The functioning of the Enforcement Directorate
GS 2 – Statutory, regulatory and various quasi-judicial bodies.
Context:
- The Enforcement Directorate (ED) is frequently in the headlines these days. It dates back to May 1, 1956, when the Department of Economic Affairs established an ‘Enforcement Unit’ to handle Exchange Control Law infractions under the Foreign Exchange Regulation Act (FERA).
- The ED is now a multifaceted organisation that investigates economic crimes under the Prevention of Money Laundering Act (PMLA), the Fugitive Economic Offenders Act, the Foreign Exchange Management Act, and the FERA.
Where does the ED’s power come from?
- When the profits of crime (property/money) are created, the greatest approach to save that money is to park it somewhere where no one in the country can question you. As a result, there was a need to control and prevent money laundering.
- The PMLA was introduced in 2002 for this same purpose, although it was not adopted until 2005. The goal was to prevent money from being parked outside of India and to trace the layers and route of money. So, according to the Act, the ED has the authority to investigate under Sections 48 (authorities under the Act) and 49. (appointment and powers of authorities and other officers).
- If money has been laundered overseas, the PMLA court (as established by the Act) has the authority to issue a letter of rogatory under Section 105 of the Code of Criminal Procedure (reciprocal arrangements respecting proceedings). The mentioned government can then release the records and proof that the agency requires. The preventative component is to instil fear and deterrence in people’s thoughts.
When a crime is committed, when does the ED intervene?
- Whenever a local police station registers an offence with profits of crime over one crore, the investigating officer submits the information to the ED. Alternatively, if the Central Agency becomes aware of the offence, they can request the First Information Report (FIR) or the charge sheet if it has been submitted immediately by police personnel. This will be done to determine if any laundering has occurred.
What distinguishes the investigation between local police and ED officers?
Consider the following example:
- If a theft occurs at a nationalised bank, the local police station will initially look into the matter. If it is discovered that the bank’s founder took all of the money and kept it in his home without spending or using it, the offence is just theft, and the ED will not intervene because the money has already been confiscated. However, if the stolen amount is used to purchase some properties after four years, the ill-gotten money is brought back into the market; or if the money is given to someone else to buy properties in different parts of the country, there is ‘laundering’ of money, and the ED will need to step in and investigate the layering and attachment of properties to recover the money.
What are the ED’s additional duties and functions?
- Under Sections 16 (power of survey) and 17 (search and seizure) of the PMLA, the ED conducts a search (property) and a seizure (money/documents) after determining that the money has been laundered. Based on that, the authorities will determine whether arrest is required under Section 19. (power of arrest). The ED can also conduct a search and seizure without summoning the subject for interrogation under Section 50 (authorities’ powers regarding summons, production of documents, and giving testimony, among other things).
- It is not essential to summon the individual first and then begin the search and seizure. If the offender is apprehended, the ED has 60 days to file a prosecution complaint (charge sheet) since the maximum sentence under the PMLA is seven years. If no one is arrested and just the property is attached, the prosecution complaint and attachment order must be filed within 60 days with the adjudicating body.
Because the PMLA is new, can the ED examine incidents of money laundering in the past?
- If an ill-gotten property is obtained before 2005 (the year the legislation was enacted) and disposed of, there is no case under PMLA. However, if the profits of the crime were possessed prior to 2005, kept in cold storage, then utilised after 2005 to purchase real estate, the money’s colour remains black, and the individual is subject to prosecution under the PMLA.
- Section 3 (money laundering offence) states that a person is guilty of money laundering if he or she is found to have directly or indirectly attempted to engage in or knowingly assisted a party engaged in one or more of the following activities: concealment; possession; acquisition; use; or projecting as untainted property; or claiming as untainted property in any way.
