OCTOBER 25, 2023

By Vijay Kumar

THE very words, "Enforcement Directorate" (ED for short) sends a chill down many a political spine. In the recent past several politicians and officers have come under the ED radar and many of them have faced incarceration.

A similar situation prevailed in the late 1980s when ED's Director Bhure Lal was a super-cop as far as top industrialists were concerned. On April 15, 1987, ‘India Today' reported:

During his 20-month tenure as director, enforcement, he had been a dreaded figure, with the reputation of a determined sleuth.

Lal's record in the Enforcement Directorate is now part of history, for he went after leading businessmen in a manner that no one else had dared.

For Bhure Lal, 48, the change of fortunes has been dramatic. Earlier, he was doing the interrogating. Last fortnight it was his turn to be questioned, by the Central Bureau of Investigation.

What is this ED all about?

It started on a humble beginning. On 1st May 1956, an ‘Enforcement Unit' was formed in the Department of Economic Affairs for handling Exchange Control violations under Foreign Exchange Regulation Act, 1947 (FERA). 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 three Inspectors of Special Police Establishment. It must have been these policemen who gave the directorate the enFORCE look. There were two branches – at Bombay and Calcutta.

The next year in 1957, this Unit was named 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.

FERA 1947 was repealed and replaced by FERA, 1973 and the "Enforcement Directorate" (ED) continued to exercise power under the new Law, but the directorate was attached to the Department of Personnel & Administrative Reforms.

For four years (1973 – 1977), the Directorate was under the administrative jurisdiction of the Department of Personnel & Administrative Reforms and now it is under the Department of Revenue, Ministry of Finance, Government of India.

FERA, 1973, which was a regulatory law, was repealed and in its place, a new law, the Foreign Exchange Management Act, 1999 (FEMA) came into operation from 1st June 2000. And this Enforcement Directorate lost all its importance, power, and glamour – but that was only for a short while.

Prevention of Money Laundering Act, 2002 (PMLA) was enacted and ED was entrusted with its enforcement from 1st July 2005. And the ED bounced back with powers unimaginable any time before.

And as icing on the cake came the Fugitive Economic Offenders Act, 2018 (FEOA) and ED was entrusted with its enforcement from 21st April 2018.

What do they do?

They are concerned with enforcing the following Laws:

1. The Prevention of Money Laundering Act, 2002 (PMLA) : This is the most dreaded law now aimed to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for connected or incidental matters. 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 property and to ensure prosecution of the offenders and confiscation of the property by Special courts. If there is a crime and if there is money, be sure ED will be there.

2. The Foreign Exchange Management Act, 1999 (FEMA): It is a civil law enacted to consolidate and amend the laws relating to facilitation of 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. This is a mild law now with hardly any threat of arrest.

3. 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 India warranting arrest and provide for the confiscation of their properties to the Central Government. Enforcement Directorate (ED) has filed FEOA applications against 19 persons till now of whom ten have been declared as fugitive economic offenders. Vijay Mallya and Nirav Modi find place in the list.

4. The Foreign Exchange Regulation Act, 1973 (FERA): The main functions under the repealed FERA are to adjudicate Show Cause Notices issued under the Act up to 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 courts.

In the Vineet Narain case (2002-TIOL-203-SC-PIL-LB) in 1997, the Supreme Court directed:

1. A Selection Committee headed by the Central Vigilance Commissioner and including the Home Secretary, Secretary (Personnel) and Revenue Secretary, shall prepare a panel for appointment of the Director, Enforcement Directorate. The appointment to the post of Director shall be made by the Appointments Committee of the Cabinet (ACC) from the panel recommended by the Selection Committee. (Subsequently the Central Vigilance Commission Act, 2003 included this in the statute)

2. The Director, Enforcement Directorate like the Director, CBI shall have a minimum tenure of two years. In his case also, premature transfer for any extraordinary reason should be approved by the aforesaid Selection Committee headed by the Central Vigilance Commissioner.

3. In view of the importance of the post of Director, Enforcement Directorate, it shall be upgraded to that of an Additional Secretary/Special Secretary to the Government.

4. Officers of the Enforcement Directorate handling sensitive assignments shall be provided adequate security to enable them to discharge their functions fearlessly.

5. Extensions of tenure up to the level of Joint Director in the Enforcement Directorate should be decided by the said Committee headed by the Central Vigilance Commissioner.

6. There shall be no premature media publicity by the CBI/Enforcement Directorate.

7. Adjudication/commencement of prosecution shall bemadeby the Enforcement Directorate within a period of one year.

8. The Director, Enforcement Directorate shall monitor and ensure speedy completion of investigations/adjudication and launching of prosecutions. Revenue Secretary must review their progress regularly.

9. For speedy conduct of investigations abroad, the procedure to approve filing of applications for Letters Rogatory shall be streamlined and, if necessary, Revenue Secretary authorised to grant the approval.

10. A comprehensive circular shall be published by the Directorate to inform the public about the procedures/systems of its functioning for the sake of transparency.

11. In-house legal advice mechanism shall be strengthened by appointment of competent legal advisers in the CBI/Directorate of Enforcement.

12. The Annual Report of the Department of Revenue shall contain a detailed account on the working of the Enforcement Directorate.

The Supreme Court had given several other directions in later years on the functioning of ED.

Most of the senior officers in the Directorate are from the Revenue Services (mostly from CBIC) with a few from IAS, IPS etc.,

The primary function of the Directorate of Enforcement now is administration and enforcement of the Prevention of Money Laundering Act, 2002 (PMLA), filing of prosecution complaint before special courts, attachment and confiscation of property involved in money laundering,carrying out international cooperation with competent authorities in foreign jurisdictions ensuring that the accused persons do not enjoy the proceeds of crime.

ED has the sole jurisdiction to investigate money laundering cases and the Law Enforcement Agencies having the responsibility to investigate a "predicate offence", including the State Police Authorities, are required to make a reference to ED to examine the money laundering aspect of the criminal activity. In certain cases, the fact that a predicate offence has taken place is also obtained from publicly available sources or on receipt of information from the Financial Intelligence Unit (FIU).

In 2012, P. Chidambaram, the then finance minister while speaking on the PMLA Amendment Bill in the Parliament stated,

…firstly, we must remember that money-laundering is a very technically defined offence. It is not the way we understand ‘money-laundering' in a colloquial sense. It is a technically defined offence.  It postulates that there must be a predicate offence and it is dealing with the proceeds of a crime .  That is the offence of money-laundering. It is more than simply converting black money into white or white money into black. That is an offence under the Income Tax Act. There must be a crime as defined in the Schedule. As a result of that crime, there must be certain proceeds… The predicate offences are all listed in the Schedule. Unless there is a predicate offence, there cannot be an offence of money-laundering ."

And the Supreme Court denied bail to Chidambaram in a PMLA case.

Investigation under PMLA generally covers collection of information/evidence from public domain, other investigating agencies (Predicate Offence Investigating Agency, Income Tax Department, Customs and Indirect Tax Department, Ministry of Corporate Affairs, Serious Fraud Office, SEBI, etc.), financial institutions, banks, District Sub Registrar office, etc. Identification and quantification of proceeds of crime and involvement of person/ entities in any process or activity connected with proceeds of crime are main requirements for proving offence of money laundering as well as for punishment for money laundering offence.

Statistics as furnished by the Directorate in the ED website

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