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(Sharecast News) - Gambling group 888 announced the departure of its chief executive on Monday, as it said it was suspending some VIP accounts in the Middle East pending the outcome of an internal compliance investigation.
Just weeks after announcing that chief financial officer Yariv Dafna had "mutually agreed" to step down from the business, 888 announced that CEO Itai Pazner is stepping down with immediate effect.
888 had said in January that Dafna was stepping down at the end of March, but the company has now said he will remain in his job until the end of the year.
Non-executive chair Lord Mendelsohn is assuming the position of executive chair on an interim basis while the company searches for a permanent CEO.
The news came alongside a separate statement in which the company said that an internal compliance review had revealed that "certain best practices" had not been followed in regard to 'know your client' and anti-money laundering processes for 888 VIP customers in the Middle East region.
As a result, VIP activities in certain of its .com markets have been suspended pending the outcome of the investigation.
"While further internal investigations are underway, the board has taken the decision to suspend VIP customer accounts in the region, effective immediately," 888 said. "The board currently estimates that the impact is less than 3% of group revenues, should the suspensions remain in place."
888 said its current understanding is that the process deficiencies identified are isolated to the Middle East only.
Mendelsohn said: "The board and I take the group's compliance responsibilities incredibly seriously. When we were alerted to issues with some of 888's VIP customers, the board took decisive actions.
"We will be uncompromising in our approach to compliance as we build a strong and sustainable business."
At 0945 GMT, the shares were down 23% at 79.32p.
Russ Mould, investment director at AJ Bell, said: "Gambling stocks are under enough regulatory scrutiny as it is without inviting reasons for further attention and yet that's exactly what 888 has done.
"News it is suspending VIP accounts in the Middle East over best practices not being followed over money laundering is incredibly damaging.
"Combine that with the announcement of CEO Itai Pazner's immediate departure and the market is likely to draw its own conclusions.
"A brief and to the point statement with the usual pleasantries doesn't indicate the reason for his exit, leaving the obvious supposition that this debacle is to blame.
"Investors may have been more reassured by him staying in place to sort out the problems in the Middle East - an unenviable task which will now fall to the newly 'executive' chair Jon Mendelsohn.
"A background in politics may serve him well in the interim period before a new boss is found, given the tricky waters he now has to navigate. The imminent departure of the company's finance chief Yariv Dafna and the company's hefty debt pile only add to the list of complications."
