Entain facing a “substantial financial penalty” from Turkish bribery probe
FTSE 100 operator reveals deferred prosecution agreement negotiations over alleged bribery offences by third-party suppliers
Entain has confirmed it is likely to face a “substantial financial penalty” on the conclusion of a HMRC investigation into the firm’s historic online gambling operations in Turkey.
Releasing an update on the investigation, which commenced in November 2019, the London-listed operator confirmed it is in negotiations regarding a deferred prosecution agreement (DPA) with the Crown Prosecution Service (CPS).
In November 2019, Entain’s subsidiary, Entain Holdings (UK) Limited, received a production order from HMRC, requiring the firm to provide information relating to its former Turkish-facing online betting and gaming business, which operated from 2011 until its sale in 2017 for €150m.
HMRC’s investigation at the time concerned the processing of payments by a number of former third-party suppliers in Turkey, however the financial watchdog later widened that probe to include possible lawbreaking at a corporate level in July 2020.
Entain has confirmed the investigation concerns breaches of section 7 of the Bribery Act 2010, which relates to the failure of a corporate entity to prevent bribery.
“The company understands that the HMRC investigation, which is ongoing, includes a review of its former Turkish-facing business and acknowledges that historical misconduct involving former third-party suppliers and former employees of the group may have occurred,” Entain said in a statement.
“The group continues to co-operate fully with HMRC and the CPS.”
It is understood negotiations between Entain and the CPS are ongoing and any potential resolution would be subject to judicial approval.
Entain has confirmed that while the investigation remains unresolved, the firm is likely to face a “substantial” financial penalty, the size of which is yet to be determined.
Entain added: “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.”
The operator confirmed that since the investigation began, it has undergone a comprehensive review of anti-bribery policies as well as acting to strengthen its wider compliance procedures and related controls.
Entain’s shares were down 3.2% in early trading on the London Stock Exchange before rebounding slightly to 1,361p per share.
In a statement concerning the investigation, Entain chairman Barry Gibson stressed the substantive changes made to the business since the sale of the Turkish operations in 2017, as well as Entain’s desire to resolve what he called a “historical issue”.
“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,” Gibson said.
“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.
“We will continue to work closely with both the CPS and HMRC to ensure that this matter can be concluded as soon as is practical,” the Entain chairman added.
Addressing the effect of the investigation on Entain, Regulus Partners suggested that regulators from other operational jurisdictions would now seek updates from Entain on the investigation going forward.
Indeed, regulators from the Nevada Gaming Commission (NGC) questioned then GVC (as Entain was known at the time) CEO Kenny Alexander about the firm’s Turkish operations way back in 2019, with Alexander getting into a heated exchange with NGC regulator Terry Johnson.
Regulus Partners wrote in a note: “Entain’s legacy Turkey problems provide a valuable warning that creating firewalls and third-party agreements to get around restrictive legislation might look good on paper, but they tend to be dangerously transparent in the face of effective scrutiny,”
“Equally, the confused state of gambling legislation in a country might allow lawyers to provide convincing workarounds, but the likelihood of some level of payments and affiliate risk to actually extract the money from customers and/or out of the country can run dangerously high.
“As we continue to flag, payments is nearly always the most exposed area of corporate risk in gambling, but it is an area too few boards and senior executives fully understand, in our view,” the analyst firm added.