Foreign Exchange Management

Enforcement Directorate (ED) and its Functions

The Enforcement Directorate (ED) is one of several government organizations responsible for law enforcement, research, intelligence & evaluation of high-profile cases involving frauds, money laundering, and other illegal activities.

In Indian politics, the phrase “Enforcement Directorate” is much sought after. However, most people are unaware of this phrase. So, in this post, we’ve gone through the concept and functions of the (ED) Enforcement Directorate, also called as the ED.

The Directorate of Enforcement, with its headquarters in New Delhi, was founded in 1956. It is in charge of enforcing the Foreign Exchange Management Act of 1999 (FEMA) and some clauses of the Money Laundering Prevention Act. For operational reasons, the Directorate is under the administrative supervision of the Department of Revenue; the policy elements of the FEMA, its law, and its modifications are under the purview of the Department of Economic Affairs. On the other hand, the Department of Revenue is in charge of policy matters relating to the PML Act. Prior to the implementation of FEMA on June 1, 2000, the Directorate implemented laws under the Foreign Exchange Regulation Act of 1973.

Organization of the ED

The parent entity of the Enforcement Directorate is the Department of Revenue of the Ministry of Finance. The Enforcement Directorate is divided into 10 Zonal offices, each led by a Deputy Director, and 11 sub-Zonal offices, each led by an Assistant Director.

The Enforcement Directorate has offices in the following countries:-

Objectives of the Enforcement Directorate

• Enforcing 2 major fiscal Acts in India: the Foreign Exchange Management Act (FEMA), 1999 & the Prevention of Money Laundering Act (PMLA), 2002.
• Conducting investigations into alleged FEMA violations or infringements in order to inflict appropriate fines on the accused perpetrator.
• Conducting investigations, tracing, attaching, and/or confiscating assets connected to financial crime, and arresting and prosecuting criminals are all authorized under the PMLA 2002.

Composition of the Enforcement Directorate

Some of the Enforcement Directorate’s officers are hired directly, while others are delegated from other state agencies such as the Income Tax, Excise, and other departments.

The officers come from the IAS (Indian Administrative Services), IRS (the Indian Revenue Service), IPS (the Indian Police Service), ICLS (the Indian Corporate Law Service, and other government agencies.

A quick glance of the legislation guarded by the Enforcement Directorate, as well as its powers under the PMLA and FEMA, are given below:-

1. Foreign Exchange Management Act, 1999: In India, the Act, passed in 1999, aimed to control foreign exchange, trade & commerce, development, and maintenance. Foreign exchange offences are classified as civil offences under the Act. It is based on civil law and has quasi-judicial powers. Since the year 2000, the Enforcement Directorate has been enforcing this legislation.

2. Prevention of Money Laundering Act, 2002: The Act was passed in 2002, but it has only been in force since July 1, 2005, when it was turned over to the ED for execution. It is a matter of criminal law. It focuses with the control of money laundering, the seizure of the accuser’s property gained from the laundered money, and other rules and penalties.

For the most part, the Enforcement Directorate serves as an Intelligence and Enforcement agency. To combat money laundering, it collaborates with the Financial Intelligence Unit India (FIU-IND).

3. Fugitive Economic Offenders Act, 2018: Fugitive Economic Offenders Act, 2018 was enacted as per the provisions of the Prevention of Money Laundering Act of 2002. The FEOA 2018 empowers any special court for the purpose of seizing and confiscating the property of criminals accused with a crime worth more than Rs 100 crores who also try to avoid legal procedures.

Working Methodology: Modus Operandi

• Improve job performance by using updated systems and techniques and removing outdated systems and procedures.
• The team is striving to improve communication between itself.
• The process of sharpening their inquiry abilities by learning from global best practices.
• Delegate responsibilities and adhere to strict standards while dealing with difficulties in order to achieve excellence in the organization’s operations.
• Handles all legislation for which they are accountable and strives 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, non-biased acts.
• Does not tolerate power abuse.
• Operate with the discipline to reach their goals
• the team is liable for the consequences of their actions and accountable for a result.

