Xiaomi (1810. H.K.), Deutsche Bank (DBKGn.DE), HSBC (HSBA.L), and Citigroup (C.N.) received letters from India’s financial crime bureau on Friday for alleged unlawful payments to overseas organizations.
Under India’s foreign exchange rules, the Enforcement Directorate (E.D.) appellate authority issued shows cause notices for alleged 55.51 billion rupees ($673.2 million) illicit remittances. The agency froze funds last year.
Show cause notices ask companies why the government agency should not take action against them for misbehavior.
Xiaomi and the three banks declined to comment.
India claims Xiaomi’s local unit made illegal royalty payments to foreign businesses. The Chinese corporation claimed that payments were legitimate and would “continue to use all means to protect the reputation and interests.”
In a statement, the E.D. claimed Xiaomi and personnel, including its India CFO, received notices.
The government said the banks received notifications for allegedly allowing overseas royalty payments without due scrutiny and documentation.
Last year, Reuters reported that Indian authorities had charged that Xiaomi misled Deutsche Bank for years by pretending it had a royalty deal when it did not.
According to court records, Deutsche, Citi, and HSBC have Xiaomi’s frozen assets.
The Chinese company has risen significantly by supplying inexpensive smartphones in India. It competes with Samsung Electronics (005930. K.S.) and other Chinese firms in the developing South Asian market.
Xiaomi informed a court last year that the asset freeze was “severely disproportionate” and ceased its India activities. An Indian court denied Xiaomi’s freeze-lift motion in April.
Comment Template