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Entain has revealed it will likely be hit with a “substantial financial penalty” following a probe by the UK tax authority and the public prosecutor into its former Turkish business unit.

The operator added that historical misconduct involving former third-party suppliers and ex-employees of the group may have also occurred.

“While the company cannot say at this stage what the consequences of the investigation will be, it is likely that they will include a substantial financial penalty which is yet to be determined,” the company said in a statement.

Entain said offences under investigation include, but are not limited to, a breach of the Bribery Act.

Entain added that it cooperates fully with HMRC and was in deferred prosecution agreement (DPA) talks with the Crown Prosecution Service (CPS) to resolve the issue.

DPAs are voluntary agreements where entities disclose their own criminal activities to authorities.

This means that companies can avoid criminal prosecution in exchange for full disclosure, financial penalties and remedial measures.

Investigation started in 2019

Entain, formerly known as GVC Holdings, first received a production order from HMRC in November 2019.

The order required the subsidiary to provide information related to the group’s former Turkish-facing online betting and gaming business, which was owned by Entain from 2011 until its sale in 2017.

At that time, the group believed that HMRC’s investigation targeted several former third-party suppliers, which processed payments for its operations in Turkey, where betting is illegal.

However, in July 2020, Entain announced that HMRC had expanded the scope of its investigation to examine potential corporate offences from within the group itself.

The news of the expanded investigation caused a sell-off among investors and came just days after the company revealed the departure of Kenny Alexander after 13 years as chief executive.

Ultimate outcome uncertain

Entain stated that it is currently unable to determine the exact size of a potential financial penalty, and the ultimate outcome of the investigation remains uncertain.

Although there remains a possibility of prosecution for certain entities within the group, Entain said it is actively pursuing a resolution through ongoing DPA negotiations.

However, any resolution would be subject to judicial approval.

Entain stressed that it has undertaken a comprehensive review of its anti-bribery policies and procedures and has taken action to strengthen its wider compliance programme and related controls since the investigation first commenced.

“Entain has been through a period of extraordinary transformation since then, and has taken decisive action to be a best-in-class, responsible operator with outstanding corporate governance.”

Entain chairman Barry Gibson

“Whilst the discussions with the CPS remain ongoing, the board is content with progress to date and looks forward to pursuing an orderly conclusion to this matter,” Entain said.

Entain chairman Barry Gibson added: “We are keen to achieve a resolution to what is an historical issue relating principally to a business that was sold by the group nearly six years ago.

“Entain has been through a period of extraordinary transformation since then, and has taken decisive action to be a best-in-class, responsible operator with outstanding corporate governance.

“The board and leadership teams have been overhauled, 100% of our revenue is now from regulated or regulating markets, and our business model, strategy and culture have been reviewed, analysed and stress-tested,” he concluded.

Wider repercussions

Paul Leyland of Regulus Partners described Entain’s issues in Turkey as a “valuable warning” for other operators.

He stressed that attempting to circumvent restrictive legislation through firewalls and third-party agreements might seem appealing in theory but becomes transparent and risky under effective scrutiny.

Leyland expects gambling regulators in both the UK and North America to view this development as significant, making them increasingly likely to request updates.

However, he acknowledged that Entain has demonstrated significant progress in corporate culture, business practices and risk management under new management since 2020.

“There is also a possibility that the payments-led investigation into Entain will further strain relationships between gambling and commercial banking, however counter-productive this may be,” he added.