Accounting giant KPMG could be in heading for hot water after the Financial Reporting Council (FRC) opened an investigation into their auditing of Entain’s 2022 accounts.
It’s not known exactly why the enquiry has been called for, with the FRC simply revealing that their enforcement division will be looking into the conduct of the accounting firm, with specific reference to their auditing of the Ladbrokes and Coral owner for the financial year ending 2022.
It has been suggested that the matter relates to a legacy court case involving Entain’s subsidiary business in Turkey and Her Majesty’s Revenue & Customs
(HMRC), with the operator agreeing an out-of-court settlement for £615 million after they were found to have been too pliant in tackling corporate bribery.
Settling Down
So far, Entain have declined to comment on the investigation, while a spokesperson for KPMG UK revealed that the firm ‘… will cooperate fully with the FRC to conclude this matter as quickly as possible.’
The sheer uncertainty is weighing heavily on shareholders and investors, with Entain’s stock market price falling 2% on Monday as the rumour mill went into full motion.
Although unconfirmed, some media outlets are linking the investigation into KPMG to Entain’s issues with HM Revenue & Customs, which concluded in 2023 with that sizable out-of-court payment.
That related to alleged Bribery Act failings in Turkey, where Entain held a controlling interest in Headlong Ltd, a sportsbook and online gaming operation between 2011 and 2017. HMRC claimed that this business had been the focal point for ‘potential corporate offending’, with suggestions that they did not have in place the correct procedures to battle corruption and bribery.
The long-winded investigation into Entain lasted for the best part of four years, with company officials ultimately paying out £615 million to settle up with authorities.
That included the expected sanction of £585 million, plus as additional £10 million to cover the costs of HMRC and the Crown Prosecution Service (CPS), as well as a further £20 million in charitable donations.
By the December of 2023, Entain had secured permission from the judge to sign a deferred prosecution agreement with the CPS. So although Entain, as an entity, was charged with a criminal offence, the matter is suspended as long as they adhere to strict rules.
Aside from a group of investors attempting to sue Entain for £100 million in compensation, that was supposed to be the end of the matter – and it was, until the latest investigation into KPMG surfaced.
And it will be interesting to see what, if any, doors that opens for a revised look at Entain’s behaviour during the investigated period.
Licensed Operators Warned Over Black Market Involvement
Meanwhile, the UK Gambling Commission has urged casino game developers to be more diligent in managing which sites that their content is made available at.
It comes after the identification of an alarming new trend, which sees games made by UK licensed operators appearing on black market sites. Customers are able to access these casinos illegally, which can put their finances and personal data at risk given how little regulation is in place in some offshore jurisdictions.
These sites can also target those that have signed up for GAMSTOP or another self-exclusion scheme, providing a pathway back to problem gambling that is much harder to police than with licensed operators.
And so the regulator has doubled down on their desire to tackle ‘unlicensed gambling’, while ‘disrupting’ illegal activity to the point that it’s no longer a source of profit.
“Operators providing Business-to-Business (B2B) gaming solutions, including live games, live casinos and slots, can help the Commission tackle the illegal market by reviewing their own practices,” a spokesperson for the Gambling Commission has revealed.
“The Commission has found that, in some instances, third party resellers are distributing games supplied by operators to the illegal market, often in breach of their contractual obligations. Commission licensees may have been negligent in allowing them to do so and in the process, place their own licence at risk.”
The regulator has called upon operators to more closely monitor where their games are being used, terminating any deals with black market and offshore firms. They have also asked for licensees to inform them of any illegal activity… a failure to do so could see them breaching their licensing requirements.
“The Commission is adopting a proactive approach to this matter and may decide at any point to conduct test purchasing activity to evidence potential breaches.”