Context: The Supreme Court has stayed the investigation conducted by the Directorate of Enforcement (ED) into government-run liquor retailer Tamil Nadu State Marketing Corporation (TASMAC) offices. The SC has criticised the ED for “crossing all limits” and “violating the federal structure”.
Relevance of the topic:
Prelims: Key facts about the Enforcement Directorate (ED).
Mains: Enforcement Directorate (ED): Powers and Criticism.
About Enforcement Directorate (ED)
- ED is a multi-disciplinary organisation mandated with investigation of economic crimes and violations of foreign exchange laws.
- It operates under the Department of Revenue, Ministry of Finance.
- Its primary mandate is to enforce two key laws: the Prevention of Money Laundering Act, 2002 (PMLA) and the Foreign Exchange Management Act, 1999 (FEMA).
- Additionally, it is tasked with implementing the Fugitive Economic Offenders Act, 2018 (FEOA).
- The agency investigates cases of money laundering, violations of foreign exchange laws, and works to attach and confiscate assets derived from criminal activities.
- Headquarters: New Delhi
Powers granted to Enforcement Directorate under different Laws
1. Prevention of Money Laundering Act, 2002 (PMLA):
- Search and Seizure: ED has the power to search and seizure records or property if the suspect is believed to be involved in money laundering.
- Power to Arrest: An authorised officer may arrest a person if has reason to believe that any person has committed an offence punishable under the PMLA Act, based on the material in his possession. He shall inform him of the grounds for the arrest as soon as possible.
- Summoning powers: ED has the power to summon any person to give evidence or to produce any records during the course of any investigation or proceeding under the Act.
- Attachment of property: The Director or an authorised officer (not below the rank of Deputy Director) can attach property of persons accused of money laundering. He may issue a written order to provisionally attach such property for a period not exceeding 180 days.
2. Foreign Exchange Management Act, 1999 (FEMA):
- ED has the powers to-
- conduct investigation into suspected contraventions of foreign exchange laws and regulations.
- adjudicate and impose penalties on those adjudged to have contravened the law (violation of FEMA).
3. Fugitive Economic Offenders Act, 2018 (FEOA):
- ED has the power to attach the properties of the fugitive economic offenders who have escaped from India warranting arrest, and provide for the confiscation of their properties to the Central Government.
Issues with the functioning of Enforcement Directorate
These powers along with functional issues in ED have scope for political misuse.
- Low conviction rate: ED has registered 5,422 cases under PMLA till March 2022, but only 23 persons have been convicted- less than 0.5%.
- Self-Incrimination: ED can force an accused to self-incriminate during interrogation and such statements can be used as evidence in court. This raises concerns about the violation of Article 20 of Indian Constitution, which protects individuals from self-incrimination.
- No checks and balances in search/seizure: Under PMLA, ED officials can carry out search operations even without prior FIR in predicate offence.
- Autonomy: The Centre government’s authority to extend the tenure of ED officials, including the Director, raises concerns about ED’s autonomy. The Act of extension can be an incentive for displaying regime loyalty in discharging duties, and gives scope for the deployment of ED for political vendetta.
- Accountability: ED has policing powers without accountability imposed on regular police. E.g., Case information report is not provided to the person concerned at the time of arrest.
Hence, it is necessary to ensure functional autonomy of ED by giving it power to appoint its own cadre and ensure accountability by strengthening PMLA appellate tribunals.