As part of the Centre’s crackdown against Chinese entities, India’s financial watchdog Enforcement Directorate (ED) on Tuesday conducted searches at 44 places across the country in an alleged money-laundering investigation against Chinese smartphone manufacturing company, Vivo and its associated firms.
The searches were carried out under sections of the Prevention of Money Laundering Act (PMLA) at Vivo India’s offices located in several states including Delhi, Uttar Pradesh, Meghalaya Maharashtra, and others after a First Information Report (FIR) was registered by the economic offences wing of the Delhi Police.
“Recently we filed a money laundering case after taking cognisance of a Delhi Police (economic offences wing) FIR against a distributor of the agency based in Jammu and Kashmir where it was alleged that a few Chinese shareholders in that company forged their identity documents,” said an ED official.
The ED believes this alleged forgery was done to launder illegally generated funds using shell or paper companies. Further, some of the illegal proceeds were diverted abroad or invested in some other businesses by dodging Indian tax and enforcement agencies.
“We have come across many shell companies being operated in India by the Chinese company. All these are being used to launder money,” said a senior ED official.
According to sources, Vivo’s directors Zhengshen Ou and Zhang, have likely fled India due to fear of investigation. The enforcement agency has until now received information about money laundering worth ?10,000 crores during the raids, according to ED sources.
Meanwhile, the CBI (Central Bureau of Investigation) is already probing this case in India and has lodged a separate first information report (FIR). Further, the Income Tax (IT) department and the Ministry of Corporate Affairs (MCA) are also keeping a close watch on the Chinese manufacturing firms.
In a statement, a Vivo India spokesperson said, “Vivo is cooperating with the authorities to provide them with all required information. As a responsible corporate, we are committed to be fully compliant with laws.”
For the unversed, the raid on Vivo comes weeks after the ED seized ?5,551.27 crores from Xiaomi Technology India Private Ltd in connection with illegal outward remittances made by the company. The recovery was made from the company’s bank accounts under the provisions of the Foreign Exchange Management Act (FEMA).
According to Xiaomi, it had remitted 84% of the amount mentioned above as part of royalty payments, which were for the in-licensed technologies and IPs used in their Indian version products.
“The company (Xiaomi) started its operations in India in the year 2014 and started remitting the money from the year 2015. The company has remitted foreign currency equivalent to INR 5,551.27 crore to three foreign-based entities, which include one Xiaomi group entity, in the guise of royalty,” the ED had said in a statement.
“Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities. The amounts remitted to other two US-based unrelated entities were also for the ultimate benefit of the Xiaomi group entities.”
Additionally, in December last year, the Indian IT department raided many premises of several Chinese smartphone companies including Xiaomi, Oppo and Vivo, their distributors and linked associates. They claimed to have identified unaccounted income allegedly worth over 6,500 crore due to violation of the Indian tax law and regulations.