The arrest of China’s tech giant Huawei’s Chief Financial Director enters a new chapter after new documents expose close ties to possible Huawei “shell” companies.

According to a Reuters report, new documents revealed that Chinese tech multinational Huawei allegedly has close ties to two obscure firms. One, operated in Tehran, Iran, is a company that sells telecommunication equipment. While the other company is the firm’s owner, a parent company registered in Mauritius. The connection to the firms may help convict a top Huawei executive of deceiving financial institutions into permitting transactions in violation of the U.S. sanctions on Iran.

The documents obtained by Reuters and originally filed in Iran and Syria show that a Huawei executive appeared to have been appointed as the manager of Iran Skycom. They also showed that at least three Chinese individuals had signing rights for Iran’s Skycom and Huawei’s bank accounts. Huawei had previously maintained that Skycom and parent company Canicula Holdings were independent of Huawei.

Reuters also discovered that a lawyer from the Middle East said Huawei was operating in Syria through the shell company Canicula. The ties, which were not previously reported, led the US to take legal action against Huawei’s Chief Finance Director (CFO) Meng Wanzhou, who was arrested in Canada last December at Washington’s request. The arrest shocked the world when it happened during the efforts of the US and China to reduce tensions due to the trade dispute.

Meng was then released on C$10 million bail on Dec. 11, 2018. She is still in Vancouver while the US is trying to extradite her. In the US the 46-year-old woman is facing conspiracy charges for deceiving several financial institutions and sentences up to 30 years for each charge.

So far, parties related to Meng, Huawei, Canicula and the US Justice Department have yet to comment on the latest developments. The fate of Meng and Huawei will play heavily into China and the US’ relationship which has been tenuous due to a trade war between the two countries. China has actively voiced disapproval of the arrest of Meng, but has more recently distanced itself from Huawei possibly in an effort to salvage the trade dispute.

Huawei and Skycom: The Relationship Explained

Several banks questioned Huawei about articles released in 2012 and 2013 about the relationship between the tech giant and Skycom, as per court documents submitted by the Canadian authority at the request of the U.S. last December.

Reuters quoted data from the confidential file indicating US authorities said that Meng and Huawei’s other companies repeatedly lied to the banks about the nature of the company’s ties with Skycom.

Due to Huawei’s deception to the financial institutions, the banks cleared hundreds of millions of dollars of transactions that were in violation of U.S. sanctions on Iran which prevented conducting business with the country.

The papers also explained that in a private meeting with a bank executive in August 2013, Meng said that Huawei had sold its shares in Skycom. Meng did not mention that the Skycom buyer was the Huawei-controlled company.

In court documents, Huawei is said to have told the unnamed financial institutions that it released its shares in Skycom in 2009, the same year Meng resigned from Skycom’s board of directors. Skycom’s buyer was not mentioned in those files.

It is known from Skycom data in Hong Kong that the company’s shares were transferred to Canicula in November 2007. Canicula, registered in Mauritius in 2006, has controlled Skycom shares for around a decade.

Reuters sources also said US authorities are onto Canicula’s operations. The firm has an office in Damascus and operates in Syria under Huawei’s brand. Those sources also added that among Canicula’s customers are three big telecommunication companies, such as MTN Syria, controlled by South Africa’s MTN Group Ltd.

The US Considers Huawei a Threat to US National Security

The reason behind US fears about Huawei is because the company has allegedly developed several technologies that can pose a threat to a country’s privacy. That’s why the world and in particular the US is wary of the smartphone maker. The U.S. has also held beliefs that Huawei has ties to the Chinese government, which the company has always denied.

The accusations targeting Huawei claim its devices are loaded with spying capabilities that could access potentially sensitive US internal information — a belief which could also be a contributing factor behind Meng Wanzhou’s arrest. Even though the company has denied allegations of any spying capabilities, countries such as Japan, Australia and New Zealand have banned Huawei products in its markets.

Meanwhile, Huawei is strengthening its position in the smartphone market and eager to expand its market. Based on data from the International Data Corporation (IDC), Huawei overtook Apple in the global smartphone market for the second quarter of 2018.

According to reports from Phone Arena on Aug. 1, 2018, IDC recorded that during the second quarter of 2018, Huawei shipped 54.2 million units with a market share reaching 15.8 percent, up 40,.9 percent compared to the same period in the previous year.

South Korea smartphone giant Samsung still dominated by gaining 20.9 percent of the global market share at that period.

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