British insurer Aviva is under investigation by Indian tax authorities for allegedly breaching local commission regulations through a system of fake invoices and covert cash payments. The Directorate General of GST Intelligence has accused Aviva of orchestrating a scheme to bypass commission caps by channeling about $26 million to fictitious vendors between 2017 and 2023.

According to a notice seen by Reuters, Aviva’s India operations used these fake invoices to claim tax credits and evade approximately $5.2 million in taxes. The investigation reveals that the purported vendors, who were supposed to provide marketing and training services, were actually fronts for funneling money to Aviva’s insurance agents.

The notice, dated August 3, details a complex network of transactions designed to circumvent regulatory limits on commissions. The investigation uncovered emails and WhatsApp messages between Aviva executives and insurance distributors discussing methods to sidestep compensation regulations. Notably, a 2019 email involving then-CEO Trevor Bull indicated that senior management was aware of these practices.

The findings include a 205-page report with evidence of fraudulent activity, including screenshots of communication and summaries of interviews with key personnel such as Aviva India’s CFO Sonali Athalye. The report highlights that payments were made under the guise of “Over Ride Commission” (ORC), which was used interchangeably with terms like marketing and sales promotion expenses.

In addition to the fake invoicing, the investigation found that Aviva hired 559 individuals as “agent mentors” who did not provide actual training services. Instead, these mentors issued fraudulent invoices to facilitate excess commissions for agents. The scheme extended to paying vendors in cash through photos of 10-rupee notes, further illustrating the elaborate nature of the fraud.

Aviva’s Indian joint venture partner, Dabur Invest Corp., did not comment on the matter, and Aviva’s Indian operations have yet to respond to the allegations. The company faces potential penalties of approximately $11 million, equivalent to its 2023 profit from life insurance sales in India.

The case is part of a broader investigation into over a dozen Indian insurers suspected of evading $610 million in unpaid taxes, interest, and penalties. Despite being a relatively small market for Aviva, the insurer views India as a growth opportunity amidst intense competition from domestic players like LIC, which dominates the market.

The investigation underscores significant regulatory challenges for multinational companies operating in emerging markets and highlights the need for stringent compliance measures. Aviva has yet to formally address the allegations but is expected to challenge the notice’s claims.