Money laundering: ED arrests Vivo India executives, Lava International MD
The Enforcement Directorate (ED) on Tuesday arrested three executives of Chinese mobile maker Vivo Mobiles India, including a Chinese national, as part of its ongoing investigation into alleged money laundering and tax evasion. Hari Om Rai, the founder of Lava International, was also arrested. The ED's probe into the case under the Prevention of Money Laundering Act (PMLA) started in February 2022 after the Delhi Police filed an FIR based on a complaint by the Ministry of Corporate Affairs.
Why does this story matter?
The ED claims that several companies were created within India with the main goal of illicitly transferring funds to China. Its investigation reportedly shows that Vivo Mobiles India sent a significant portion, about half of its proceeds from sales totaling Rs. 1.25 lakh crore, to China, for alleged tax evasion in India. This case has increased the legal woes of Vivo in India and comes amid growing tensions between China and India over various issues, including border conflicts.
Money laundering case against Vivo
In 2022, the ED raided Vivo offices and charged it with money laundering. It also blocked 119 Vivo India-linked bank accounts, but a court later overturned the move as Vivo argued it wasn't able to pay salaries. The ED alleged Vivo India transferred nearly Rs. 62,500 crore to China illegally to show "huge losses" in India and avoid taxes. The agency accused the smartphone maker of destabilizing "the financial system of the country" and threatening its sovereignty, Economic Times reported.
Why Lava founder was arrested
According to the ED, Lava's Rai was responsible for facilitating Vivo's operations in the country. The agency claimed he was the "main conspirator" who created a web of companies to bypass Foreign Direct Investment (FDI) rules and help Vivo grow its business illegally in India.
Vivo's market presence, involvement in NewsClick case
Vivo is owned by Chinese firm BBK Electronics, which also runs brands like OPPO and Realme. Vivo is the second largest smartphone brand in India, with a 17% market share, just behind Samsung, per Counterpoint. Separately, last week, the Delhi Police mentioned Vivo in its FIR against NewsClick, a news company accused of spreading Chinese propaganda. The police reportedly stated that illegal foreign funds were transferred to NewsClick through Chinese telecom companies like Xiaomi and Vivo.
Implications on Indo-China relations
Bilateral ties between India and China have hit rock bottom following skirmishes in Galwan Valley three years ago. In June 2020, the Indian government banned hundreds of Chinese apps, including TikTok, over national security concerns and tightened scrutiny of investments from China. Moreover, in February this year, a Chinese national was arrested for espionage. If proven true, allegations against Vivo could exacerbate the cross-border conflict and lead to increased scrutiny of Chinese industries and products.
