Online betting group 888 has removed its chief executive and suspended VIP customer accounts in the Middle East amid an internal investigation into a failure to follow anti-money laundering processes.

Shares in the Gibraltar-headquartered group, which last year acquired William Hill’s operations outside the US in a £2.2bn deal, plunged by more than a quarter as investors fuelled 888’s biggest drop in share price since 2006. Its market value has slumped more than 70% over the last year.

The company said certain “best practices have not been followed” in relation to “know your client” and anti-money laundering regulations.

“While further internal investigations are under way, the board has taken the decision to suspend VIP customer accounts in the region, effective immediately,” the company said. “Based on the board’s current understanding, the process deficiencies identified are isolated to this region only.”

The suspensions account for up to 3% of group revenues (about £50m) if they remain frozen, the company said.

The company also announced the immediate departure of Itai Pazner, the chief executive of 888 for the past four years, who has worked at the company for more than two decades.

“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,” said Russ Mould, the investment director at AJ Bell. “News it is suspending VIP accounts in the Middle East over best practices not being followed over money laundering is incredibly damaging.”

In an effort to calm investors, 888 has asked the chief financial officer, Yariv Dafna, who was expected to leave at the end of March, to stay on until the end of the year.

The company said its chair, Jonathan Mendelsohn, a Labour peer and former party lobbyist and fundraiser who is married to the European Meta executive Nicola Mendelsohn, would temporarily take on executive responsibilities while the board seeks a replacement for Pazner.

“The board and I take the group’s compliance responsibilities incredibly seriously,” said Lord Mendelsohn. “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.”

The Gambling Commission has fined 888 several times for compliance failures in recent years.

Last year it was fined £9.4m, the third highest in the history of British gambling regulation, over multiple failings that led to customers racking up huge losses during the depths of the Covid pandemic.

In 2017, the company paid £7.8m for “outrageous” failings, after more than 7,000 people who had voluntarily banned themselves from gambling were still able to access their accounts.