INDIA MOVES TO DEEPEN XIAOMI SCRUTINY, SFIO FLAGS FUND FLOWS AND FDI CONTROLS

India’s Serious Fraud Investigation Office has recommended a detailed investigation into Xiaomi’s local operations, putting fund movements, beneficial ownership and foreign investment approvals under the microscope.

India’s Serious Fraud Investigation Office, SFIO, has recommended a comprehensive investigation into Xiaomi Technology India Private Limited and related entities over alleged irregularities in its business model and possible breaches of foreign investment rules.

A government memorandum reviewed by Reuters said the proposed investigation would examine the movement of funds through Xiaomi’s Indian operations and whether the company secured mandatory government approvals for investments following India’s tightening of rules governing investments from countries sharing a land border with India.

The memorandum also calls for scrutiny of the beneficial ownership and control of Xiaomi’s foreign investors and group entities, including whether direct or indirect changes in ownership or control were properly disclosed and approved.

The proposed 21-point investigation framework would allow investigators to examine financial statements and auditor reports for possible material misstatements and record statements from current and former directors, chief financial officers and compliance officers. It also envisages coordination with other government agencies where potential violations overlap.

The recommendation still requires approval from India’s Ministry of Corporate Affairs, which oversees the SFIO. It does not establish that Xiaomi has committed fraud or breached Indian law.

Xiaomi said it had not received any notice or communication from the SFIO and maintained that it complies fully with Indian laws.

The proposed probe comes as Xiaomi faces wider regulatory pressure in India, including a 55.51 billion rupee, approximately $584 million, freeze of Indian bank assets imposed in 2022 over alleged illegal remittances, allegations the company disputes.

For compliance teams, the case highlights the increasing scrutiny of cross-border fund flows, beneficial ownership, related-party structures, foreign investment approvals and the accuracy of corporate financial disclosures.