Russian ABBYY still works in Ukraine, and state agencies purchase its software

ABBYY is one of the most famous Russian technology businesses like Yandex or Kaspersky Lab. The Ukrainian government banned its products in 2017, but the company seems to continue its operation in Ukraine despite over five months since the beginning of the full-scale Russian invasion. AIN.Capital’s editor reveals details of this story.

Backstory

In 1989, ABBYY was founded by the Russian entrepreneur David Yang (he is on the Forbes 2021 TOP 200 wealthiest business people of Russia list). Its first product was the online dictionary Lingvo and the second one was the optical character recognition application FineReader. In the 1990s, the company released software for corporate clients. In the 2000s, it got used by Ukrainian state authorities. Its products are FineReader PDF, FineReader Server, PDF Transformer, Recognition Server, Smart Classifier, Comparator, Mobile OCR Engine, FlexiCapture, etc.

Since the 1990s, the company has registered legal entities in Ukraine. As of 2022, over 150 people worked in the Ukrainian office. And this fact is remarkable because:

• in 2017, the company got on the sanction list made by the Security and Defense Council of Ukraine due to the Russian military aggression since 2014;
• those sanctions forbade any transactions, blocked assets, and banned the software from use in state agencies.

Nowadays, the company (as many other Russian businesses) claims it is international and headquartered in the US. However, after the full-scale Russian invasion, the company supposedly transferred its assets to another Russian firm (that is connected with ABBYY and its team and owners).

As a result, only one entity of ABBYY left in Ukraine and made millions of hryvnias, for example, in 2020.

How did the company get on the sanction list

In 2017, President Petro Poroshenko of Ukraine signed a decree that confirmed the prior decision of the National Security and Defense Council (NSDC) regarding sanctions for Russian companies and their subsidiaries in Ukraine. That list contained 468 names, and about 20% of them were IT companies. This decree blocked social media VKontakte and Odnoklassniki, Mail.RU products, and other Russian services that were most visited among Ukrainian internet users.

The sanctions forbade purchases and transactions with state entities. The assets of the sanctioned companies must be blocked along with other restrictions that should make their further activity impossible. After that, the offices of big Russian IT companies in Ukraine were closed: Yandex Ukraine, VK Ukraine, etc.

The Russian ABBYY and its Ukrainian subsidiary also were included in the list. They also were present on the NSDC sanction list in 2020 (for a year). However, the legal entity of the Russian company has been changed.

But now, both Russian and Ukrainian entities (the latter changed its name from Abbyy Ukraine LTD («Абі Україна ЛТД») to Cesiko LLC (ТОВ «Цесіко») are on the NSDC sanction list again, from May 21, 2021, until May 21, 2024.

At the same time, this Russian company has another subsidiary registered in 1999 — Abbyy Ukraine LLC (ТОВ «Абі Україна»). And it still operates.

Russian and Ukrainian offices

ABBYY is a Russian enterprise with Russian founders and employees that pays taxes in the Russian Federation.

During its long history, ABBYY has had many legal entities in Russia: ABBYY LLC (ООО «Аби»), ABBYY Production LLC (ООО «Аби Продакшн»), ABBYY Language Solutions LLC (ООО «Аби Лэнгвидж Солюшнз»), ABBYY Infopoisk LLC (ООО «Аби Инфопоиск»), some of which have been closed, some of which are still running. One of the existing Russian legal entities, ABBYY Production LLC (ООО «Аби Продакшн»), pays 77 million rubles in taxes per year. Another, ABBYY LLC (ООО «Аби»), reports 37 million rubles in taxes and fees a year, according to Rusprofile.

As per HeadHunter, in February 2022, the company was among the top ten employers in Russia, with up to 1,000 Russian employees. According to ABBYY’s LinkedIn page, it employs 850 people in Russia and over 150 workers in the Ukrainian office.

But recently, it started to promote itself as an international business.

