HMRC Enquiry into Entain expected to result in a “substantial financial penalty”
A prolonged enquiry started by HM Revenue and Customs in 2019 and focusing on a Turkish betting site formerly owned by Entain appears to be approaching a conclusion. For the past few days, Entain, the group which owns leading UK betting sites Ladbrokes and Coral, has been in the spotlight following the release of a statement about the investigation. In this statement, the Entain expressed their expectation that the investigation will result in a substantial fine imposed on the business for historic breaches surrounding Headlong, one of the group’s betting sites at the time.
The HMRC enquiry appears to have been of an extremely complex nature and has spanned over a lengthy period of time. Entain received a production order from HMRC at the end of November 2019, and this required the company to produce and provide any information that relating to the Turkish betting site between the years 2011 and 2017. At the time, experts and those involved in the betting and gaming industry were of the opinion that this is simply an enquiry into the relationship between Entain’s betting sites and third-party suppliers. It soon became apparent, however, that there was more to the investigation, the scope of which widened in July 2020 to include any potential instances of corporate offending.
The chair of Entain Barry Gibson has released a statement about the status of the investigation, quickly reminding everyone that Headlong is no longer amongst the betting sites owned by Entain. The group, known as GVC Holdings at the time, unceremoniously sold the website almost 6 years ago, in November 2017, as this was one of the compliance requirements that had to be fulfilled before Entain could acquire Ladbrokes and Coral. Another betting operator, Ropso Malta, became the owner of Headlong. Gibson also stated that Entain is keen to come to an out-of-court agreement in relation to this “historical issue”. He pointed out:
“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 per cent 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 potential breaches or offences investigated by the HMRC are contrary to Section 7 of the Bribery Act 2010. Section 7 states that a company is guilty of an offence if it bribes another person in order to obtain or retain business or advantage. It is, however, a statutory defence for the company to show that there are adequate processes preventing this from happening. Entain has pointed out that it is currently involved in deferred prosecution agreement negotiations with the Crown Prosecution Service (CPS) and that a resolution would be the best outcome for it. The company has also released a statement to assure all interested parties that a substantial amount of work has been carried out to ensure that all betting sites currently owned by Entain are fully compliant, and that robust anti-bribery procedures are in place. The statement reads:
“Whilst prosecution of a group entity or entities, which may defend the action successfully or be convicted, remains a possibility, the group is seeking to conclude DPA negotiations with the CPS. […] it is likely that they [the consequences] will include a substantial financial penalty which is yet to be determined. The company cannot identify reliably at this stage the size of any financial penalty. 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 group continues to co-operate fully with HMRC and the CPS. It is not possible at this stage to say how the investigation into the company will conclude.”
It is important to note that, since the sale of Headlong, Entain has gone an extra mile to become a more socially responsible, ethical, and robustly compliant operator of betting sites. There are strict procedures and policies in place ensuring that Know Your Customer checks, anti-money laundering procedures, and the risks of gambling harm are reduced to a minimum. While the current rules and regulations in the UK gambling industry remain vague and subjective, Entain is one of the companies that may benefit from the new legislation that will follow the White Paper on UK gambling. Meanwhile, the fine the company is facing may have a substantial detrimental effect on its profit for 2023, however it is expected that Entain will manage to make up some of the losses along the way.