India’s Enforcement Directorate, the country’s principal financial investigation agency, accused Xiaomi’s Indian business of breaking foreign exchange laws by sending “illegal remittances” in a statement released on Friday.

According to the agency, Xiaomi India “had remitted foreign currency equivalent to [55.5 billion rupees, $726 million] to three foreign-based businesses, including one Xiaomi group firm in the guise of royalty,” acting on the directions of its parent company.

Xiaomi began operations in India in 2014 and began remitting money a year later, according to the agency. Indian police have now confiscated a similar amount of money “located in the company’s bank accounts.”

“Xiaomi India buys fully assembled mobile phones and other products from Indian producers,” the Enforcement Directorate said. “The three foreign-based businesses to whom such sums have been sent have not provided any service to Xiaomi India,” the agency noted.

The corporation was also accused of supplying “misleading information to the banks while remitting the money abroad,” according to the suit.

“All our operations are strictly comply with local laws and regulations,” Xiaomi India, which distributes Mi-branded devices, said in a statement. The firm stated on Twitter on Saturday that it felt the royalty payments and bank statements were “all authentic and truthful.”

“In-licensed technologies and IPs used in our India version products” were the reason for the payments.

Since border tensions between the world’s two most populous countries erupted two years ago, India has been tough on Chinese enterprises. India banned around 200 applications in 2020, many of which were Chinese, including TikTok, the enormously popular video platform.

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