Its homepage switched to English; there is no Russian in the settings, and there are no Russian offices on its website. Effective at the beginning of 2022, under locations on the website was a large office in the Otradny Business Center in Moscow (7,631 sq. m). And this address was present in the sanction lists above. In January 2022, the company transferred the product rights to its American entities due to “international expansion plans.” It also removed most of its software products from the Russian register of national software provided by the Russian Ministry of Digitalization. It granted all its intellectual property to the American office.

In April 2022, ABBYY gave its Russian business to Content AI LLC (ООО «Контент ИИ») while calling it “a technology partner ready to help clients and partners in Russia.” Content AI was established in April 2022. Surprisingly, almost all its founders are managers of ABBYY. According to TAdviser, the initial owner of 51% of equity of Content AI was Vadym Tereshchenko, the Chief VP at ABBYY and Managing Director at ABBYY Production LLC (ООО «Аби Продакшн»), who has worked for the company since the 1990s. Soon, his share was transferred to a person with the same family name — Elena Tereshchenko.

Oleg Sazhin, CEO at ABBYY LLC (ООО «Аби»), was indicated among the founder until July 2022 with a 12.2% share. Elena Bocharova, VP of Global Legal at ABBYY, was also on the founder list. As well as Svetlana Dergacheva, CEO at Content AI, in her LinkedIn profile, you can learn that she is SMB Director at ABBYY.

According to Russian registers, the current founder of the company is Content AI Solutions Bilisim Ve Teknoloji Hizmetleri Anonim Sirketi (100% share), registered in Turkey. The President of its Board is Elena Bocharova, who has worked for ABBYY since 2005. And Svetlana Dergacheva confirmed TAdviser that Content AI is the same team — the same developers and engineers — familiar to ABBYY’s customers.

Based on job openings, Content AI is actively hiring people in Russia. Its CTO, Ivan Volkov, also says this. He also states that the team “was built of people from a company with a 30-year history” and that they work on the same products that ABBYY developed.

A few more facts about Content AI’s connection with ABBYY:

• the domain ars.contentai.ru redirects to sso.abbyy.com;
• from April to July 2022, 62% of referral traffic to contentai.com originated from abbyy.com;
• there are job openings in Russia posted from ABBYY: for example, they are looking for employees for a branch in Novosibirsk.

A statement of the company

The AIN.Capital editors asked ABBYY’s Ukrainian and international offices for commentary regarding the Russian and Ukrainian offices and the sanctions.

• The answer was that ABBYY Ukraine is neither a subsidiary nor the ownership of the Russian company.

“ABBYY is an American group of companies owned by outside investors, founders, and management of the company. The largest shareholder of ABBYY is the American investment company Marlin Equity Partners. ABBYY headquarters is located in North Carolina, US, and the company has offices in fourteen countries. ABBYY software products are owned and managed by our US holding company,” the company said.

• They also stated that the Ukrainian firm is against the war, ceased sales in Russia, and is about to cease operations in the Russian Federation and Belarus. ABBYY published a statement from its CEO on LinkedIn at the beginning of the invasion. It says Ukrainian employees are suffering and getting support from the company. But there is no word about the cause of this suffering and who started the war.
• Technically, it’s true. As mentioned above, all IP and sales were transferred to the American HQ. Then, ABBYY handed over its operations, clients, and team to Content AI after the invasion started. However, the founders of Content AI were the managers of ABBYY, and its team, clients, and products are the same people who worked in the Moscow office. So, ABBYY virtually distanced itself from the Russian market while still working there. We have found no proof that Content AI is independent of ABBYY, but the opposite. Nonetheless, ABBYY reps say it’s an independent business.

“ABBYY has stopped selling products and services in Russia and Belarus and is winding down its activities in Russia. ABBYY’s Moscow office had far fewer than 1,000 employees, and now the main development centers and related facilities are located in the United States, Hungary, Serbia, and Cyprus.

Content AI is a small independent company. ABBYY does not own or control it. This company was created by several former ABBYY employees and employs a small group of our former employees.”

