Enforcement Directorate (ED)

The Enforcement Directorate (ED) is often on news for various economic crimes related cases. Read here in detail about the ED.

The Directorate of Enforcement is a multi-disciplinary organization mandated to investigate offenses of money laundering and violations of foreign exchange laws.

It is composed of officers from the Indian Revenue Service, Indian Police Service, and the Indian Administrative Service as well as promoted officers from its cadre.

In addition to directly hiring people, the Directorate also draws officers from different Investigating Agencies like Customs & Central Excise, Income Tax, Police, etc. on deputation.

The Enforcement Directorate has its headquarters in New Delhi. There are five regional offices in Mumbai, Chennai, Chandigarh, Kolkata, and Delhi headed by Special Directors of Enforcement.

Director of ED

The tenure of the ED director has been extended from two years to five years in 2021.

• The change in tenure of the ED Director was done by amending the Central Vigilance Commission Act, 2003.
• The ED director can be appointed first for two years. But if needed, the tenure can be extended for three more years.
• This will require three separate annual extensions.
• However, no extension can be granted to an ED chief after five years.

History of Enforcement Directorate

The origin of this Directorate goes back to 1st May 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs for handling Exchange Control Laws violations under Foreign Exchange Regulation Act, 1947 (FERA ’47).

• This Unit with Delhi as Headquarters was headed by a Legal Service Officer, as Director of Enforcement, assisted by an Officer drawn on deputation from Reserve Bank of India (RBI) and 03 Inspectors of Special Police Establishment.
• There were two branches in Bombay and Calcutta.
• In 1957, this Unit was renamed as ‘Enforcement Directorate’, and another branch was opened at Madras.
• In 1960, the administrative control of the Directorate was transferred from the Department of Economic Affairs to the Department of Revenue under the Ministry of Finance.

With the onset of the process of economic liberalization, FERA 1973, which was repealed and in its place, a new law- the Foreign Exchange Management Act, 1999 (FEMA) came into operation in June 2000.

Further, in tune with the International Anti-Money Laundering regime, the Prevention of Money Laundering Act, 2002 (PMLA) was enacted, and ED was entrusted with its enforcement from July 2005.

With the increase in the number of cases relating to economic offenders taking shelter in foreign countries, the Government has passed the Fugitive Economic Offenders Act, 2018 (FEOA), and the Enforcement Directorate is entrusted with its enforcement with effect from April 2018.

Statutory functions of ED

The statutory functions of the Directorate include enforcement of the following Acts:

The Prevention of Money Laundering Act, 2002 (PMLA): 

• It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering and for matters connected therewith or incidental thereto.
• ED has been given the responsibility to enforce the provisions of the PMLA by conducting an investigation to trace the assets derived from proceeds of crime, provisionally attach the property, and ensuring the prosecution of the offenders and confiscation of the property by the Special court.

The Foreign Exchange Management Act, 1999 (FEMA):

• It is a civil law enacted to consolidate and amend the laws relating to facilitating external trade and payments and to promote the orderly development and maintenance of the foreign exchange market in India.
• ED has been given the responsibility to conduct an investigation into suspected contraventions of foreign exchange laws and regulations and to adjudicate and impose penalties on those adjudged to have contravened the law.

The Fugitive Economic Offenders Act, 2018 (FEOA): 

• This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.
• It is a law whereby the Directorate is mandated 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.

The Foreign Exchange Regulation Act, 1973 (FERA): 

• The main functions under the repealed FERA are to adjudicate the Show Cause Notices issued under the said Act up to 31.5.2002 for the alleged contraventions of the Act which may result in the imposition of penalties and to pursue prosecutions launched under FERA in the concerned courts.

Sponsoring agency under COFEPOSA:

• Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), this Directorate is empowered to sponsor cases of preventive detention about contraventions of FEMA.

For the trial of an offense punishable under section 4 of PMLA, the Central Government (in consultation with the Chief Justice of the High Court), designates one or more Sessions Court as Special Court(s).

• The court is also called PMLA Court and any appeal against any order passed by the PMLA court can directly be filed in the High Court for that jurisdiction.

But unlike CBI, ED cannot register a case on its own. It is required by the agencies such as CBI or state police to register an offense based on which the Case Information Report is filed by Enforcement Directorate.

Recently, the Supreme Court upheld the power of the Enforcement Directorate to arrest under PMLA.

• The SC bench held that the power given to ED for making arrests, conducting search and seizures, and attaching proceeds of crime are constitutionally valid and do not suffer from the vice of arbitrariness.