India has tightened scrutiny of China-based firms since 2020, and one of the areas that has been brought into focus is the role of CAs or chartered accountants in setting-up shell companies to launder money to China.
The Ministry of Corporate Affairs has started the process of inspecting books of accounts of more than 500 Chinese companies, a person with knowledge of the matter told Bloomberg recently. Apart from ZTE and Vivo, this includes Xiaomi, Oppo, Huawei Technologies, several Indian units of Alibaba Group such as Alibaba.com India E-commerce Pvt. Ltd., and Alibaba Cloud (India) LLP, the person said, asking not to be identified as the details are private.
This week, ET reported Indian agencies are probing the local support that two Chinese nationals got in incorporating a company which projected itself as a subsidiary of smartphone maker Vivo.
Two chartered accountants and a company secretary are already under the scanner of the investigators, people in the know said.
The company, Grand Prospect International Communication Pvt Ltd, is a distributor of Chinese manufacturer Vivo’s products in Jammu & Kashmir. Forged documents have allegedly been used for the registration of the company and the procurement of director identification numbers.
On Tuesday, the Enforcement Directorate raided nearly four dozen locations linked to Vivo and its related entities including Grand Prospect. The central agency is probing if any shell companies were used to launder money.
The two Chinese nationals are shareholders of Grand Prospect. The company falsely projected itself to be a subsidiary of Vivo and was incorporated to conduct fraudulent businesses, according to the deputy registrar’s complaint filed with the police.
A probe by the deputy registrar of companies for Delhi and Haryana found that the two Chinese nationals used the professional address of a chartered accountant in New Delhi. The probe also allegedly revealed that the CAs facilitated the incorporation of the company by “witnessing” the signatures and documents of the Chinese nationals.
The company secretary, the investigation by the deputy registrar or companies revealed, allegedly certified processes relating to proactive enforcement and compliance of the legal requirements under the Companies Act without verifying them.
No comments from ICAI, so far.
On June 20, The Hindu reported that the Government of India has recommended disciplinary action against 400 Chartered Accountants and Company Secretaries (CSs) for their alleged role in incorporating Chinese shell companies in Indian cities by fluting norms and rules.
The Institute of Chartered Accountants of India (ICAI), the professional body of CAs in India, said that complaints are being processed in terms of the Chartered Accountants Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases Rules, 2007, and only after the investigation it can be confirmed about allegation and number of professionals involved with this.
Source: Economic Times