Vivo China Accused of Siphoning Rs 70,000 Crore Under the Guise of Imports: ED Report
08-10-2024
10:58 AM
1 min read
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- Why in News?
- Significance of Maldives for India
- India – Maldives Bilateral Relation
- Visit of President of Maldives to India
Why in News?
The Enforcement Directorate (ED) has filed a chargesheet against Vivo China, accusing the company of siphoning off Rs 70,000 crore from India under the guise of import payments.
Chinese Commercial Entities (CCE) and India’s internal security
- Background
- A disturbing picture of Chinese Commercial Entities (CCE) has emerged after a series of actions by Indian authorities since 2020.
- The investigation began after the June 15, 2020, incident in Ladakh’s Galwan.
- Actions by Indian authorities included busting of spying rings, tax raids on major Chinese telecom companies, a crackdown on mobile apps and a study of incoming investments into India.
- The actions by these agencies revealed a web of companies and individuals indulging in espionage, profiling of high value individuals, large-scale tax evasion and exfiltration of bulk data.
- Findings of investigating agencies
- The assessment by agencies found that the Chinese commercial entities operate in India with five primary objectives:
- influencing minds; build economic control; acquisition of data; for espionage and to target scientists to compromise innovation and intellectual property rights (IPRs).
- The objective of counterintelligence is pursued through top officials of Chinese companies in India.
- Small-size shell companies were also used as financial conduits to fund espionage rings and resident agents.
- A disturbing picture of Chinese Commercial Entities (CCE) has emerged after a series of actions by Indian authorities since 2020.
- Modus operandi of these entities
- Hundreds of small companies controlled by Chinese nationals have dummy Indian directors and managers for a show of legitimacy.
- Many of these companies did not physically exist at their registered offices. However, their banking accounts were active and being operated from abroad.
- A cheap (and sometimes below production cost) pricing model that has given them control of a large chunk of the telecom and hardware markets in India.
- Investigations also show that some senior Chinese employees of these companies are documented members of the Chinese Communist Party.
- Hence, Beijing has a strong leverage on their operations in India.
- Agencies also found a seamless flow of data to Chinese servers through remote access of modems, switches, routers and networks sold and installed by these companies in India.
- Similarly, a seamless data link through Chinese origin mobile phones was also established during investigations.
- The data collected has helped Chinese artificial intelligence (AI) engines create portraits, with biometric details of millions of Indians.
- Threat for India’s Internal Security
- Access to personal data of Indians
- Chinese entities have been storing away information and data using multiple methods, with the objective of gaining strategic advantage over India’s economic and security systems.
- Influencing minds
- Deep cover resident agents, posing as officials of these companies, are attempting to fund and influence masses in India.
- This is being done to foment the sentiments of masses and create internal disturbances.
- Such entities are also used to influence Tibetan monks living in India.
- Chinese national Luo Sang, who was arrested for money laundering in August 2020, was actively sending money in packets to Tibetan monks.
- Agencies are suspecting that it was intended to gather information about the Dalai Lama and the Tibetan government in exile.
- Espionage and money laundering
- Small-size shell companies were also used as financial conduits to fund espionage rings and resident agents.
- E.g., operating under the name of Charlie Peng, the web is believed to have laundered over Rs 1,000 crore, with some of the proceeds used to gather intelligence in India.
- Recently, a top executive of a telecom company found in the possession of sensitive documents.
- The investigation also revealed of exhaustive profiling of key business leaders.
- Access to personal data of Indians
Steps Taken By The Government
- Crackdown by investigating agencies
- Chinese commercial entities are under sustained investigation by the intelligence agencies since 2020.
- Multiple raids have been conducted by the ED under the provision of Prevention of Money Laundering Act.
- Clampdown on Chinese investment
- In 2020, Central govt declared that foreign investments from countries with which India shares land border shall be under approval route.
- Since China shares a land boundary with India, this announcement clamped down on investments from China making prior government clearance mandatory for all forms investments, even indirect ones.
- Ban on Chinese app
- The govt of India has banned more than 250 Chinese apps including PUBG Mobile, Tiktok, Shein, AliExpress and more.
- Other steps
- The Intelligence Bureau created a new wing — China Coordination Centre — to collaborate with financial enforcement agencies to investigate Chinese companies.
- The 57th Director General of Police conference, held in January 2023, discussed the issue of influence wielded by Chinese commercial firms.
Vivo China siphoned off Rs 70,000 crore
- About the news
- ED has filed a chargesheet against Vivo China, accusing the company of siphoning off Rs 70,000 crore from India under the guise of import payments.
- Allegations made by ED
- The ED claims that Vivo India remitted Rs 70,837 crore abroad since 2014, with large sums being sent to overseas entities controlled by Vivo China.
- These entities, based in Hong Kong, Samoa, and the British Virgin Islands, were allegedly set up as trading companies to conceal their connection to Vivo China.
- The ED also stated that Vivo China tried to hide its relationship with Vivo India, creating a structure that distanced itself on paper while maintaining control over the distribution network.
- Special Purpose Vehicles, like Multi Accord Ltd in Hong Kong, were set up to exert control over Vivo India.
- The chargesheet also alleges that Vivo India and its state distributor companies misdeclared their ownership to the Indian government.
- Chinese nationals used Indian firms like Labquest Engineering Pvt Ltd and Lava International Ltd to carry out unauthorized business activities and obtain invitations to India without raising suspicion.
- The ED claims that Vivo India remitted Rs 70,837 crore abroad since 2014, with large sums being sent to overseas entities controlled by Vivo China.
Q.1. What are the allegations made by the Enforcement Directorate against Vivo China?
The ED alleges that Vivo China siphoned off Rs 70,000 crore under the guise of import payments. Funds were funneled to overseas entities controlled by Vivo China, using shell companies to conceal their involvement and evade Indian authorities.
Q.2. How did Chinese companies like Vivo China impact India’s internal security?
Investigations reveal that Chinese companies like Vivo China were involved in espionage, data exfiltration, and economic manipulation. The ED uncovered a network of dummy companies and unauthorized data flow to Chinese servers, posing a threat to India’s internal security.
Source: ED: Vivo China siphoned off Rs 70,000 crore under garb of imports | Hindustan Times | The Economic Times | India Today