The big banks have taken their first tentative steps toward extricating themselves from the Potemkin, if still quite blood-soaked, would-be revival of the Czarist empire. The Big Four, on the other hand, are being a bit less tentative in cutting Vladimir Putin & co. off from the wider world.
It took less than two weeks from the invasion of Ukraine for Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers to decide to leave Russia…. The speed at which Russia has been transformed into a pariah state appears to have caught the accounting firms by surprise. Some of their websites had yet to be updated early Monday. “KPMG has been rated the No. 1 Audit firm in Russia since 2009,” that firm’s website read…. The firms’ exit creates another obstacle to an eventual re-entry of big Russian companies to the global financial markets. The lack of a Big Four auditor would likely make it harder for those companies to raise money overseas. It could also prove a barrier to Russian companies listing on U.S. stock exchanges.
It gets worse for the Russians, you guys.
"Together with our colleagues, members, and landlords, we have been finalizing solutions to divest operations in Russia and we've suspended all expansion plans for the business in this region," the company said in statement posted to LinkedIn on Monday. "We unequivocally condemn the unprovoked and unjust war that is bringing senseless devastation to the people of Ukraine."
The European Commission on Tuesday outlined ambitious proposals to “make Europe independent from Russian fossil fuels well before 2030….”
“We must become independent from Russian oil, coal and gas,” the commission’s president, Ursula von der Leyen, said in a news release. “We simply cannot rely on a supplier who explicitly threatens us.”
FinCEN said sanctioned Russian and Belarusian entities and individuals may try to evade sanctions in various ways, including through non-sanctioned Russian and Belarusian banks and financial institutions in third countries. Some indicators of possible sanctions-evasion activity include the use of shell companies to obscure the ownership of entities or funds or to make international wire transfers…. Some red flags financial institutions and crypto firms should watch out for include transactions coming from or sent to an internet protocol, or IP, address located in Russia or Belarus, or from IP addresses already flagged as suspicious.
"Coinbase blocks over 25,000 addresses related to Russian individuals or entities we believe to be engaging in illicit activity, many of which we have identified through our own proactive investigations," [chief legal officer Paul] Grewal wrote.
"We shared them with the government to further support sanctions enforcement.
"Sanctions play a vital role in promoting national security and deterring unlawful aggression and Coinbase fully supports these efforts by government authorities."
JPMorgan’s move, effective March 31, will exclude Russia’s sovereign and corporate debt from fixed-income benchmarks, including the Emerging Market Bond Index (EMBI) and the Corporate Emerging Market Bond Index (CEMBI). Along with Russia, Belarus’s sovereign debt will also be excluded from the bank’s environmental, social and governance-linked indexes as of March 31, JPMorgan said.
Speaking of which, gunmakers don’t traditionally make it through ESG screens, but what could be more moral at the moment than providing much-needed arms to the remarkably gallant but outmanned and outgunned Ukrainians?
Sweden-based financial-services company Skandinaviska Enskilda Banken AB said it would permit some of its funds to buy shares of weapons makers and defense companies…. It was triggered by “the serious security situation and growing geopolitical tensions in recent months—which culminated with Russia’s invasion of Ukraine—brought this issue to the fore from a policy perspective and resulted in a changed position among some of the fund company’s customers,” he added.
Anyway, as big of a pain in the ass as this is for JPMorgan and other U.S. banks, it’s tearing a gaping hole in their European counterparts.
Since the conflict started, the Euro Stoxx banking sub index has fallen by roughly one-quarter. France’s Société Générale SA, Italy’s Unicredit Spa and Austria’s Raiffeisen Bank International AG, all of which have local operations in Russia, have fallen as much as 35%, 38% and 47%, respectively…. Others with less direct links to Russia haven’t been spared. UBS Group AG said Monday that its direct risk exposure, including loans and derivatives, to the country was $634 million as of Dec. 31, a small portion of its emerging market total of $21 billion. Still, its shares have lost one-fifth of their value since Feb. 23.
Big Auditors to Leave Russia Amid Invasion of Ukraine [WSJ]
WeWork says it is finalizing plans to divest its Russia operations [CNN Business]
Biden says U.S. will ban Russian oil imports in response to Putin’s invasion of Ukraine [CNBC]
The European Union seeks independence from Russian oil and gas. [NYT]
U.S. Warns Banks, Crypto Firms Against Potential Efforts to Evade Russian Sanctions [WSJ]
Crypto platform blocks thousands of Russia-linked wallets [BBC News]
Russia, Blocked From the Global Internet, Plunges Into Digital Isolation [NYT]
JPMorgan to Exclude Russian Debt From Bond Indexes [WSJ]
Sweden’s SEB Changes Course on Defense Stocks as War Tests ESG Rules [WSJ]
Banks in Europe Take Brunt of Market Selloff [WSJ]
For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.