News: Enforcement Directorate (ED) has been in news for the attachment of several properties of Dr. Farooq Abdullah, for his alleged involvement in money laundering.
About Enforcement Directorate (ED)
Directorate of Enforcement is a Multi-Disciplinary Organization mandated with the task of enforcing the provisions of two special fiscal laws – Foreign Exchange Management Act, 1999 (FEMA) and the Prevention of Money Laundering Act, 2002 (PMLA).
The origin of this Directorate goes back to 1st May 1956, when an ‘Enforcement Unit’ was formed, in the Department of Economic Affairs, for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947.
How powers of the Enforcement Directorate (ED) evolved?
The powers of the Enforcement Directorate has been separated concerning the PMLA (2002) and FEMA (1999);
FERA (The Foreign Exchange Regulation Act, 1947) phase:
- The scope of power of ED remained limited since its existence from 1957 till 1973 when FERA (Foreign Exchange Regulations Act) was amended.
- FERA Empowered ED with the power to arrest for FERA violations. It allowed even Enforcement Officer to enter any business premises without a warrant and arrest anyone.
- Even an Assistant EO was empowered to search any vehicle or person without a warrant.
- But even then, the ED’s domain was largely limited to the corporate world.
The Foreign Exchange Management Act, 1999 (FEMA) phase
- Post-liberalisation FERA was repealed in January 2000, as it was seen as a coercive and obsolete law.
- FEMA (Foreign Exchange Management Act) replaced the FERA Under FEMA forex violations were amounted to civil offenses, compoundable after payment of a fine.
- ED lost its power to arrest people or take them into custody.
The Prevention of Money Laundering Act, 2002 (PMLA) Phase
- After the 9/11 attacks, the attention of the world turned to terror financing. After establishment of the Financial Action Task Force (FATF), India was under pressure to deal with the issues of terror financing.
- Thus, Prevention of Money Laundering Act (PMLA) came into force in 2005. It re-empowered ED with the powers of criminal prosecution.
- Madhu Koda case became the first in the history of the agency to end in conviction.
- With the amendments in 2009 and 2013, the scope of PMLA was widened. It provided more teeth to the ED.
- It has become the only Act in India, under which a statement recorded before an investigating officer is admissible in a court as evidence.
- In 2017, SC struck down a provision under which an arrested accused could be granted bail only if the court was satisfied that the accused was not guilty.
- Between 2005 and 2017, before this ruling, only 2 to 3 persons could secure the bail, out of 120 persons accused by the ED.
What are the provisions related to the attachment of properties?
- It is one of the most coercive and talked about provisions of the PMLA, which empowers ED to attach properties of the accused.
- Under PMLA, on the direction of the ED Director, money generated out of criminal activity (proceeds of crime) can be attached. If the wealth (money) is not available, ED can attach property equivalent to that value.
- The attachment provides for the property to remain out of bounds for the accused until the trial is complete.
- However, if the property is already in use (running businesses or residential houses), attachment doesn’t lead to immediate sealing of property, until the case reaches its logical conclusion.
- For Example, in 2018, the ED attached the Holiday Inn Hotel at Delhi’s IGI airport in connection with the Air India case. But the hotel continues to host guests as usual.
- Also in 2018, the ED had attached 50% of former Finance Minister P Chidambaram’s bungalow in New Delhi’s Jor Bagh. Which of being still enjoyed by Chidambaram and his family.
- The ED order would be valid for 180 days, during which time it must be confirmed by the Adjudicating Authority under the PMLA. If it is not confirmed, the property would be automatically released from attachment.
Difference between CBI and Enforcement Directorate:
|Central Bureau of Intelligence(CBI)||Enforcement Directorate(ED)|
|(CBI) examines the corruption and high profile cases related to white-collar crimes or crime which is required by the Central or State to CBI to look into||Enforcement Directorate or ED is committed to preventing money laundering offenses.|
|CBI operates under the Ministry of Personnel Public Grievances and Pension||ED is a part of the Ministry of Finance|
The CBI can register a complaint on its own or by request of the Courts.
|Enforcement directorate cannot register a case on its own, it is required by the agencies such as CBI or state police to register an offense based on which the ED Case Information Report is filed by Enforcement Directorate.|
Challenges and issues surrounding Enforcement Directorate:
- Firstly, Critics say that the government has been using the foreign funding law as a tool to silence its critics and Non-government groups that have raised concerns about the social costs of India’s rapid economic development.
- For Ex: critics point out the recent ED raid on Amnesty India.
- Secondly, Conviction of cases: Under PMLA, the agency has conducted over 1,700 raids from March 2011 to January 2020 in connection with 1,569 specific investigations. In the same period though, the ED has managed to secure convictions in only a paltry 9 cases, most of which are relatively-speaking low profile cases.
- Thirdly, ED has insufficient manpower: Anonymous ED sources have through various stories complained about insufficient manpower, the difficulty in establishing evidence of a proper money trail, and poor litigation strategies. For Example, since the PMLA enacted investigation is pending in over 1,000 cases.
- Fourthly, regarding the Question of Independence and misuse: Critics of ED are calling it a tool of political intimidation because of ED’s administrative control of Ministry. For Example, the Panchkula land case created widespread criticisms over the Enforcement Directorate
- Fifthly, ED Lacks Jurisdiction if the convict is out of India. ED’s power to investigate or arrest the convicts at present is limited within the territory of India.
- Lastly, the Funding is inadequate: The powers and the responsibilities of ED requires adequate financing but the previous budgetary allocations are inadequate with respect to the functions of the ED.
Solutions to improve the performance of ED:
- Firstly, increasing the funding of the ED: Increasing the Budgetary allocation of ED will help them to improve the conduct of investigation and consequently the conviction rate.
- Secondly, increasing the Man power: By increasing the man power ED can become more efficient and reduce the pendency of cases. Thereby increasing the credibility of ED as a whole
- Thirdly, considering the autonomous status of ED: This will curb the question over Independence and improve the ED’s image as a reputed agency against economic offenses in our country.
Strengthening the Enforcement Directorate is the need of the hour that will not only strengthen the Indian Economy but also prevent India from various kinds of economic offenses happening in the country.