Enforcement Directorate

The ED operates under the Department of Revenue, Ministry of Finance and has enforced economic laws since its establishment in 1956. The agency's key responsibilities include implementing the Prevention of Money Laundering Act (PMLA), the Foreign Exchange Management Act (FEMA), and the Fugitive Economic Offenders Act (FEOA), 2018. ED is headed by a Director in New Delhi and the ED has five regional offices. The agency's powers encompass investigating crimes ranging from cryptocurrency to terrorism, conducting property searches, and initiating prosecution. However, criticisms include selective targeting, low conviction rates, alleged overreach of powers, and harassment claims during investigations. Reforms in the legal framework are crucial for a more transparent and accountable system. The ED's role is pivotal in safeguarding India's economic stability and integrity by combating financial crimes.

In 2021, the Parliament approved two bills, namely, The Central Vigilance Commission (CVC) Bill and the Delhi Special Police Establishment(DPSE) Bill, with the aim of facilitating the extension of the tenures of directors leading the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED). The amended law permitted, in the public interest, the extension of the services of the chiefs of ED and CBI for an additional three years beyond their initial two-year terms, through successive one-year extensions. In 2023, the Supreme Court validated these amendments as constitutionally sound. However, it declared the third extension of service granted to the then Director of the ED as invalid.

The Enforcement Directorate (ED) in India is a non-statutory, law enforcement and economic intelligence agency that operates under the Department of Revenue, Ministry of Finance, Government of India. It was established in 1956 with the primary objective of enforcing economic laws and regulations in the country. The ED is responsible for investigating and enforcing laws related to foreign exchange violations, money laundering, and financial frauds. It is headquartered in Delhi.

• Prevention of Money Laundering Act (PMLA): The ED primarily enforces the provisions of the Prevention of Money Laundering Act, 2002. It investigates cases of money laundering and takes action against individuals or entities involved in such activities.
• Foreign Exchange Management Act (FEMA): The agency enforces the regulations outlined in the Foreign Exchange Management Act, 1999, which deals with foreign exchange violations and offenses related to cross-border transactions.
• Fugitive Economic Offenders Act, 2018 (FEOA): The ED has the power to seize the properties of fugitive economic offenders. They refer to those who have fled from India to evade judicial proceedings and arrest.
• Investigation and Adjudication: The ED conducts thorough investigations into financial crimes and economic offenses. It is empowered to attach and confiscate properties derived from the proceeds of crime.
• Adjudication Authority: The Directorate functions as the Adjudicating Authority under the PMLA. It has the power to decide on the confiscation of properties obtained through money laundering.
• International Cooperation: The ED collaborates with international organizations to exchange information and coordinate efforts in combating money laundering and financial crimes with a transnational impact.
• Prosecution: The agency has the authority to initiate prosecution against individuals and entities involved in economic offenses and money laundering. It can file criminal cases and pursue legal actions in the appropriate courts.
• Attachment and Confiscation: The ED is vested with the authority to attach and eventually confiscate properties, both in India and abroad, that are deemed to be proceeds of crime.

• The Enforcement Directorate (ED) is led by a Director based in New Delhi, who is supported by special directors.
• The appointment of the director follows the guidelines of the Central Vigilance Commission Act 2003. The Central Vigilance Commissioner heads a high-level committee, and the director is appointed by the Centre based on their recommendations.
• The director serves a fixed term of 2 years, with the possibility of a maximum of three annual extensions.
• Special Directors of Enforcement oversee the operations of the five regional offices located in Mumbai, Chandigarh, Chennai, Kolkata, and Delhi.
• Recruitment of officers occurs through direct recruitment and by drawing personnel from other agencies. The recruitment pool includes officers from IRS, IPS, and IAS backgrounds.

• The scope of offences covered by the PMLA schedule has expanded significantly, growing from six to over 30 since 2002. The ED is empowered to investigate various crimes, including those related to cryptocurrency, GST, Virtual Digital Assets, terrorism, wildlife hunting, and copyright infringement.
• The PMLA grants the ED the authority to take suo-moto cognizance of offenses listed in its extensive schedule throughout the country, regardless of whether state governments provide consent.
• Statements recorded before an ED investigating officer under the PMLA are admissible as evidence in court.
• The ED, under Sections 16 (power of survey) and 17 (search and seizure) of the PMLA, conducts property searches and seizes money/documents upon determining that money laundering has occurred.
• Decisions regarding the necessity of arrest are made in accordance with Section 19 (power of arrest).
• Section 50 of the PMLA allows the ED to conduct search and seizure directly without summoning the individual for questioning.

• Selective Targeting: One of the primary criticisms is that the ED is sometimes accused of selective targeting and politically motivated actions. There are claims that investigations and enforcement actions are influenced by political considerations.
• Poor conviction rates: Since 2005, the ED has registered more than 5,90 cases but disposed of only 25 cases which is only 0.4% of the total cases.
• Overreach of Powers: The ED has faced accusations of overreach, especially concerning the broad powers granted to it under the PMLA such as statement before ED being admissible in court and the burden of proof is left on the accused. Critics argue that these extensive powers might be misused or applied disproportionately.
• Allegations of Harassment: In some high-profile cases, there have been allegations of harassment during investigations. Individuals subjected to ED inquiries have claimed that the process itself is intimidating and can be misused to target specific individuals or businesses.

There is a need for reforms in the legal framework which governs agencies like the ED. A more transparent and accountable system, along with periodic reviews and updates to laws, is necessary to address the evolving challenges in economic enforcement. The Enforcement Directorate plays a crucial role in maintaining the economic stability and integrity of the country by curbing illegal financial activities and ensuring compliance with relevant laws. It works to address the complex financial crimes and protect the financial system of India.