Directorate of Enforcement

26 Jul Directorate of Enforcement

This article covers “Daily Current Affairs” and the topic details “Directorate of Enforcement”. The topic “Directorate of Enforcement” has relevance in the “Indian Polity” section of the UPSC CSE exam.

For Prelims:

What is the Directorate of Enforcement? What are its functions? 

For Mains:

GS2: Statutory, Regulatory, and various quasi judicial bodies

Why in the news?

The Madras High Court recently upheld the Enforcement Directorate’s (ED) arrest of Tamil Nadu Minister V. Senthilbalaji.

About Directorate of Enforcement

The Directorate of Enforcement (ED) is a multidisciplinary organisation responsible for investigating economic crimes and violations of foreign exchange laws. It is under administrative control of the Department of Revenue, Ministry of Finance.

History of Directorate of Enforcement

Composition of ED: 

• The ED is headed by a Director, who is an IRS officer of the rank of Additional Director General of Revenue.  
• The Director is appointed by the Central government and has a tenure of two years, which can be extended by one year.
• The Director is assisted by a number of Special Directors, Joint Directors, and Deputy Directors. 
• The ED also has a number of regional offices and sub-regional offices across India.

Acts under which ED functions: 

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

• • It is a criminal law enacted to prevent money laundering and confiscate property derived from such activities.
  • The Enforcement Directorate (ED) holds the responsibility for investigating assets linked to proceeds of crime.
  • The law allows for the provisional attachment of property and prosecution of offenders in a Special court.

• The Foreign Exchange Management Act, 1999 (FEMA):

• • It is a civil law designed to facilitate external trade, payments, and the development of the foreign exchange market in India.
  • The ED is responsible for investigating suspected contraventions of foreign exchange laws.
  • The law grants the authority to adjudicate and impose penalties for contraventions of foreign exchange regulations.

• The Fugitive Economic Offenders Act, 2018 (FEOA):

• • The law aims to prevent economic offenders from evading Indian law by remaining abroad.
  • The ED is empowered to attach properties of fugitive economic offenders and confiscate them.

• The Foreign Exchange Regulation Act, 1973 (FERA):

• • This law has been repealed and its functions included adjudicating Show Cause Notices and pursuing prosecutions for contraventions until 31st May 2002.

• Sponsoring agency under COFEPOSA:

• • The Directorate is the sponsoring agency under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA).
  • ED is authorised to sponsor cases of preventive detention related to contraventions of FEMA.

Criticism of ED

• Misuse of power: The ED has been accused of using its powers to target political opponents and harass businesses. For example, in 2018, the ED raided the offices of the National Herald, a newspaper owned by the Gandhi family, on charges of money laundering. The raids were widely seen as politically motivated, and the ED eventually dropped the charges.
• Lack of transparency: The ED’s investigations are often shrouded in secrecy, and the agency has been accused of not being transparent about its methods and procedures. For example, the ED does not release the names of the people it is investigating, and it often refuses to share information with the accused or their lawyers.
• Political bias: The ED has been accused of being biased in its investigations, and of targeting political opponents of the ruling party. For example, the ED has been criticized for its investigation into the Rafale fighter jet deal, which is seen as a major political issue in India.
• Low conviction rate: The ED has a low conviction rate, and many of the cases it investigates do not result in any charges being filed. For example, between 2005 and 2013, the ED filed charges in only 1% of the cases it investigated.

Solutions to these issues:

• Strengthening oversight: The ED should be subject to stronger oversight, and it should be made more accountable for its actions. This could be done by creating an independent oversight body, or by giving more powers to the existing oversight bodies.
• Boosting ED’s Funding: Providing more financial resources to the ED will enhance the quality of investigations and lead to higher conviction rates.
• Strengthening Manpower: Increasing the number of personnel in the ED will improve efficiency and reduce the backlog of cases, enhancing the agency’s overall credibility.
• Ensuring Autonomy: Granting autonomous status to the ED will address concerns about its independence and bolster its reputation as a reputable agency combating economic offenses in the country.

Ultimately, the goal should be to create an ED that is effective in combating economic crime, but that also respects the rights of individuals and businesses. By addressing the issues raised above, the government can help to ensure that the ED is a force for good in India.

Sources: 

Explained | Senthilbalaji case: What has the SC said about ED’s powers to arrest and seek custody in the past? – The Hindu

plutus ias current affairs eng med 26th July 2023

Q1. With reference to Enforcement Directorate (ED), consider the following statements: 

1. The Enforcement Directorate (ED) is an autonomous financial investigation agency under the Department of Economic Affairs, Ministry of Finance.
2. The ED operates only within the territorial boundaries of India and does not have the jurisdiction to investigate international financial crimes. 
3. The Director of the Enforcement Directorate is appointed by the Central government and has a fixed tenure of two years, which can be extended by one more year. 

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only 

(d) 1, 2 and 3

Answer: (c) 

Q2. Consider the following:

1. Companies Act, 2013
2. The Foreign Exchange Regulation Act, 1973
3. The Foreign Exchange Management Act, 1999
4. The Fugitive Economic Offenders Act, 2018

Under how many of the aforementioned acts does the Enforcement Directorate (ED) function?

(a) Only one 

(b) Only two 

(c) Only three 

(d) All Four 

Answer: (c)

Q3. Critically analyze the effectiveness of the Enforcement Directorate in combating financial crimes and money laundering in India.

Gaurav N