Date: 23.05.2024

by Maciej Akimow

Entain Faces Major Setback: £750M Polish Asset at Risk Due to Compliance Issues?

Recently, Entain has been facing numerous challenges, including internal changes, regulatory issues, and criticism from activist investors of its extensive acquisition policy. Now, this global powerhouse might face another blow from the CEE region. Is the Polish operator STS, acquired for £750 million, at risk of losing its license due to AML compliance failures?

Entain is currently at a critical juncture in its operations, standing on the brink of selecting a new CEO. Despite the company sharing generally positive news about its condition recently, another obstacle has now appeared on its winding path.

Regulatory Troubles for STS

Just a few days ago, in a report based on the strategic review that began in January this year, Entain highlighted its high hopes for its operations in Central and Eastern Europe. These hopes were largely pinned on the Polish brand STS, which Entain acquired last year for £750 million. The company expressed optimism that potential regulatory changes in Poland would allow for the launch of an online casino in the country. However, according to our information, this does not seem likely at the moment.

A much more immediate and likely scenario involves regulatory issues related to STS’s operations as the operator has been fined €700,000. The penalty is related to shortcomings in the Anti-Money Laundering (AML) policy, stemming from incidents between 2017 and 2019.

During this period, a woman working as a cashier at the Polish Central Anti-Corruption Bureau embezzled funds from the bureau’s treasury. These funds were funneled to her husband, who placed bets with Polish bookmakers. It was later revealed that most of these funds were used to place bets with STS, where the cashier’s husband even had VIP status. Over several years, the cashier managed to embezzle over €2 million.

The couple was convicted in a criminal case for their actions, as well as STS manager who was penalized for failing to fulfill his duties. The fine for STS is based on five violations of the Anti-Money Laundering and Terrorism Financing Act.

The potential consequences of these failures might not end there. The fine itself may not be overly burdensome for the company, but the actions of the Polish Ministry of Finance, which oversees the gambling industry, could be far more significant. Polish law stipulates that significant AML policy violations could even result in the loss of the operator’s license.

For Entain, this would undoubtedly be a major blow, as losing a £750 million asset would certainly not help stabilize the current situation within the organization.

Former CEO Mateusz Juroszek commented on the publication claiming the case is outdated and the fine has been already settled. However, it seems inaccurate as the case is now pending before the Polish Supreme Administrative Court

Investors’ Criticism and Potential Oversights

The decision to acquire STS for such a large sum was previously met with significant criticism from investors, who highlighted the weaknesses of an extensive acquisition policy, especially one so costly. This certainly serves as a crucial argument for critics of this transaction.

It is also challenging to determine to what extent Entain was aware of the allegations against STS at the time of the acquisition. This is undoubtedly an underlying aspect of the case that could lead to separate consequences.

Our editorial team has requested comments from Entain and Eminence Capital, whose voice was the most important and vocal in criticizing Entain’s acquisition of STS.