Enforcement Directorate (ED) - Power and Composition Explained

9 Apr 2024  Read 2865 Views

Law enforcement agencies are the backbone of any civilised society. Their main purpose is to provide safety and security so people can do their work without fear. There are many law enforcement agencies in India, some under the central government and others under the state government. Examples are the CBI, RAW, National Investigation Agency, BSF, etc. 

Infamous cases like Nirav Modi's PNB scam, Vijay Mallya's fraud, and Arvind Kejriwal's Delhi Liquor policy scam have a common central-level economic intelligence and law enforcement agency, i.e., the Enforcement Directorate (ED).

In this blog, we will discuss all about the Enforcement Directorate, its background, functions, organisational structure and other important details. Let's get started!

What is Enforcement Directorate (ED)?

The ED is an Indian law enforcement agency tasked with enforcing economic laws and fighting economic crimes, particularly offences like money laundering, foreign exchange violations, and financial fraud.

The ED is India's financial watchdog. It works under the Department of Revenue, Ministry of Finance.

Background & History of Enforcement Directorate (ED)

  • The ED was set up in 1956 as an "Enforcement Unit" to handle violations of the Exchange Control Law under the Foreign Exchange Regulation Act (FERA) of 1947.
  • In 1957, this Enforcement Unit was renamed as the "Enforcement Directorate".
  • In 1960, the ED was transferred from the Department of Economic Affairs to the Department of Revenue.
  • Then, between 1973-77, ED went under the administrative jurisdiction of the Department of Personnel and Administrative Reforms.
  • Currently, the Directorate is under the administrative control of the Department of Revenue, Ministry of Finance, and Government of India.
  • In 2005, ED was responsible for enforcing the Prevention of Money Laundering Act, 2002 (PMLA).
  • In 2018, ED was responsible for enforcing the Fugitive Economic Offenders Act (FEOA).

In simple words, the nature of ED changed as India changed. In the pre-liberalization era, the laws driving ED were "regulation" laws, but those became "management" laws in the post-liberalisation era.

Structure of Enforcement Directorate(ED)

Powers and Functions of the Enforcement Directorate(ED)

The statutory functions of the Directorate include the 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 deals with related matters.

The ED investigates violations of PMLA's rules and regulations, seizes the assets of those found guilty and issues orders to attach the assets. Additionally, the ED assists other countries in money laundering situations and asset recovery under the PMLA.

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 promoting the orderly development and maintenance of the foreign exchange market in India.

The ED is responsible for investigating violations of FEMA's rules and regulations. They can decide on violations and may impose fines of up to three times the amount in question.

The Fugitive Economic Offenders Act, 2018 (FEOA)

This law was enacted to prevent economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.

The ED can initiate cases against fugitives from India. 

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 upto 31 May 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 handle preventive detention cases for FEMA violations under COFEPOSA.

Difference between Central Bureau of Investigation (CBI) & Enforcement Directorate (ED)

 

CBI

ED

Role

CBI is primarily responsible for investigating crimes that have national significance or involve multiple states

ED is focused on enforcing economic laws and combating economic crimes, particularly those related to money laundering and foreign exchange violations.

Operates under

The Ministry of Personnel, Public Grievances, and Pensions

The Department of Revenue, Ministry of Finance

Jurisdiction

CBI investigates cases related to corruption, economic offences, special crimes, cases of public importance, and cases referred by the central government or the courts

ED investigates cases under laws such as the Prevention of Money Laundering Act (PMLA) & the Foreign Exchange Management Act (FEMA).

Its scope includes investigating financial fraud, black money, and illegal foreign exchange transactions.

Structure

CBI is headed by a Director who is usually an IPS officer.

ED is headed by a Director who is an officer from the Indian Revenue Service (IRS)

Also read- Loss of over ₹580 Crore: ED's case against CM Kejriwal in Delhi Liquor 'Scam'

What is the difference between Judicial Custody and ED Custody?

When someone is in judicial custody, they are held by the Magistrate and sent to jail. Whereas being in ED custody means the person is placed under the ED for interogation and investigation.

Criticism of the Enforcement Directorate(ED)

Political Influence

Some claim that the agency is used as a tool for political disputes, targeting individuals or entities associated with opposition parties.

Use of Preventive Detention Provisions

The ED can invoke preventive detention provisions under the PMLA, which allow for the arrest and detention of individuals without formal charges being filed. Critics argue that these provisions can be misused, leading to unjustified arrests and lengthy detention.

Excessive Authority

Critics contend that the ED is often given broad and draconian powers, including the ability to seize assets before a trial is concluded. This can lead to the freezing of assets and financial hardships for individuals or entities without due process.

Limited Focus on Economic Crimes

Some argue that the ED's priorities may not always align with the most significant economic crimes. Critics suggest that the agency might disproportionately focus on high-profile cases while potentially neglecting other, equally important matters.

Conclusion

Over the years, the Enforcement Directorate has emerged as a key agency in the battle against economic offences. Notably, with the rise in global transactions and the international nature of many financial crimes, the ED's role has expanded beyond India's borders.

About the Author: Anirudh Nikhare | 42 Post(s)

Anirudh did his Bachelor's in Law and has practical experience in IPR, Contracts, and Corporate. He is your go-to legal content writer turning head-scratching legal topics into easy-to-understand gems of wisdom. Through his blog, he aims to empower readers with knowledge, making legal concepts digestible and applicable to everyday life.

Liked What You Just Read? Share this Post:

Finology Blog / Legal / Enforcement Directorate (ED) - Power and Composition Explained

Wanna Share your Views on this? Comment here: