DIRECTORATE OF ENFORCEMENT (ED)
1. Context
- Recently, Declaring as “not valid in law” the two tenure extensions granted by the government to Sanjay Kumar Mishra, Director of Enforcement Directorate, beyond the September 8, 2021 cut-off date it had fixed, the Supreme Court said he can continue on the post only until July 31.
- This cuts short Mishra’s stint as the ED chief In April this year, the Supreme Court declined to entertain a plea by 14 political parties which alleged “selective and targeted” use of Central probe agencies such as the ED and CBI by the Central government against their leaders.
- The top court said it can intervene in individual cases when facts are before it, but cannot lay down separate general guidelines only for politicians who “stand absolutely on the same standing as the (rest of the) citizens of the country”.
- The top court allowed Mishra to remain on the post until July 31, taking into account the government’s submission that India is undergoing a Financial Action Task Force (FATF) review and his continuance in office is necessary for “effective presentation of the efforts made by the country”.
2. About the Directorate of Enforcement
The Directorate of Enforcement (ED) is a law enforcement agency in India that operates under the Department of Revenue, Ministry of Finance. It is responsible for enforcing economic laws and fighting financial crimes in the country. The primary objective of the Directorate of Enforcement is to enforce the provisions of two major laws:
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Foreign Exchange Management Act (FEMA): This law deals with foreign exchange and foreign trade in India. The ED ensures compliance with FEMA regulations and investigates violations related to foreign exchange transactions.
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Prevention of Money Laundering Act (PMLA): The ED is also responsible for implementing the provisions of the PMLA, which focuses on preventing money laundering and combating the financing of terrorism. It investigates cases related to money laundering and takes appropriate action against those involved.
The Directorate of Enforcement plays a crucial role in maintaining the economic stability of the country by addressing financial offenses and ensuring compliance with relevant laws. It conducts investigations, searches, and seizures, and has the authority to attach and confiscate properties acquired through illegal means
3. Establishment and History
- The Directorate of Enforcement was established on 1st May 1956, as the "Enforcement Unit" within the Department of Economic Affairs.
- Its primary focus was on preventing and detecting violations of the Foreign Exchange Regulation Act (FERA) of 1947.
- Over the years, the agency's role expanded, and in 1999, the Enforcement Directorate was established as a separate entity under the Ministry of Finance.
- The enactment of the Prevention of Money Laundering Act (PMLA) in 2002 further broadened its jurisdiction, giving it the power to investigate cases related to money laundering.
- Since its establishment, the ED has played a crucial role in combating economic offences and ensuring compliance with economic laws in India.
- It has been involved in several high-profile cases, including those related to financial scams, money laundering by influential individuals, and cross-border financial crimes.
- The ED collaborates with various domestic and international agencies, including financial intelligence units, law enforcement agencies, and Interpol, to gather information, share intelligence, and effectively coordinate efforts to combat economic offences.
4. Functions and Roles of ED
4.1. Enforcing Economic Laws
- The primary function of the ED is to enforce two key economic laws in India: the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).
- It ensures compliance with these laws and investigates money laundering, foreign exchange violations, and economic fraud cases.
4.2. Money Laundering Investigations
- The ED investigates cases involving money laundering, which is the process of concealing the origins of illegally obtained money to make it appear legitimate.
- It identifies and seizes properties and assets derived from illicit activities and prevents their further use.
4.3. Foreign Exchange Violations
- The ED is responsible for investigating cases related to violations of foreign exchange laws and regulations.
- It monitors and controls foreign exchange transactions to maintain the stability of the Indian rupee and prevent illegal activities such as smuggling and illegal money transfers.
4.4 Financial Frauds
- The ED also investigates and takes action against financial frauds, including bank frauds, Ponzi schemes, and other fraudulent activities affecting the Indian financial system.
- It works closely with other law enforcement agencies, such as the Central Bureau of Investigation (CBI), to tackle complex financial crimes.
5. Challenges
5.1. The complexity of economic crimes.
- Economic crimes are often complex and involve a variety of financial transactions.
- This can make it difficult for the ED to trace the proceeds of crime and to build a case against the perpetrators.
5.2. The difficulty of tracing the proceeds of crime
- The proceeds of crime are often hidden in complex financial structures, making it difficult for the ED to track them down.
- The ED also faces challenges in obtaining information from foreign jurisdictions, where the proceeds of crime may have been transferred.
5.3. The lack of international cooperation
- Economic crime is often transnational, making it difficult for the ED to cooperate with foreign law enforcement agencies.
- This is due to differences in legal systems, as well as political and economic considerations.
5.4. Political interference
- The ED has been accused of being used as a political tool by the ruling party to target its opponents and critics.
- This has raised questions about the independence and impartiality of the ED.
5.5. Lack of transparency
- The ED has been criticized for its lack of transparency.
- The agency does not publish its annual reports, and it is difficult to obtain information about its investigations.
- This has made it difficult for the public to hold the ED accountable.
5.6. Human rights violations
- The ED has been accused of violating the human rights of those it investigates.
- The agency has been accused of using coercive tactics, such as prolonged detention and interrogation, to extract confessions from suspects.
5.7. The limited resources
- The ED is a relatively small agency with limited resources.
- This can make it difficult for the ED to investigate complex economic crimes and prosecute the perpetrators.
6. Conclusion
- The Directorate of Enforcement in India plays a crucial role in enforcing economic laws, preventing money laundering, and combating financial crimes.
- With its specialized expertise, investigative capabilities, and coordination with domestic and international partners, the ED contributes to the integrity of the financial system, national security, and the country's overall socio-economic development.
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For Prelims: Directorate of Enforcement, Financial Action Task Force, Prevention of Money Laundering Act (PMLA), the Foreign Exchange Management Act (FEMA), Supreme Court, Foreign Exchange Regulation Act (FERA) of 1947, Central Bureau of Investigation,
For Mains:
1. Discuss the establishment and evolution of the Directorate of Enforcement in India. Explain its key functions and roles in combating economic offences. (250 Words)
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Previous Year Questions 1. Which one of the following is not correct in respect of Directorate of Enforcement ? (CDS 2021)
A. It is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance.
B. It enforces the Foreign Exchange Management Act, 1999.
C. It enforces the Prevention of Money Laundering Act, 2002.
D. It enforces the Prohibition of Benami Property Transaction Act, 1988.
Answer: D
2. The Prevention of Money Laundering Act, 2002 become effective since which one of the following dates? (UKPSC RO/ARO 2012)
A. July 2002 B. August 2003 C. July 2004 D. July 2005
Answer: D
3. FEMA (Foreign Exchange Management Act) was finally implemented in the year (UPPSC 2013)
A. 1991 B. 1997 C. 2000 D. 2007
Answer: C
4. The Foreign Exchange Regulation Act was replaced by the ______ in India. (SSC Steno 2020)
A. Foreign Exchange Currency Act
B. Foreign Exchange Finances Act
C. Foreign Exchange Funds Act
D. Foreign Exchange Management Act
Answer: D
5. "Central Bureau of Intelligence and Investigation" is listed in the __________ list given in the Seventh Schedule of the Constitution of India. (SSC CGL 2017)
A. Union B. State C. Global D. Concurrent
Answer: A
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Source: The Indian Express
