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RoC probe reveals Chinese companies with dummy Indian directors

A two-year crackdown on Chinese entities by enforcement agencies have revealed a web of companies and individuals indulging in espionage, profiling of high value idividuals, large-scale tax evasion and exfiltration of bulk data that point to Beijing’s growing hunger for data and secrets.

A disturbing picture of Chinese Commercial Entities (CCE) has emerged after a series of actions by Indian authorities since 2020—busting of spying rings, tax raids on major Chinese telecom companies, a crackdown on mobile apps and a study of incoming investments into India. From uncovering of deep cover resident agents attempting to fund and influence Tibetan monks to a top executive of a telecom company found in the possession of sensitive documents and revelations of exhaustive profiling of key business leaders, Indian enforcement agencies have had their hands full.

A look at the CCE cauldron
The complicated web of companies and individuals investigated by several enforcement agencies points to a ‘thousand grains of sand’ approach to intelligence gathering. Chinese entities have been storing away information and data using multiple methods, with the objective of gaining strategic advantage over India’s economic and security systems.

Four broad approaches have been visible-—an attempt to influence minds and thought, gaining economic control of markets and private entities, acquiring bulk data to feed artificial intelligence engines and indulging in overt espionage.

The shell companies web
Agencies have cracked down on hundreds of small companies controlled by Chinese nationals, which have dummy Indian directors and managers for a show of legitimacy. A probe into the Registrar of Companies (RoC) data of these companies showed that they did not physically exist at their registered offices but their banking accounts were active and being operated from abroad.

Some of these entities were allegedly being used for espionage funding activities in India. In one case, this web was used to influence Tibetan monks living in India.

Chinese national Luo Sang, who was arrested for money laundering in August 2020, was actively sending money in packets to Tibetan monks, with agencies suspecting that it was intended to gather information about the Dalai Lama and the Tibetan government in exile. Operating under the name of Charlie Peng, the web is believed to have laundered over Rs 1,000 crore, with some of the proceeds used to gather intelligence in India.

Major Chinese corporation
Enforcement agencies have gone deep into the records of large Chinese companies operating in India, with raids being carried out on several major firms like ZTE, Huawei, Vivo and Xiaomi. A look by financial experts into records shows a cheap (and sometimes below production cost) pricing model that has given them control of a large chunk of the telecom and hardware markets in India.

Investigations also show that some senior Chinese employees of these companies are documented members of the Chinese Communist Party and Beijing has a strong leverage on their operations in India. In one case, the CEO of a telecom major was found in possession of sensitive documents. In another, a deep profile of an Indian business leader of interest to a Chinese company was discovered.

Agencies also found a seamless flow of data to Chinese servers through remote access of modems, switches, routers and networks sold and installed by these companies in India. Similarly, a seamless data link through Chinese origin mobile phones was also established during investigations. The data collected—fingerprint locks, uploading selfies, low light 180 degree cameras-—has helped Chinese artificial intelligence (AI) engines create portraits, with biometric details of millions of Indians.

Chinse apps
An explosion of Chinese origin apps have also been observed, mostly designed for providing loans, online gambling, messaging and processing payments. Several Ponzi scheme themed apps have also come to the fore. Investigations show that most of these are operated using online banking from China, in what is being described as a ‘vacuum cleaner approach’ to intelligence collection.

Cyber instruction

There has been an aggressive attempt by the Chinese state to test and infiltrate Indian networks, in what enforcement agencies believe is an effort to build a map of India’s online dependencies. Besides financial organisations, the targets of these tests and attacks have been in the field of power, telecom, aviation and space sectors.

Investments and influecne
While regulatory action since 2020 has stalled rising Chinese investments in India through companies like Alibaba, Tencent and ByteDance, investigators believe that large-scale buy in was planned to gain control of Indian entities that were in control of large sets of data—from companies running financial apps to betting platforms and shopping apps. Business Journal

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