• It’s worth mentioning that having an HQ in the US doesn’t mean the company couldn’t have another HQ in Moscow. For instance, Yandex has an office in the Netherlands, but it’s still a Russian enterprise. The same here.
• Speaking of sanctions, it is more complicated. According to a press release, no one of ABBYY entities is under sanctions in Ukraine. It is not true. Its Ukrainian firm was on the sanction list for years (see ‘How did the company get on the sanction list’). However, they admit that Ukraine imposed sanctions in 2017 against the Russian ABBYY LLC (ООО «Аби»), which belongs to the ABBYY Group and distributed software products in Russia and the CIS countries (Ukraine finally left the CIS in 2018).
• The company also declares that those sanctions are personal. It means they cover a specific natural or legal person but not the group of companies, its workers, or business in general.
• That’s technically true. But the reality looks different. Looking at other banned Russian firms or services (Yandex or VK), we can see that the authors of the list tried to include as many services, domains, and legal entities belonging to those companies as possible. Why one ABBYY firm was included in the sanction list and the other not it’s unknown. According to its press release, since 2017, the ABBYY managers have been in touch with the Ukrainian government to ensure that ABBYY fulfills the current legislation of Ukraine.
• Regarding the Ukrainian office, the company reps say ABBYY Ukraine continues operating within the Ukrainian legal field and has about 150 employees. Its team provides Customer Support, Professional Services, Customer Success Management, and Training. Andrii Levkovych is CEO. Vitali Tyshchenko, Chief Customer Officer at ABBYY, also lives in Ukraine.

Conclusions:

ABBYY used to be and remains a Russian business whose HQ moved abroad. It handed over its operations in Russia to a new, freshly registered company. It has been founded and is led by people from ABBYY. It employed its engineers and continues to cooperate with the latter’s clients. ABBYY published vacancies in Russia.

We pay attention to that because this large and well-known Russian business has an acting office in Kyiv. Despite all the sanctions. And the ABBYY products were used in many Ukrainian state-owned entities, for example, the National Bank of Ukraine, Pension Fund of Ukraine, Ukrenergo National Energy Company, and others. Its office was also one of the biggest 1C distributors in Ukraine.

Interestingly, on Prozorro, you can find ABBYY software purchase tenders for state entities from 2019, 2020, and 2021. But the sellers, in most cases, are not ABBYY subsidiaries but other companies that do sell and implement its software: Specvuzautomatyka, InfoSphere, Soft Online, IBit, QBit, etc.

Before the sanctions, the Ukrainian office was responsible for the whole of Eastern and Central Europe, Israel, and Turkey. Most of the marketing materials were made in Kyiv.

Today, you can check the sanction list and find Cesiko LLC (ТОВ «Цесіко») (former ABBY Ukraine Ltd («Абі Україна Лтд»), see above). Another subsidiary — ABBYY Ukraine LLC (ТОВ «Абі Україна»), is registered at the same legal address as Cesiko LLC — 31 Dehtiarivska Street. It’s not being terminated and earned according to Opendatabot ₴28 mln in revenue and got ₴18 mln profit in 2020. Among ABBYY’s international positions on LinkedIn, there are several jobs for the Kyiv office.

On Glassdoor, you can see feedback from anonymous employees of the company’s Ukrainian office saying that it masks itself behind a Cyprus legal entity and says it is a European business, but it is not. Other anonymous reviews include comments that the company’s management supports the Russian management (there was a story in 2014 about how the head of ABBYY’s Russian office was fired because of criticism of the Russian authorities).

In other words, after over five months of the full-scale Russian invasion of Ukraine, a subsidiary of the prominent Russian company continues its routine work here while it should be under sanctions at least from 2017. It remains unknown what kind of Ukrainian state entities’ data are accessible for the Russian ABBYY and how is any cooperation between them possible.

ABBYY does not officially operate in Russia, but there is a company associated with ABBYY, and it does. This company carries out sales and development, hires people, pays taxes in Russia, and thus directly supports and finances Russia’s war in Ukraine.