By Astha Deep
Published On: December 24, 2021 at 17:25 IST
Introduction
Established in 1956, the Enforcement Directorate comes under the Ministry of Finance in Department of Revenue. It is the law enforcing agency that regulates the working of the economic affairs the country and countering economic crime. It was formed with the prime objective of putting blanket control on Exchange control violations. It is head quartered in New Delhi while it has five branches across India in Mumbai, Chennai, Kolkata, Chandigarh and in Delhi. Zonal offices are all across India. The ED does investigation on frauds and money laundering.
The administrative supervision on economic matters and policy elements lies with ED. The Foreign Exchange Management Act 1999 is enforced and the clauses of Money Laundering Prevention Act are also into executive operation. FEMA was implemented on June 1, 2000 before which the Enforcement Directorate was implemented under the Foreign Exchange Regulated Act in 1973.
Role of Enforcement Directorate
- Investigate into the contraventions of the provisions of FEMA which came into force on July 1, 2000. The designated authorities deal with the contraventions by the way of adjudication and the penalty imposed is upto three times the sum involved in the matter.
- Investigate the offences related to money laundering under the Prevention of Money Laundering Act which came into force on July 1, 2005. The matters involve confiscation of property if that is a part of the proceeds of the crime that is an element of Scheduled Offence under the PMLA. In total there are 156 offences and 28 statutes under Prevention of Money Laundering Act.
- For the upkeep of the integrity of India the Fugitive Economic Offenders Act, 2018, the fugitives who try to escape will be punished.
- The cases of preventive detention are with under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
- The restitution of assets and money laundering under the provisions of Prevention of Money Laundering Act in which support is seeked also from foreign countries in such matters.
Laws implemented under the ED
- Foreign Exchange Management Act 1999
To regulate and control the foreign exchange, trade, development, commerce and other economic matters. Foreign exchange offences are civil offences under the Act.
- Prevention of Money Laundering Act 2002
The act was passed in 2002 but came into force on July 1, 2005, then it was properly executed by the Enforcement Directorate. This keeps a control on the property and assets of the individual or organization that has committed the crime of money laundering and he gains the launderer made in the process. The rules and penalties for the same are also mentioned.
- Fugitive Economic Offenders Act, 2018
The Fugitive Economic Offenders Act 2018 empowers the special court to confiscate and seize the assets and other related property of the offenders of more than 100 crore.
Modus Operandi
- Improve work performance using up-to-date systems and techniques, and remove outdated systems and processes.
- The group tries to improve communication between them.
- The process of sharpening their curiosity by learning from global best practices.
- Delegate responsibilities and adhere to rigorous standards while meeting the challenges of organizational excellence.
- Manage all laws for which they are responsible and strive for a better outcome.
In all situations, conduct a fair and reasonable inquiry. - It gathers information and shares the truth without fear.
- Makes the best choice possible without favouring anyone.
Fair, nonbiased acts. - Does not tolerate power abuse
- Act with discipline to achieve their goals
- Groups are responsible for the consequences of their actions and responsible for the results.
- Authority of the Bureau of Enforcement Authority of Agents: Authority of Agents: The primary authority of DE agents is to investigate cases of money laundering, initiate asset seizure proceedings and prosecute convicted persons.
Powers of Investigative Officer
ED investigative officers have the following rights under the Money Laundering Act 2002:
As a criminal act, they may seize any document of property or the value of any property purchased as part of money laundering, directly or indirectly.
They can search and verify the square footage and records of the property.
They have the right to arrest the accused, call witnesses and record their statements.
Authority: The ED agency can affix an identification mark on confiscated property or records.
They can create an appropriate inventory and save reports as needed.
Enforcement Directorate and its Functions
- To collect, produce, and disseminate intelligence related to the 1999 FEMA violations, intelligence comes from a various, including central and state intelligence agencies, states, complaints, and other sources.
- To investigate any violation of FEMA, 1999, such as “hawala” currency fraud, derealization of export earnings, non-repatriation of currency, and other types of violations under FEMA, 1999 .
- To hear the 1973 FERA and 1999 FEMA Violation complaints. These violations are punishable by emergency arrest, settlement, or a fine of up to three times the amount involved in the incident. Manage money laundering and fraud issues under the old FERA, 1973, including trials, appeals and prosecution.
How Laws are implemented under ED?
- Investigate the violations of the Prevention of Money Laundering Act.
Investigate, search, freeze or seize assets obtained through money laundering (within the scope of the Act), as well as arrest and prosecute offenders PMLA, 2002. There are 156 violations under 28 regulations are programmed violations under the PMLA.
The offenses covered by this law are penal in nature.
The individual involved can be sentenced to at least 3 years and up to 7 years in prison, as well as a fine of up to Rs. 5 lakhs. The penalties can be very severe.[i]
- Foreign Exchange Regulations Act adjudication of a show-cause notice.
The Foreign Exchange Regulations Act was passed by the Indian Parliament in 1973 and entered into force on January 1, 1997 . It was repealed in 1999 and replaced by the Foreign Exchange Management Act. It was repealed by the government of Atal Bihari Vajpayee in 1998.
