Advisory For ED

Tools for Investigation for ED under PMLA

Being vested with the powers to enforce two important laws, namely the Foreign Exchange Management Act, 1999 and the Prevention of Money Laundering Act, 2002 in the country, the Enforcement Directorate had come a long way since its inception tracing back to May 1, 1956, the time when an ‘Enforcement Unit’ was established under the Department of Economic Affairs which was there to handle Exchange Control Law violations falling under the Foreign Exchange Regulation Act, 1947 (FERA)^[1]. At that time, the Enforcement Unit had two branches; one was located in Mumbai and the other in Calcutta, now Kolkata.

At the current time, the Directorate has been vested with the power of enforcing a number of laws. The Directorate enjoys the quasi-judicial powers under FEMA laws for investigation by ED of the alleged violations occurring under the Exchange Control Laws and Regulations, as well as possesses the authority for imposing fines on the individuals who are found guilty. The Officers of the Enforcement Directorate are empowered under the PMLA for undertaking inquiries to find, provisionally attach/or confiscate assets arising from Scheduled Offenses. PMLA also empowers the ED to arrest and prosecute the Money Launderers.

Under the PMLA, 2002, the ED has been empowered to undertake the investigation by ED of offences of money laundering and also to levy penalties/take actions/to prosecute the convict in cases where the crime has been established and the offence is proved. The Scheduled Offences listed under PMLA illustrated the actions that need to be taken against the proceeds of crime. The aforesaid Schedule under PMLA has listed a total of 156 offences under 28 statutes. The ED shall also perform the additional responsibility of extending cooperation to other foreign countries in the matter of investigations regarding money laundering cases and also for the recovery from the proceeds of crime held in foreign countries. 

Power of Investigation by ED

Under Sections 48 & 49 of the PMLA, the power of investigation is vested to the officers of the Directorate of Enforcement (ED) for the offences of Money Laundering. The officers are also authorized to initiate proceedings in respect of attachment of property and may also launch prosecution in the designated Special Court reserved for the offence of money laundering.

1. Power during Survey

Prevention of Money Laundering Act, 2002 and Fugitive Economic Offenders Act, 2018

Section 16 of the PMLA and Section 7 of the FEOA empowers the Investigating authority during the survey:

• For placing marks of identification on the records inspected by him and can also take extracts or make copies therefrom;
• Making an inventory of the property checked or verified by him.
• Recording of the statement of any person presenting the place of the survey which may be relevant for or useful in any proceeding under this Act.

• Power during Search and Seizure

Section 17 of the PMLA empowers the Authorized Officer with the following powers of search and seizure:

• Entering and searching any building, place, vessel, vehicle or aircraft where there is reason to believe that certain records or proceeds of crime are being kept.
• To Break open the lock of any door, box, locker, safe, almirah or other property or object in cases where the keys thereof are not available.
• Seizure of any record or property found during such search.
• Placing marks of identification on the records inspected by him and can also take extracts or make copies therefrom, make a note or an inventory of such record or property.
• Taking examination on oath of any person found to be in possession or control of any record or property regarding any or all matters relevant for the purposes of the investigation by ED under this Act and where it is not possible to seize such record or property, the authorized officer may pass an order to freeze such property. After such freeze of property, the same shall not be transferred or otherwise dealt with, except with the prior approval of the officer making such order.  

• Power to issue Summons.

Under Section 50 of PML, the ED has been vested with the power to summon any person whose attendance is considered necessary either to give evidence or to present any records during the course of the investigation by ED or any proceeding under this Act. 

All the summoned persons are bound to be present on the required date, to attend either in person or through their authorized agents, as may be directed by the officer, and are bound to state the fact truthfully upon any subject in respect of which they are examined or shall make such statements, and produce such documents as may be asked for. Such proceedings shall be considered to be the judicial proceedings falling under the meaning as described according to section 193 and section 228 of the Indian Penal Code.

• Power of Search of Persons

Under Section 18 of PMLA, if the Authorized Officer has sufficient reasons to believe (the sufficient reason as described for such belief to be recorded in writing) that any person has hidden his personal information or has any substance under his possession, has ownership or control of any proceedings, reports or records of crime which can be relevant to or useful for any proceedings, then such authorized official shall search that person and seize such record or property as found relevant or useful for the purpose of bringing the proceedings to some conclusion.

• Attachment of Property

Under Section 5 of PMLA, the Director or any other officer not below the rank of Deputy Director as duly authorized by the Director has sufficient reasons to believe (such reasons should be recorded in writing) based on any substance in his possession, that the suspected person is in possession some proceeds of crime and such proceeds of crime are likely to be concealed, destroyed, transferred or dealt with in any manner, not in favour of taking the proceedings to a favourable stage, then such authorized official may, by an order in writing, provisionally attach concerned property for a period up to 180 days from the date of the order, in such manner as may be prescribed.

Further, Under Section 5 of PMLA, the Director or any other officer not below the rank of Deputy Director as duly authorized by the Director has sufficient reasons to believe (such reasons should be recorded in writing) based on any substance in his possession, that if such substances are involved in money laundering, then should not be attached immediately, it is likely to impact the proceedings of the crime.

Recovery of Fines, Penalties and Arrears of Penalties

Under Section 69 of PMLA, wherein any fine is imposed on any person under section 13 or section 63 and such imposed fine or penalty is not paid within a period of 6 months from the day of imposition of such fine or penalty, then the Director or Assistant Director of Enforcement or any other officer authorized by them in this regard shall proceed to recover such amount of fine or penalty from the said person in the same manner as it is prescribed in Schedule II of the Income Tax Act, 1961 for the recovery of arrears and the above-mentioned officers shall have all the powers of the Tax Recovery Officer as mentioned in the said Schedule for the said purpose.

Appeals

Under Section 26 of PMLA, any person concerned who is aggrieved by an order made by the Adjudicating Authority under the Act may file an appeal to the Appellate Tribunal between a period of 45 days from the date of receipt of a copy of such order made by the Adjudicating Authority. Also, under Section 42, any person aggrieved by any decision or order of the Appellate Tribunal may choose to file an appeal to the High Court within a period of sixty days from the date of communication of such a decision or order of the Appellate Tribunal to him.

Other powers of The Enforcement Directorate under PMLA, 2002

Some of the other powers related to investigation by ED are:

Retention of Impounded records held during the investigation

Under Section 50 of PMLA, the ED shall retain the custody of any produced records during the proceedings of the required period as it thinks fit.

However, a Deputy Director or an Assistant Director shall retain such custody of records only after recording his reasons for so doing, and if they wish to retain such record for a period exceeding three months, prior approval of the Director would be required.

Time Limitations

Under the Sections 20 and 21, any property or record so seized shall be seized or, if frozen, shall be frozen for a period not more than 180 days from the day on which such seizure or freezing has been done unless it is permitted by Adjudicating Authority under PMLA to continue such seizure or freezing beyond the period of 180 days.

Release of seized/frozen records

Under Section 21, after passing an order of confiscation of properties under Section 8, the Adjudicating Authority shall order the release of the records to the person from whom such records were obtained. However, the Director or any other officer authorized by him on this behalf may further withhold such release for a period of ninety days more if he (Director of Enforcement) has the opinion that the property is relevant for the purpose of appeal proceedings under this Act.

Admissibility of recorded statements before the ED

The statements which are recorded before the Investigating Officer under PMLA shall be admissible evidence in the Court of Law as such a proceeding is considered to be the judicial proceedings falling under the meaning of Section 193 and 228 of IPC.

Read Our Article: Power of Enforcement Directorate under Foreign Exchange Management Act, 1999