India arrests Vivo and Lava executives on money laundering charges

Earlier this week, the Enforcement Directorate (ED), India's financial crime agency, arrested four senior executives from the smartphone industry. The individuals involved were Hari Om Rai, co-founder, chairman and managing director of domestic device manufacturer Lava Mobiles; Guangwen Kuang aka Andrew Kuang, a Chinese national and employee of smartphone maker Vivo; and accountants Nitin Garg and Rajan Malik. The arrests were made in connection with an ongoing money laundering investigation, with all four remanded to three-day custody ending October 13, 2023.

Indian authorities raided Vivo offices and related entities at more than 40 locations last year and accused the company of illegal remittances of more than 100 billion Indian rupees (US$1.2 billion) from India to China. According to media reports, Vivo reported zero profits between 2014 to 2020 to avoid paying taxes in India.

ED accuses Vivo of illegally transferring funds to NewsClick, a news portal which is under investigation on charges of spreading Chinese propaganda. In addition, it has alleged that the three Indian accused helped Vivo in forming a company based on forged documents. ED alleged that Lava's Hari Om Rai helped Vivo set up its operations in India in 2014 by embezzling funds.

Growing tensions

"We are obviously very concerned about it. We do not know all the facts, but Lava as a company has been an Indian champion in the important and growing smartphone segment, where India is now becoming one of the world's largest producers of smartphones," Union Minister of State for Information Technology, Rajeev Chandrasekhar told an Indian financial daily recently.

The arrests were made under the Prevention of Money Laundering Act (PMLA) and come amid growing geopolitical tensions. China recently released maps which show the state of Arunachal Pradesh as part of its territory and barred three players from the state from competing in the recently concluded Asian Games in Hangzhou.

Apart from Vivo, Indian authorities have targeted other Chinese device companies, including Xiaomi, in the past. Historically, India and China have hardly been on friendly terms for long but the relationship deteriorated in the aftermath of the Galwan Valley clashes in 2020 between the Chinese and Indian forces. 

The Indian government banned several Chinese apps, including TikTok and Helo, following the incident. India also made it difficult for Chinese telecom vendors Huawei and ZTE to do business in the country.

Vivo is the second-largest smartphone company in the country after Samsung, with a 17% market share. Lava is one of the largest Indian device makers.