FEMA hearings resulted in cover letters sent by FERA officials to various multinationals and others suspected of law violations. at the end of the trial.[ii]
- Sponsor cases under COFEPOSA involving FEMA violations.
COFEPOSA(Preservation of foreign exchange and prevention of smuggling activities) was promulgated in 197 under the chairmanship of Indira Gandhi.
Treatment and Funding – Recommend cases of prophylactic detention and help investigate cases related to FEMA violations under Currency Custody and Contraband Prevention (COFEPOSA).[iii]
- Cooperation with other countries to combat money laundering.
Section 56 of the Anti-Money Laundering Act 2002 allows the central government to enter into an agreement with any foreign government to enforce the provisions of the law.
This agency can exchange information to prevent money laundering offenses and seek cooperation in such cases. The ED has been empowered under the Fugitive Economic Crimes Act, 2018 to work with Indian and foreign governments to track down and apprehend offenders.
Provide and request mutual legal assistance from Contracting States regarding the seizure / confiscation of criminal profits and the transfer of persons accused under the Foreign Exchange Regulations Act and Prevention of Money Laundering Act. The emergency service may also attempt to return property related to the incident.[iv]
Functions of Directorate of Enforcement
The main functions of the Directorate are as under:
- Investigate contraventions of the provisions of Foreign Exchange Management Act, 1999(FEMA) which came into force with effect from 1.6.2000. Contraventions of FEMA are dealt with by way of adjudication by designated authorities of ED and penalties upto three times the sum involved can be imposed.
- Investigate offences of money laundering under the provisions of Prevention of Money Laundering Act, 2002 (PMLA) which came into force with effect from 1.7.2005 and to take actions of attachment and confiscation of property if the same is determined to be proceeds of crime derived from a Scheduled Offence under PMLA, and to prosecute the persons involved in the offence of money laundering. There are 156 offences under 28 statutes which are Scheduled Offences under PMLA.
- Adjudicate Show Cause Notices issued under the repealed Foreign Exchange Regulation Act, 1973 (FERA) upto 31.5.2002 for the alleged contraventions of the Act which may result in imposition of penalties. Pursue prosecutions launched under FERA in the concerned courts.
- Render cooperation to foreign countries in matters relating to money laundering and restitution of assets under the provisions of PMLA and to seek cooperation in such matters.[v]
In the matter of Suman Sehgal Vs Union of India[vi] “For that matter, Section 37(3) does not refer to any express provision of the Income Tax Act. The only conclusion which can be therefore logically read is that there is no pre-condition that any ‘proceeding’ ought to be pending against a particular or specified individual nor is the pre- requisite for exercise of such power dependent upon existing judicial proceeding. As long as there are certain matters under the investigation of the concerned authority, it can invoke the power under Section 37(3).”
For Example- Mallya has also been charged with money laundering by the Law Enforcement Department under the PMLA. Based on CBI’s investigation, ED filed a lawsuit accusing him and A. Raghunathan (CFO of Kingfisher Airlines) of a 900 crore default with IDBI bank officials.
Violations of Offences under Foreign Exchange Regulations Act :
FEMA matching is a mechanism by which a guilty person is authorized to pay for committing section 13 violations. Thus, violations under FEMA are general and civil in nature. To include any FEMA violation, an application must be filed with the Reserve Bank of India. However, it should be noted that if a person trades or transfers currencies or foreign exchange securities to someone who is not an authorized person (hawala trading) and is found guilty of such trading, the pooling of items Similar would only be done by DE (FEMA Contrast Measures, 1999).
However, the double default option will not be available in the following cases:
- Where the amount cannot be quantified; and
- When the offense of the person was committed within three years from the date on which the same offense committed by the person was added.
It should be noted that in the event that the ED has filed a criminal complaint against the defendant (as explained previously), the pooling of irregularities is also expressly permitted in this case. The only condition is that the order of incorporation is notified to the Tribunal and on this notice, the person linked to such violation be relieved of his duties.
Conclusion
The Enforcement Directorate is basically a government department that keeps a check and control on the economic and financial matters to prevent laundering in the nation by imposing of the laws that are formulated for the same. Through the process of adjudication and proper investigation that is needed and according to the powers and authority given to them. The provisions of FEMA and PMLA and FERA are given priority to encounter the fraudulent acts and money laundering in and beyond the boundaries of the country.
ABOUT THE AUTHOR
The author, Astha Deep , is a 1st year BBA-LLB student at Chanakya National Law University, Patna. Having keen interest in dealing with complexities of legal field has been her keen source of motivation. This has helped her express her cognitive opinions through writing blogs and research papers. She possesses deep curiosity in Corporate laws and aims to contribute in that field. She is an experience collector and learner for life exploring various fields of both law and life.
Edited by: Aashima Kakkar, Associate Editor, Law Insider
[i] Prevention of Money Laundering Act 2002
[ii] Foreign Exchange Regulations Act, 1973
[iii] COFEPOSA
[iv] Anti-Money Laundering Act 2002- Section 56
[vi] Suman Sehgal Vs Union of India AIR 2006 Delhi 216, 2007 138 CompCas 988 Delhi, (2006) 203 CTR Del 129, 2007 73 SCL 286 Delhi