The Vivo India Money Laundering Case

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An affidavit filed by the Enforcement Directorate (ED) before the Delhi High Court alleges that the Vivo India engaged in money laundering in an attempt to undermine the integrity and sovereignty of India.

A Description of the Case

The affidavit was sent last week to the Delhi High Court. The anti-money laundering organisation, according to the document, was investigating the questionable financial dealings of 22 enterprises controlled by foreigners and corporations domiciled in Hong Kong. Significant cash transfers were made by these companies to China.

According to the ED, Vivo India set up 22 businesses in various states that allegedly helped to launder money. 22 businesses were incorporated by Vivo India with the aid of a Delhi-based CA company.

Vivo India had before claimed that they were abiding by all Indian laws.

Directors Zhengshen Ou and Zhang Jie, leading executives for the Chinese smartphone manufacturer Vivo, escaped from India through Nepal.

On the basis of a FIR filed with the Delhi Kalkaji Police Station under sections 417, 120B, and 420 of the IPC, 1860 against Grand Prospect International Communication Private Limited (GPICPL) and its Director, shareholders, and certifying professionals, among other parties, on the basis of a complaint made by the Ministry of Corporate Affairs, the ED opened a Prevention of Money Laundering case against them in February.

Vivo India has filed a petition with the Delhi High Court to overturn the Enforcement Directorate’s (ED) decision to freeze the company’s bank account in connection with a money laundering investigation.

On Friday, Senior Attorney Siddharth Luthra brought up the situation before the Delhi High Court bench, which also included Justice Subramonium Prasad and Chief Justice Satish Chandra Sharma. He said that the ED had blocked all of their bank accounts.

Meanwhile, as a result of Xiaomi India’s unauthorised outbound transfers, ED officers confiscated 5,551.27 crore from the firm on April 30. In accordance with the Foreign Exchange Management Act’s stipulations, the company’s bank accounts were searched for the seized property (FEMA).

In February of this year, an inquiry into the allegedly unlawful remittances was started. The business “has sent foreign cash equivalent to 5551.27 crore to three foreign-based organisations, including one Xiaomi group entity under the pretence of royalty,” according to ED.

 

The Actions of Enforcement Directorate (ED)

On Tuesday, the Enforcement Directorate (ED) searched 44 locations around the nation as part of an investigation into allegations of money laundering by the Chinese smartphone manufacturer Vivo and associated businesses.

According to the ED, Vivo India remitted Rs 62,476 crore of the total selling revenues of Rs 1,25,185 crore. i.e., mostly to China, about 50% of the turnover leaves India.

In various states, including Delhi, Uttar Pradesh, Meghalaya, and Maharashtra, searches were being conducted in accordance with the Prevention of Money Laundering Act (PMLA), according to a PTI report.

The ED believes that this alleged forgery was carried out to hide part of the “proceeds of crime” from Indian tax and enforcement authorities by utilizing shell or paper firms to launder unlawfully obtained monies.

The move is being viewed as a component of the Union government’s efforts to strengthen controls over Chinese entities and the ongoing crackdown on such businesses and their affiliated Indian operatives who are allegedly engaging in serious financial crimes like money laundering and tax evasion while operating here.

 

International IT departments’ actions

The I-T department conducted nationwide raids on the offices of several of these Chinese smartphone manufacturers, including Xiaomi, Oppo, and Vivo, as well as their distributors and connected associates, in December of last year. The department later claimed to have found alleged unaccounted income worth over Rs 6,500 crore as a result of violations of Indian tax law and regulations.

According to market research and analysis company IDC, Vivo had a 15% market share in the Indian smartphone market in the first quarter of 2022 with the shipping of 5.5 million units.

The March 2022 quarter saw Vivo surpass all other 5G brands in the nation in the Rs 10,000–20,000 pricing range, according to a Counterpoint research analysis.

 

The Extended News

The increased action against the Chinese-backed businesses or organisations operating in India is taking place against the backdrop of the ongoing military standoff between the two nations at the Line of Actual Control (LAC) in eastern Ladakh.

After learning about a recent FIR filed by the Delhi Police’s economic offences wing against a distributor of Vivo located in Jammu and Kashmir, the ED opened a money laundering probe. A few Chinese stockholders in the corporation were accused of forging their identification documents in the FIR.

For suspected violations of the Foreign Exchange Management Act, the ED in April ordered the seizure of deposits from Chinese smartphone manufacturer Xiaomi India totaling Rs 5,551 crore (FEMA).

In a February raid, the Income-tax authorities allegedly discovered that the Chinese telecom corporation Huawei had manipulated its account books to lower its taxable income in India.

Conclusion

The Enforcement Directorate’s (ED) probe into the money laundering case involving Chinese smartphone maker Xiaomi and Indian handset company Vivo has reportedly widened. According to a recent report in The Economic Times, the ED is now investigating allegations that some officials of both companies had indulged in fraudulent activities related to foreign exchange transactions (FEMA) and the Prevention of Money Laundering Act (PMLA). This latest development comes after it was recently revealed that the ED had filed chargesheets against top executives of both companies in connection with the alleged money laundering scam. It will be interesting to see how this case unfolds and what implications it may have for both Xiaomi and Vivo in India.

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