AML Advisory

ED Registered Over 5,200 Money Laundering Cases Since 2014

The Directorate of Enforcement (ED), a specialized agency, has registered around 5,200 money laundering cases since 2014. The cases were reported and investigated under the provisions of the Prevention of Money Laundering Act of 2002 (PMLA). Further, the Directorate of Enforcement works based on the following objectives of the PMLA as outlined below:

• Prevention of money laundering activities like Hawala, Bulk Cash Smuggling, etc.;
• Prevention of channelizing money into illegal activities;
• Confiscation of property derived from or involved in money laundering;
• Penalizing the offenders involved in the offence of money laundering;
• Appointing an adjudicating authority to take charge of money laundering matters.

Overview of the Prevention of Money Laundering Act

The Prevention of Money Laundering Act of 2002 (PMLA) is a legal framework established to combat money laundering activities in India. It also enables the government or a public authority to confiscate property earned from or involved in money laundering. The Act is enacted to fight the criminal offence of legalizing income from an illegal source.

Role of ED in Money Laundering Cases since 2014

The Enforcement Directorate (ED) is crucial in preventing money laundering in India. The following are some of the prominent roles and responsibilities of ED combatting money laundering in India:

1. Investigation of Money Laundering Cases

Sections 48 and 49 of the PMLA empower the Directorate of Enforcement to conduct investigations and take action in money laundering cases. The ED is also empowered to collaborate with other law enforcement agencies, such as the CBI, RBI, and SEBI while conducting money laundering investigations.

2. Attachment and Seizure of Property and Assets

Sections 5 and 17 of the PMLA, read along with section 8 of the FEOA, empower the Directorate of Enforcement to attach, search, and seize any property or assets derived from/involved in laundering money.

3. Issuance of Summons

Section 50 of the PMLA authorizes the Directorate of Enforcement to issue summons to any person considered relevant to give evidence or produce records during any investigation/ proceedings undertaken under the Act.

4. Prosecution and Legal Proceeding

The Act also authorizes the officers of the Enforcement Directorate to initiate legal proceedings or prosecution for attachment of property at the designated special court. The ED is also liable to file chargesheets and closely work with the judiciary to ensure speedy adjudication of cases.

5. Prevention and Awareness

The Enforcement Directorate is further empowered to implement and create awareness regarding the anti-money laundering regulations. It guides financial institutions and other entities about money laundering risks and preventive measures.

6. Enhancing International Cooperation

The Directorate of Enforcement is responsible for enhancing international cooperation through global collaborations with diverse international agencies and organizations. 

7. Monitoring and Reporting

The Directorate of Enforcement also plays a crucial role in monitoring and reporting money laundering activities to detect and create awareness of suspicious financial transactions.

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Factors Attributing Surge in Money Laundering Cases Since 2014

Some factors combined with the challenges faced by regulatory agencies have contributed to a significant rise in money laundering cases in India. Consider the following factors attributing a surge in money laundering cases in India:

1. Corruption & Political Instability

Emerging corruption, political instability, and a lack of robust financial control are considered crucial factors contributing to a surge in money laundering cases across different countries. 

2. International Trade and Cross-Border Financing

The increasing international trade and cross-border financing for terrorist activities is yet another factor which promotes illicit funding options (i.e., money laundering) in India.

3. Technological Advancements

The growth and advancement of technological aspects like digital banking, cryptocurrency, and online financial services have significantly facilitated an easy option for criminals to conceal their illicit practice of money laundering in India.

4. Regulatory and Enforcement Inconsistency

The lack of regulatory standards and enforcement practices has created a gap between money laundering criminals and the government. The inconsistency reported is also a significant factor attributed to a surge in money laundering cases in India.

List of ED Registered Money Laundering Cases in India

According to the Minister of State for Home Nityanand Rai, the Directorate of Enforcement registered more than 5,297 money laundering cases with approx. 40 convictions and 3 acquittals under the Prevention of Money Laundering Act of 2002 since 2014. The following is the list which comprises the list of famous ED-registered money laundering cases in India:

• ICICI Bank- Videocon Case (2016-2022);
• National Herald Case (2012);
• Sand Mining Case (2022);
• Jharkhand Mining Case (2022);
• School Service Commission (SSC) Recruitment Scam;
• Chinese Visa Case;
• Patra Chawl Scam;
• Nawab Malik And Dawood Ibrahim’s Scam;
• Jammu & Kashmir Cricket Association Fund Scam (2018); etc.

Business Implications of Money Laundering Cases in India

Money laundering activities have a significant impact on the macroeconomics of the businesses in the country. The following are the business implications of money laundering cases in India:

1. Loss of Investor’s Confidence

Money laundering has a corrective impact, leading to a loss of investor confidence and trust in the financial system. It ultimately pulls investors out of the capital market, leading to a constant decline in the overall health of the financial market.

