India seizes $725 million of Xiaomi assets: why?

The Financial Crimes Enforcement Agency in India said today that it has seized the bank account assets of Xiaomi Technology India Private Limited.

What happened and why?

India seizes $725 million in local bank accounts of China's Xiaomi Corp. This was done following an investigation that revealed that the smartphone maker was making illegal money transfers to foreign organizations, passing them off as royalty payments.

For example, the firm transferred a foreign currency equivalent of 55.5 billion rupees to three foreign companies, including one company of the Xiaomi group, “under the guise of royalties.” The money transfer to two other unidentified and unrelated entities based in the US was also directed to the “ultimate benefit of the Xiaomi group companies.”

The agency added that "such huge amounts as royalties were transferred at the direction of their Chinese parent companies."

After that, Xiaomi released an official statement, which assured that its "royalties and bank reports are legal and truthful."

“These royalties that Xiaomi India made were for licensed technologies and IP addresses used in our Indian version products. We are committed to working closely with government authorities to clear up any misunderstandings,” Xiaomi said.

Source: Reuters