India’s financial crimes agency has arrested a Chinese employee of smartphone maker Vivo, the firm said.

Vivo has said it will “exercise all legal options” on behalf of its employee, Andrew Kuang, but Indian officials have not yet commented.

Vivo’s office was raided by authorities last year on suspicion of sending illegal funds from India to China.

In the Indian smartphone market, it is the second-largest brand after Samsung.

According to Vivo, it complies with Indian law and denies any wrongdoing.

In the wake of a widening rift between India and China, the arrest comes as a shock.

Reuters reported last week that Indian police had accused Vivo of helping transfer funds illegally to NewsClick, a news portal being investigated for spreading Chinese propaganda.

Tuesday’s arrest was made under the Prevention of Money Laundering Act (PMLA). According to Atul Pandey, Senior Partner at legal firm Khaitan, it is “a very stringent law that allows criminal cases to be filed, unlike regular foreign exchange violations, which are mostly civil offenses.”

As well as customs evasion, Vivo has been accused of tax evasion by the tax enforcement agency. In India, the company is owned by China’s BBK Electronics, which operates brands such as Oppo and Realme.

A total of $670m in assets of Chinese mobile phone companies, including Xiaomi, have been frozen by Indian authorities in the past 18 months.