The Enforcement Agency of India has just issued a Show Cause Order to Xiaomi Technology India Limited and three foreign banks – Citibank, HSBC and Deutsche Bank. An order of cause is a court order requiring one or more parties to prove or disprove something to the court. In this case, it involved violations of the Exchange Control Act equivalent to $6.7 million.
The actual violation was Xiaomi, but the above banks also received the order because they had a role in the violation. According to the ED, the bank allowed money transfers abroad without securing any technical cooperation agreement.
This issue can be traced back to 1200 Xiaomi India bank account was stolen due to illegal outflow of funds equivalent to USD 6.7 million . The Exposure Draft concluded after investigation that Xiaomi India transferred foreign currency out of the country on behalf of group entities and deposited it there. This is a direct violation of FEMA Title 4, 1999.
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