2. Increased Costs of Business Compliance

Money laundering activities lead to a constant increase in business compliance costs, which is achieved by implementing various anti-money laundering regulations and witnessing substantial growth in the investment system.

3. Revenue Loss & Financial Instability

Money laundering activities significantly impact the finances and economic instability of businesses. They further lead to revenue loss and financial instability among individual financial institutions and the nation as a whole.

4. Reputational Damage

Money laundering activities negatively impact reputational damage, which deters foreign investment and international trade relationships in the global business space.

5. Legal Impact

Money laundering activities have an adverse legal impact on the businesses included in illegal activities like arms dealing, organized crimes, and terrorist financing.

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Economic Impact of Reporting Money Laundering Cases Since 2014

The Directorate of Enforcement played a significant role by reporting money laundering cases, which positively impacted the Indian economy. The following are the economic impacts of reporting money laundering cases since 2014.

A. Contributed Towards Economic Transparency

The addressing and reporting of money laundering cases since 2014 are contributing towards a more stable and transparent financial growth and foreign investment in India’s business economy.

B. Impact on the Black Money Market

The reporting of money laundering, which aims to reduce illegal and illicit activities, has significantly impacted the market for black money in India.

C. Reduced Crime Rates

The active investigation and reporting of money laundering cases since 2014 have significantly impacted the Indian economy by reducing crime rates. The reduction in crime rates, as observed, assists in maintaining financial integrity and stability within the economy.

D. Enhanced Due Diligence

The active investigation and reporting of money laundering cases conducted by ED have implemented a strict and enhanced due diligence process to reduce the risk of financial crimes in India.

E. Reduced Tax Evasion

The thorough investigation and reporting of money laundering cases have significantly reduced economic crimes like tax evasion and corruption, which impact the nation’s economic stability and growth.

Criticism of ED’s Action in Registering Money-Laundering Cases

Justice Surya Kant, who is heading the bench in the cases reported by ED, asked Ed to look after the quality of the prosecution, as some serious allegations disrupted the country’s economy. The following are the criticisms faced by the ED on their action of registering the money laundering cases since 2014:

A. Allegations of Political Biases

The ED has been criticized for its alleged political bias toward the individuals and business entities alleged against the government of India.

B. Concerns Regarding Due Process

In addition, the ED has also been criticized based on due process concerning the fairness of investigations conducted.

C. Concerns Regarding Powers of ED

The powers granted to the ED under the PMLA have also raised concerns about the balance between effective law enforcement and the protection of individual rights.

D. Scrutiny Over Lower Conviction Rates

The ED has also been scrutinized based on the lower rate of conviction in comparison to the cases investigated and reported by the ED.

Government Actions Reporting Money-Laundering Cases

The government of India reported many money laundering cases, which resulted in a conviction rate of around 93% since 2014. The following are some of the actions undertaken by the government to report and try money laundering cases in India:

1. Strengthened Legal Provisions

The government has enacted a series of legislative changes to strengthen the legal provisions for reporting the rising cases of money laundering and terrorist financing in India. The strengthened legal provisions bring these measures in line with the international standards for reporting black money.

2. Enhanced Searches in Course of Investigation

The government is committed to enhancing the number of searches during the investigation of money laundering cases by gathering financial intelligence, establishing better agency cooperation, and exchanging information for both domestic and international cases.

3. Established Global and Regional Regulatory Bodies

The government took action to report money-laundering cases by establishing global and regional regulatory bodies. The main objectives of establishing the regulatory bodies like the Financial Action Task Force (FATF), National Security Council Secretariat (NSCS), INTERPOL, etc., are as described below:

• Spreading awareness regarding the negative impact of money laundering;
• Developing a universal methodology for anti-money laundering;
• Building and organizing institutional training conferences for specific AML;
• Keeping a check on alternative remittance channels.

4. Advancement of Technology

The advanced use of technology and digital data analytics tools has simplified the ED’s capabilities to report and investigate money laundering cases in India. It also assists in tracing suspicious transactions and the illicit flow of funds in India.

5.    Used Organizational Approach

Also, the government introduced various organizational approaches for effectively reporting money laundering cases in India. The following are some of the organizational approaches as provided below:

• Know your customers (KYC);
• Watch list filtering;
• Suspicious activity reporting;
• Suspicious transaction reporting (STR);
• Policy formulation and employee training.

Conclusion

The registration of nearly 5200+ money laundering cases since 2014 shows the strong commitment of the Indian government in combatting financial crimes and black money marketing in India. The ED’s action mainly aims to solve the global problem of black money and achieve international cooperation among nations.

However, the ED’s reporting of the money laundering cases has been further justified with the enactments and compliance with the law enforcement agencies working according to the changing dynamics of money launderers. Strengthen your organization’s compliance with PMLA 2002 by visiting our website www.enterslice.com and protect your business from financial crime by ensuring adherence to legal standards.