Powers of Enforcement Directorate

1. Powers of the Officers: Officers’ Powers: The ED Officers’ primary powers are to investigate money laundering cases, start property attachment procedures, and prosecute those who are found guilty.
2. Powers of Investigating Officers: The ED’s Investigating Officers have the following powers under the Prevention of Money Laundering Act, 2002:-
   • As a criminal action, they can attach any property or the value of any property purchased with laundered money, either directly or indirectly.
   • They may search and examine the area as well as the property’s records.
   • They have the authority to arrest the accused, call witnesses, and record their statements.
   • Authority Powers: ED authorities may place identification markings on confiscated property or records.
   • They may create an appropriate inventory and record the statements according to the requirement.
3. Officers’ powers during the search:
   • The EG officers or authorities have the authority to enter the accuser’s property, search, confiscate, or freeze the property, investigate connected persons, and so on.
4. Powers of authorities during summons:
   • The Enforcement Directorate’s regional, zonal, or subzonal directors have the authority to summon any person involved in a financial crime, who is required to attend the meeting in person or through agents;
   • These are deemed to be as judicial proceedings and are governed by Section 45 of the IPC.

Enforcement Directorate (ED) and its Functions

As previously stated, the Enforcement Directorate’s major functions are to implement the budgetary Acts FEMA 1999 and PMLA 2002. The ED’s other functions under these Acts are listed below:-

1- Investigate any FEMA violations.

• To collect, produce, and distribute intelligence pertaining to FEMA, 1999 violations, intelligence inputs are obtained from a variety of sources, including Central and State Intelligence agencies, complaints, and other sources.
• To investigate into any breaches of the FEMA, 1999, such as “hawala” foreign exchange racketeering, non-realization of export earnings, non-repatriation of foreign exchange, and other types of infractions under the FEMA, 1999.
• To adjudicate complaints of FERA 1973 and FEMA 1999 infringement.
• These violations are punishable by arrest by the ED, settlements, or fines that may cost three times the amount involved in the case.
• To manage money laundering and fraud matters under the former FERA, 1973, including adjudication, appeals, and prosecution

2- Investigate the violations of the PMLA.

• Conducting an investigative survey, searching, freezing, or seizing property obtained via money laundering (as per section of the Act), as well as arresting and prosecuting offenders of the PMLA, 2002 offences. There are 156 offences under 28 statutes which are Scheduled Offences under PMLA.
• The offences that are covered by this legislation are criminal in nature.
• The individual involved may be sentenced to a term of not less than 3 years and up to 7 years in prison, as well as a fine of up to Rs. 5 lac. The punishment may be severe.

3- FERA adjudication of a show-cause notice.

• The Foreign Exchange Regulation Act was passed by the Parliament of India in 1973 and took effect on January 1, 1974. It was abolished in 1999 and replaced with the Foreign Exchange Management Act.
• It was abolished by Atal Bihari Vajpayee’s government in 1998.
• FEMA adjudicates show cause letters issued by FERA officials to numerous MNCs and others for suspected violations of this act up to 31-05-2005.
• To collect damages issued at the end of the adjudication process.

4- Sponsor cases under COFEPOSA involving FEMA violations.

• COFEPOSA^[1] (conservation of foreign exchange and prevention of smuggling activities) was enacted in 1974 under Indira Gandhi’s presidency.
• To process and sponsor – suggest cases for preventive detention and provide assistance in the investigation of cases involving FEMA violations under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA).

5- Cooperation with other countries to combat money laundering.

• Section 56 of the Prevention of Money Laundering Act of 2002 allows the Central Government to engage in an agreement with any foreign government to enforce the Act’s provisions.
• The agency can exchange information in order to prevent money laundering crimes and to seek cooperation in such cases.
• The ED has been given powers under the Fugitive Economic Offenders Act, 2018, to collaborate with Indian and foreign governments in order to track down and arrest the guilty.
• To give and request mutual legal assistance from contracting states regarding the attachment/confiscation of criminal profits and the transfer of accused individuals under the PMLA and the FEOA. The ED may also attempt to reimburse assets linked to the case.

Case laws:-

The case of Vijay Mallya

Mallya has also been charged with money laundering under the PMLA by the Enforcement Directorate. On the basis of a CBI investigation, the ED filed a complaint accusing him and A. Raghunathan (Kingfisher Airlines’ CFO) of a 900-crore default with IDBI Bank officials.

Conclusion

Directorate Enforcement is a government department dedicated to the advancement of our country. This is a government-supported agency that works to prevent and control money laundering in India. It is serving the nation with a good and clear vision. This agency is supported by a large number of officers from several departments. They investigate and settle the problem through the adjudication process, as well as conduct a variety of other functions by utilizing the powers granted to them by an agency. Its purpose is to boost our economy. It convicts individuals who commit fraud or engages in money laundering, as well as those who violate the requirements of the FEMA and PMLA. Its efforts in monitoring and combating money laundering, as well as serving as the guardian of two essential laws or acts, would help India improve and expand its economy.

Read our article:Penalties under FEMA Act Act, 1999