Illegal remittances cost Xiaomi India over $725mn

Xiaomi India foreign exchange
Image by Dilok | Bigstockphoto

India’s anti-money laundering agency, the Directorate of Enforcement (ED), seized $725 million or Rs 5,551.27 crore from Xiaomi India on Saturday following an investigation for alleged violations of the Foreign Exchange Management Act (FEMA).

“ED has seized Rs.5551.27 Crore of M/s Xiaomi Technology India Private Limited lying in the bank accounts under the provisions of Foreign Exchange Management Act, 1999 in connection with the illegal outward remittances made by the company,” the ED said in a tweet.

Xiaomi India, a wholly-owned subsidiary of the China-based Xiaomi Group, denied any wrongdoing and said it would cooperate with the government agencies. “As a brand committed to India, all our operations are firmly compliant with local laws and regulations.”

“We have studied the order from government authorities carefully. We believe our royalty payments and statements to the bank are all legit and truthful. These royalty payments that Xiaomi India made were for the in-licensed technologies and IPs used in our Indian version products. It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments. However, we are committed to working closely with government authorities to clarify any misunderstandings,” the Chinese company said in a media statement.

The Directorate of Enforcement (ED) is now investigating Xiaomi’s foreign funding, shareholding, financial statements and related activities.

The development comes weeks after former Xiaomi India head Manu Jain recorded his statement at the anti-money laundering agency’s Bengaluru office and provided them with other documents.

Jain, now based out of Dubai, was summoned twice by the agency, but he failed to appear.

Earlier in January this year, Xiaomi was fined Rs 653 crores ($87 million) by the Ministry of Finance on charges of evading customs duty for the period 01.04.2017 to 30.06.2020 under the provisions of the Customs Act, 1962.

As per media reports, the ED’s investigation is now part of the “larger action” undertaken by government and law agencies. India’s intelligence agencies had previously sounded alert against Chinese companies over alleged money laundering and other violations.

India’s tax and anti-money laundering agencies have also investigated Oppo, OnePlus, Huawei and ZTE.

The Economic Times reported that the country’s Ministry of Corporate Affairs (MCA) registered more than 700 cases against companies with Chinese nationals as promoters and directors over suspicious transactions or dubious credentials.

Citing intelligence inputs from the home ministry, the publication reported that these companies were misused for various purposes, including evasion of taxes and money laundering.

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