New Delhi (Reuters) – India’s financial crime agency on Friday said notices had been issued to Xiaomi (1810.HK), Deutsche Bank (DBKGn.DE), HSBC (HSBA.L) and Citigroup (C.N) over alleged illegal remittances made by the Chinese smartphone giant to foreign entities.
An appellate authority at the Enforcement Directorate (ED) issued the so-called show cause notices under India’s foreign exchange laws for alleged illegal remittances of 55.51 billion rupees ($673.2 million). The funds have been frozen by the agency since last year.
Show cause notices are typically issued to a company to ask it why the federal agency should not proceed to take action against it for wrongdoing.
Xiaomi and the three banks did not respond to requests for comment.
India alleges Xiaomi’s local unit made illegal remittances to foreign entities by passing them off as royalty payments. The Chinese company has previously said those payments were all legitimate and that it will “continue to use all means to protect the reputation and interests”.
The notices were issued to Xiaomi and officials including the chief financial officer of its India unit, the ED said in a statement.
The banks received notices because they allegedly allowed foreign remittances described as royalty payments without conducting due diligence and obtaining necessary documentation, the agency added.
Reuters reported last year Indian investigators had alleged during their probe that Xiaomi misled its banker Deutsche for years by claiming it had an agreement for payment of royalties when it had none.
Court documents show Xiaomi’s frozen assets are spread across accounts at various banks including Deutsche, Citi and HSBC.
The Chinese company is one of India’s leading smartphone players, having grown rapidly in recent years by offering budget smartphones. It competes with Samsung Electronics (005930.KS) and other Chinese brands in the booming South Asian market.
Xiaomi last year told a court that the asset freeze was “severely disproportionate” and had effectively halted its operations in India. In April, an Indian court rejected Xiaomi’s request to lift the freeze