INTRODUCTION

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 Police Service, and the Indian Administrative Service as well as promoted officers from its own cadre.

The origin of the ED goes back to 1 May 1956, when an “enforcement unit” was formed, within the Department of Economic Affairs, for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act, 1947. In 1957, the unit was renamed as the Enforcement Directorate. Sanjay Kumar Mishra former Chief Commissioner of Income Tax, New Delhi was appointed as ED chief in the rank of Secretary to Government of India, from October 2018.

HISTORY OF ENFORCEMENT DIRECTORATE

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 (FERA ’47).

  • This Unit with Delhi as Headquarters was headed by a Legal Service Officer, as Director of Enforcement, assisted by an Officer drawn on deputation from Reserve Bank of India (RBI) and 03 Inspectors of Special Police Establishment.

  • There were two branches in Bombay and Calcutta.

  • In 1957, this Unit was renamed as ‘Enforcement Directorate’, and another branch was opened at Madras.

  • In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue under the Ministry of Finance.

With the onset of the process of economic liberalization, FERA 1973, which was repealed and in its place, a new law- the Foreign Exchange Management Act, 1999 (FEMA) came into operation in June 2000.

Further, in tune with the International Anti-Money Laundering regime, the Prevention of Money Laundering Act, 2002 (PMLA) was enacted, and ED was entrusted with its enforcement from July 2005.

With the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government has passed the Fugitive Economic Offenders Act, 2018 (FEOA), and the Enforcement Directorate is entrusted with its enforcement with effect from April 2018.

OBJECTIVE

The Organization is mandated with the task of enforcing the provisions of two special fiscal laws:

  1. Foreign Exchange Management Act, 1999 (FEMA)

  2. The Prevention of Money Laundering Act, 2002 (PMLA).

COMPOSITION

It is composed of officers from the Indian Revenue Service, Indian Police Service and the Indian Administrative Service as well as promoted officers from its own cadre. In addition to directly hiring people, the Directorate also draws officers from different Investigating Agencies, viz., Customs & Central Excise, Income Tax, Police, etc. on deputation. The total strength of the department is less than 2000 officers out of which around 70% of officials came from deputation from other organizations while ED has its own cadre, too.

TENURE

In November 2021, the President of India promulgated two ordinances allowing the Centre to extend the tenures of the directors of the Central Bureau of Investigation (CBI) and the Enforcement Directorate from two years to up to five years.

  • However, no further extension can be granted after the completion of a period of five years in total including the period mentioned in the initial appointment.

STATUTORY FUNCTIONS

The Directorate of Enforcement is a multi-disciplinary organization mandated with investigation of offence of money laundering and violations of foreign exchange laws. The statutory functions of the Directorate include enforcement of following Acts:

  • The Prevention of Money Laundering Act, 2002 (PMLA): It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto. ED has been given the responsibility to enforce the provisions of the PMLA by conducting investigation to trace the assets derived from proceeds of crime, to provisionally attach the property and to ensure prosecution of the offenders and confiscation of the property by the Special court.

  • The Foreign Exchange Management Act, 1999 (FEMA): It is a civil law enacted to consolidate and amend the laws relating to facilitate external trade and payments and to promote the orderly development and maintenance of foreign exchange market in India. ED has been given the responsibility to conduct investigation into suspected contraventions of foreign exchange laws and regulations, to adjudicate and impose penalties on those adjudged to have contravened the law.

  • The Fugitive Economic Offenders Act, 2018 (FEOA): This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. It is a law whereby Directorate is mandated to attach the properties of the fugitive economic offenders who have escaped from the India warranting arrest and provide for the confiscation of their properties to the Central Government.

  • The Foreign Exchange Regulation Act, 1973 (FERA): The main functions under the repealed FERA are to adjudicate the Show Cause Notices issued under the said Act upto 31.5.2002 for the alleged contraventions of the Act which may result in imposition of penalties and to pursue prosecutions launched under FERA in the concerned courts.

  • Sponsoring agency under COFEPOSA: Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), this

Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of FEMA.

FUNCTIONS OF ENFORCEMENT DIRECTORATE

  1. Investigating violations of Foreign Exchange Management Act (FEMA) laws and provisions.

  2. Designated ED Officials adjudicate FEMA violations.

  3. Penalties up to three times the sum involved can be imposed.

  4. Investigating offences of Prevention of Money Laundering Act, 2002 (PMLA) laws and provisions.

  5. ED has the power to attach the assets 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.

  6. Processing cases of fugitive/s from India under the Fugitive Economic Offenders Act, 2018.

  7. Offenders choose to stay outside the country and its jurisdiction to protect themselves.

  8. This Act allows Economic Offenders from evading the law and preserves the sanctity of the justice system in the country.

  9. Adjudicating show-cause notices issued under the repealed FERA (Foreign Exchange Regulation Act, 1973).

  10. Sponsoring cases of Preventive Detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) with respect to FEMA violations.

  11. Rendering cooperation to foreign countries in matters related to money laundering and restoration of assets under the PMLA provisions.

CONCLUSION

It is true that law has given stringent powers to the ED in dealing with the accused that can increase the possibility of political misuse. But there must be a consensus between the adjudicating authority and the officers of ED to abide by the constitutionality of provision under PMLA, making the investigation more lucid.

The process itself should not become a punishment. ED’s expanded powers should be welcomed with a greater commitment to expeditiously resolve the cases, so both the judiciary and enforcement agencies can move forward with speedy trials and convictions.

There must be a constant scrutiny over the operations of the Enforcement Directorate and current disposition whether this clarification will improve the conviction rate (which is right now less than half a percent). And if there will be any lacunas in the operative part, change is the law of nature, these gaps can be filled either through suitable legislation, executive action or revised order of the apex court.

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