On June 13th, Gizcoupon reported that the Indian agency responsible for combating financial crimes had issued a formal notice to Chinese smartphone manufacturer Subsidiaries of Xiaomi Technology in India, its company executives, and three banks (Deutsche Bank, HSBC, and Citibank) on June 11th, Beijing time. The notice accuses them of illegally transferring funds abroad and violating the “Foreign Exchange Management Act” in India. The agency stated that the three banks received the notice because they allegedly allowed overseas remittances for patent fees without conducting due diligence and obtaining necessary documents.
According to previous disclosures, the Enforcement Directorate of India froze INR 55.51 billion (approximately $673 million) from Xiaomi’s bank accounts. The notice may indicate that the Indian government has formally confiscated the frozen funds.
The Indian investigating agency claims that Xiaomi’s Indian subsidiary violated India’s foreign exchange regulations by disguising these remittances as copyright fees. On the other hand, Xiaomi firmly asserts these remittances’ legality. Furthermore, they stated that they will “continue to use all means to protect their reputation and interests.”
The investigating agency also accuses the three banks of failing to conduct necessary due diligence and obtain relevant documents when allowing Xiaomi to make these remittances.
Anti-Money Laundering Authority of India accuses Xiaomi
In May 2022, the Anti-Money Laundering Directorate of India accused Xiaomi and its Indian subsidiary of making remittances to three overseas entities, including Xiaomi Group, under the guise of “paying copyright fees” since 2015, which “violated” India’s Foreign Exchange Management Act. As a result, the law enforcement agency seized the assets of Xiaomi’s subsidiary.
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At that time, Xiaomi stated in court that the Indian investigating agency had frozen its assets in multiple banks, causing a “disproportionate and serious impact” on its business in India. Xiaomi India stated, “We have carefully reviewed the authorities’ order. We believe that the royalties and bills we have paid to the banks are legal and genuine. The royalties paid by Xiaomi India are used for authorized technology and intellectual property rights used in our Indian version of products. These royalties paid by Xiaomi India are for the licensed technology and intellectual property used in our Indian version of the product. Of course, we will cooperate closely with the government to clarify misunderstandings.” However, in April of this year, an Indian court rejected Xiaomi’s request to unfreeze the assets.
