardian that the 28 February restrictions were legally active for 20 hours before the EU’s public statement. A Council spokesperson said: “The entry into force occurred at the beginning of the first hour of the day of publication in the [Official Journal]. This means from the very first hour of 28 February.”

The EU’s interpretation suggests PwC Cyprus – a member of one of the world’s most famous accounting groups – could have played a role in a potential sanctions breach.

It also appears that the EU’s Official Journal – which lists the names of individuals being placed under sanctions – was published 50 minutes before the leaked email train was commenced. Mordashov’s name was on that day’s list.

The Guardian has seen no evidence showing any intention to break any rules – and Mordashov’s spokesperson said the oligarch was not attempting to hide the share transfer or circumvent the law.

After the sanctions were announced, documents suggest that PwC Cyprus and a Cypriot professional services provider continued to work on the transfer. On 1 March 2022, a further email was added to the email thread marked “Follow up”. It included a series of attachments relevant to the Tui transaction, with one message from PwC outlining a list of documents that still required a signature.

A handwritten note on one sheet of the paperwork added: “Urgent, please re-sign originals, which was [sic] signed on 28.02.2022.”

The files on the transaction include a form, dated 2 March 2022, which appears to have been created by the Cyprus professional services firm working with PwC. That document incorporates a series of checkboxes that could be ticked. One of the boxes left blank was positioned next to the sentence: “We have checked the counterparty of the transaction/attorney against sanction lists.”

The share transfer caused a big splash at the time as it initially appeared that a 30% stake in Tui – out of Mordashov’s total 34% holding – had been transferred to a company whose owner was unknown. The owner of the new holding was later revealed to be Mordashov’s life partner and German authorities ruled the transaction was “provisionally invalid”. Currently the Mordashov family’s entire stake in Tui – which has now been diluted by other fundraisings to 11% – is frozen under sanctions laws and Mordashov’s partner has been added to the EU’s sanctions list.

This means Mordashov cannot sell the shares, collect dividends, vote at board meetings or profit from the stake in any other way.

Mordashov’s spokesperson said: “Not once in his long career did Mr Mordashov, or any of the companies he runs, breach any laws, whether in Europe, Russia, or any other jurisdictions. This is further substantiated by multiple due diligence procedures carried out by western auditors and regulators on the companies and Mr Mordashov himself over his 30-year career. Everything he has built and achieved was accomplished through fair business practices and strict compliance with regulations.”

The EU’s decision to place him under sanction was confirmed by a judgment in September, according to the European court of justice, but the oligarch can appeal again.

Contacted by the Guardian, the Cypriot professional services firm said it was bound by client confidentiality and has always followed the law and industry guidance.

A spokesperson for PwC said: “All PwC firms, including PwC Cyprus, take the application of sanctions against clients and sanctions prohibiting various professional services extremely seriously. As we announced in March 2022, with regards to sanctions following the Russian invasion of Ukraine, PwC introduced a policy, that goes beyond what is legally required, of applying all sanctions imposed by major countries across the PwC network, irrespective of the sanctions country of origin.”