Security Issues

SC raps govt on plea on ED chief’s term

The Supreme Court has reacted angrily to the government’s decision to grant tenure extensions to the Director of the Enforcement Directorate in order to obstruct ongoing investigations against their leaders.

What exactly is the Enforcement Directorate (ED)?

  • The ED was established in 1957 to investigate cases of civil foreign exchange violations.
  • It all started on May 1, 1956, with the formation of a ‘Enforcement Unit’ within the Department of Economic Affairs.
  • The ED is now part of the Finance Ministry’s Department of Revenue.
  • However, following the implementation of the PMLA in 2002, it began investigating criminal cases of financial fraud and money laundering.
  • It was then tasked with dealing with violations of Exchange Control Laws under the Foreign Exchange Regulation Act (FERA).
  • Today, it is a multifaceted organisation that investigates economic crimes :
    • Prevention of Money Laundering Act (PMLA)
    • Fugitive Economic Offenders Act
    • Foreign Exchange Management Act
    • Foreign Exchange Regulation Act (FERA)

Its establishment

  • When the proceeds of crime (property/money) are generated, the best way to save that money is to park it somewhere where no one in the country can question you.
  • As a result, there was a need to control and prevent money laundering.
  • The PMLA was introduced in 2002 for this very reason, but it was not passed until 2005.
  • The goal was to prevent money from being parked outside of India and to trace the layering and trail of money.
  • So, according to the Act, the ED has the authority to investigate under Sections 48 (authorities under the Act) and 49. (appointment and powers of authorities and other officers).

When a crime is committed, when does the ED intervene?

  • When a local police station registers an offence with proceeds of crime exceeding one crore, the investigating officer forwards the information to the ED.
  • Alternatively, if the Central Agency becomes aware of the offence, they can request the First Information Report (FIR) or the chargesheet if it has been filed directly by police officials.
  • This will be done to determine if any laundering has occurred.

What differentiates the probe between the local police and officers of the ED?

Case study:

  • If a theft occurs in a nationalised bank, the local police station will first look into the matter.
  • If it is discovered that the bank’s founder took all of the money and kept it in his home without spending or using it, the crime is only theft, and the ED will not intervene because the money has already been seized.
  • However, if the stolen money is used to purchase property after four years, the ill-gotten money is returned to the market.
  • If the money is given to someone else to buy properties in different parts of the country, this is considered money laundering.
  • As a result, the ED will need to intervene and investigate the layering and attachment of properties in order to recover the funds.
  • If one crore in jewellery is stolen, police officers will investigate the theft. The ED, on the other hand, will seize the accused’s assets in order to recover the sum of one crore.

The ED’s roles and functions

  • Summoning, searching, and seizing: The ED conducts searches (property) and seizures (money/documents) after determining that the money has been laundered, in accordance with Sections 16 (power of survey) and 17 (search and seizure) of the PMLA.
  • Arrest and detentions: On the basis of that, the authorities will decide if an arrest is needed as per Section 19 (power of arrest).
  • Attachment of property: Under Section 50, the ED may also conduct a search and seizure without summoning the individual for questioning. It is not necessary to summon the individual first and then begin the search and seizure.
  • Filing of chargesheet: If the person is arrested, the ED has 60 days to file the prosecution complaint (chargesheet) because the maximum sentence under the PMLA is seven years.

Our debate is centred on: Investigation Agencies’ Excessive Reach

Why does ED appear in pictures so frequently?

Ans. Money laundering

  • Money laundering is the process of making large sums of money obtained through illegal means, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
  • As a result, money launderers have an incentive to “legitimise” their ill-gotten gains through money laundering.
  • The money made is known as ‘dirty money,’ and money laundering is the process of converting ‘dirty money’ into ‘legitimate’ money.

Why does ED primarily affect politicians?

  • Bringing corruption to light: It is not always ironic to say that most politicians are never corrupt. We have a long history of political corruption.
  • Selective witch-hunting: The ED has frequently been chastised for conducting investigations, raiding, and questioning opposition party leaders, whether under the current regime or previous governments.

Problems with PMLA

  • Misuse of central agencies: The Enforcement Directorate is drawing the PMLA into the investigation of even minor crimes.
  • Asset seizure: The assets of genuine victims have been attached. The ED could walk into anyone’s home.
  • Politically motivated raids: In the midst of all of this, the PMLA’s primary goal of investigating the conversion of “illegitimate money into legitimate money” was lost.
  • Petitioners pointed out that even the Enforcement Case Information Report (ECIR), which is an equivalent of the FIR, is considered a “internal document” and is not provided to the accused.
  • Vagueness in evidence: The accused is required to make statements that are considered admissible in evidence.
  • Harassment: The ED begins summoning accused persons and requests information on all of their financial transactions and family members.
  • Against individual liberty: The initiation of an investigation by the ED has the potential to restrict an individual’s liberty.

Allegations levelled against ED

  • Huge latitude: The ED is the only Central Agency in the country that does not need permission from the government to summon or prosecute politicians or government functionaries for economic crimes such as money laundering.
  • PMLA is being used to investigate even “ordinary” crimes, and the assets of genuine victims have been attached.
  • Rights Violations: The PMLA was enacted in response to India’s global commitment to combat money laundering. Rights have been “cribbed, cabined, and confined” instead.
  • Functional obscurity: There is also a lack of transparency regarding the ED’s selection of cases to investigate. We frequently see the ED unexpectedly raiding opposition party headquarters.
  • Poor conviction rate: We have barely read the ED’s conclusion of cases. Meanwhile, the media-trial erodes the accused’s credibility, which is the desired outcome.
  • Undertrials and slower prosecution: The ED has prioritised keeping the accused in custody over proving the charges against them.

ED’s Challenges

  • The ED being hauled to court: The petitions against the ED slowed down the investigations because officers had to defend themselves in court.
  • Politicians who cry foul: There are attempts to conceal unexplained, high-value transactions that fall under the purview of the PMLA.
  • Foreign transaction investigation: The most difficult challenge they face is obtaining information on accounts and money stashed abroad in order to establish a trail.

Way ahead

  • The fight against corruption is inextricably linked to investigation reform.
  • As a result, the adjudicating authorities must work together to ensure the highest levels of transparency and fairness.
  • The ED has been balancing its integrity by speeding up investigations and court procedures.
  • The need of the hour may be systemic fixes rather than shrill calls to throw out the baby with the bathwater.
  • Corruption is unlikely to be significantly reduced unless government agencies change their operations.
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