The Functioning of the Enforcement Directorate

Context:

The Enforcement Directorate (ED) is in the news now and often. It goes back to May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs, for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act (FERA).

Relevance:

GS-II: Polity and Constitution, Governance

Dimensions of the Article:

1. Enforcement Directorate
2. Functions of Enforcement Directorate
3. From where does the ED get its powers?
4. At what stage does the ED step in when a crime is committed?
5. What differentiates the probe between the local police and officers of the ED?

Enforcement Directorate

• The Directorate of Enforcement (ED) is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India.
• It is part of the Department of Revenue, Ministry of Finance, Government Of India.
• It is composed of officers from the Indian Revenue Service, Indian Corporate Law Service, Indian Police Service and the Indian Administrative Service.
• The origin of this Directorate goes back to 1 May 1956, when an ‘Enforcement Unit’ was formed, in Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947.
• In the year 1957, this Unit was renamed as ‘Enforcement Directorate’.

Functions of Enforcement Directorate

• The prime objective of the Enforcement Directorate is the enforcement of two key Acts of the Government of India namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA).
• The ED’s (Enforcement Directorate) official website enlists its other objectives which are primarily linked to checking money laundering in India.
• In fact this is an investigation agency so providing the complete details on public domain is against the rules of GOI.
• The ED investigates suspected violations of the provisions of the FEMA. Suspected violations includes; non-realization of export proceeds, “hawala transactions”, purchase of assets abroad, possession of foreign currency in huge amount, non-repatriation of foreign exchange, foreign exchange violations and other forms of violations under FEMA.
• ED collects, develops and disseminates intelligence information related to violations of FEMA, 1999. The ED receives the intelligence inputs from Central and State Intelligence agencies, complaints etc.
• ED has the power to attach the asset of the culprits found guilty of violation of FEMA. “Attachment of the assets” means prohibition of transfer, conversion, disposition or movement of property by an order issued under Chapter III of the Money Laundering Act [Section 2(1) (d)].
• To undertake, search, seizure, arrest, prosecution action and survey etc. against offender of PMLA offence.
• To provide and seek mutual legal assistance to/from respective states in respect of attachment/confiscation of proceeds of crime and handed over the transfer of accused persons under Money Laundering Act.
• To settle cases of violations of the erstwhile FERA, 1973 and FEMA, 1999 and to decide penalties imposed on conclusion of settlement proceedings.

The PMLA being relatively new, can the ED investigate cases of money laundering retrospectively?

• If an ill-gotten property is acquired before the year 2005 (when the law was brought in) and disposed off, then there is no case under PMLA.
• But if proceeds of the crime were possessed before 2005, kept in cold storage, and used after 2005 by buying properties, the colour of the money is still black and the person is liable to be prosecuted under PMLA.
• Under Section 3 (offence of money laundering) a person shall be guilty of the offence of money-laundering, if such person is found to have directly or indirectly attempted to indulge or knowingly assist a party involved in one or more of the following activities — concealment; possession; acquisition; use; or projecting as untainted property; or claiming as untainted property in any manner.

At what stage does the ED step in when a crime is committed?

• Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above ₹1 crore, the investigating police officer forwards the details to the ED.
• Alternately, if the offence comes under the knowledge of the Central agency, they can then call for the First Information Report (FIR) or the chargesheet if it has been filed directly by police officials.
• This will be done to find out if any laundering has taken place.

What differentiates the probe between the local police and officers of the ED?

• Consider the following scenario: If a theft has been committed in a nationalised bank, the local police station will first investigate the crime.
• If it is learnt that the founder of the bank took all the money and kept it in his house, without being spent or used, then the crime is only theft and the ED won’t interfere because the amount has already been seized.
• But if the amount which has been stolen is used after four years to purchase some properties, then the ill-gotten money is brought back in the market; or if the money is given to someone else to buy properties in different parts of the country, then there is ‘laundering’ of money and the ED will need to step in and look into the layering and attachment of properties to recover the money.
• If jewellery costing ₹1 crore is stolen, police officers will investigate the theft. The ED, however, will attach assets of the accused to recover the amount of ₹1 crore.

-Source: The Hindu