Enforcement Directorate (ED): Its Background, Structure, Functions & More

PWOnlyIAS November 21, 2023 05:43 4124 0

Understand the Enforcement Directorate. Discover its role, functions, and importance in combating financial crimes and money laundering.

Enforcement Directorate (ED): Its Background, Structure, Functions & More

Enforcement Directorate – Background

Role: The Enforcement Directorate is a multi-disciplinary organization mandated with the investigation of money laundering and violations of foreign exchange laws.
Fighting Economic Crime: It is a domestic and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India.
Parent Ministry: It is part of the Department of Revenue, Ministry of Finance, Government Of India.
Money Laundering: Its primary objective is to curb the generation and circulation of black money, ensure compliance with the laws concerning foreign exchange, and prevent money laundering.

Enforcement Directorate – Evolution

Origin: On 1st May 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs
- Initial Scope: It was entrusted with handling Exchange Control law violations under the Foreign Exchange Regulation Act, 1947 (FERA ’47).
Renaming to Enforcement Directorate: In the year 1957, this Unit was renamed as ‘Enforcement Directorate’..
Statutory Power to Enforcement Directorate (ED):
- Through Foreign Exchange Management Act, 1999 (FEMA) came into operation w.e.f. 1st June 2000.
- Through Prevention of Money Laundering Act, 2002 (PMLA) was enacted and ED was entrusted with its enforcement w.e.f. 1st July 2005.
- Through Fugitive Economic Offenders Act: ED is entrusted with its enforcement with effect from 21st April 2018.

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Appointment Structure:
- CVC Act 2003: The Enforcement Directorate Director is appointed as per provisions of the Central Vigilance Commission Act, 2003
- Role of Central Government: The Centre appoints the director on the recommendation of a committee, with the Central Vigilance Commissioner as chairperson.
- Committee Members: Other committee members are secretaries in the Finance (Revenue), Home and Personnel and Training ministries
- Security of Tenure: The tenure should be “not less than two years,” and any transfer has to be sanctioned by the appointing committee

Statutory Functions of the Enforcement Directorate

Statutory Provisions	Role of the Enforcement Directorate (ED)
The Prevention of Money Laundering Act, 2002 (PMLA):	Background: It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from money laundering. Role of Enforcement Directorate: 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, Confiscation of Assets: It has the power to ensure prosecution of the offenders and confiscation of the property by the Special Court.
The Foreign Exchange Management Act, 1999 (FEMA):	Background: It is a civil law enacted to consolidate the laws relating to facilitating external trade and payments and maintenance of the foreign exchange market in India. Role of ED: ED has been given the responsibility to conduct an investigation into suspected contraventions of foreign exchange laws.
The Fugitive Economic Offenders Act, 2018 (FEOA):	Background: This law was enacted to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. Role of ED: It is a law whereby the Directorate is mandated to attach the properties of the fugitive economic offenders who have escaped from India.
Sponsoring agency under COFEPOSA:	Role of ED: Under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA), this Directorate is empowered to sponsor cases of preventive detention with regard to contraventions of FEMA

Administrative Structure of Enforcement Directorate

Headquarters: New Delhi, is headed by the director of enforcement.
- Five Regional Offices: Mumbai, Chennai, Chandigarh, Kolkata, and Delhi headed by special directors of enforcement.
- Zonal Offices: Zonal offices of the directorate are at Pune, Bengaluru, Chandigarh, Chennai, Kochi, Delhi, Panaji, Guwahati, Hyderabad, Jaipur, Jalandhar, Kolkata, Lucknow, Mumbai, Patna, and Srinagar
Parent Body: It is part of the Department of Revenue, Ministry of Finance,
Head of Organisation: Director, who oversees the functioning of the entire organization.

Difference between the Central Bureau of Investigation and the Enforcement Directorate

Feature	Central Bureau of Investigation (CBI)	Enforcement Directorate (ED)
Establishment	Founded in 1941 as the Special Police Establishment	Established in 1956 as the Enforcement Directorate
Jurisdiction	Deals with cases related to corruption, economic offenses, etc.	Primarily handles economic crimes including money laundering, FEMA and Economic mismanagement..
Functional Areas	Investigative agency primarily for criminal cases	Aims at enforcing economic laws and fighting economic crime in India.
Parent Body	Ministry of Personnel, Public Grievances, and Pensions	Department of Revenue, Ministry of Finance
Scope of Authority	Investigates cases based on the Prevention of Corruption Act, etc.	Enforces laws like PMLA, FEMA, and other economic statutes
Head of Organisation	Directed by a Director, assisted by Special, Additional Directors	Headed by a Director, assisted by Special, Joint, Deputy Directors
Investigative Power	Can conduct investigations, make arrests, and file chargesheets	Conducts inquiries, attaches properties, and carries out arrests
Types of Cases Registered	Corruption, major criminal cases, high-profile investigations	Money laundering, financial frauds, economic crime investigations
Scope of Investigations/ Areas of Work	Broader scope involving various criminal activities	Specific focus on economic and financial violations

Issues in the Functioning of the Enforcement Directorate:

Lack of Resources: The Enforcement Directorate has a limited budget which limits its capability to investigate and prosecute economic offenses.
Lack of Cooperation: The ED often faces difficulty in getting cooperation from other law enforcement agencies, such as the State Police and the Central Bureau of Investigation (CBI).
- Foreign Jurisdictions: The ED often faces challenges in obtaining cooperation from foreign jurisdictions in its investigations.
Complexity: Economic offenses are often complex and time-consuming to investigate which makes it difficult to secure convictions.
Political Interference: The ED has been accused of political interference at times which can make it difficult to operate independently and impartially.
International Data Sharing: Many countries have stringent privacy laws that make it difficult for the ED to get information about bank accounts and other financial transactions.

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Suggestions/ Improvements:

Ensure Functional Autonomy: There is a need to provide Functional independence to ED and also the protection of ED officers from political interference
Provide Statutory Backing: Ensuring statutory status by means of adequate legislation will maintain the independence of the Enforcement Directorate.
Infrastructural Upgradation: Increasing investments in infrastructural upgradations.
Financial Resources: Increased financial resources and funding so that institutions can function freely without government intervention.
Streamlining Information Sharing: There is a need for better coordination with other law enforcement agencies.

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Enforcement Directorate FAQs

The origin of the Enforcement Directorate goes back to 1st May 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs

The Enforcement Directorate is a part of the Department of Revenue under the Ministry of Finance.

It is responsible for fighting economic crimes and enforcement of FEMA (Foreign Exchange Management Act, 1999) and PMLA (Prevention of Money Laundering Act, 2002

The ED director is appointed as per provisions of the Central Vigilance Commission Act, 2003 The Centre appoints the director on the recommendation of a committee, with the Central Vigilance Commissioner as chairperson * Other committee members are secretaries in the Finance (Revenue), Home, and Personnel & Training ministries The tenure should be "not less than two years," and any transfer has to be sanctioned by the appointing committee.

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Enforcement Directorate (ED): Its Background, Structure, Functions & More

Enforcement Directorate – Background

Enforcement Directorate – Evolution

Statutory Functions of the Enforcement Directorate

Administrative Structure of Enforcement Directorate

Difference between the Central Bureau of Investigation and the Enforcement Directorate

Issues in the Functioning of the Enforcement Directorate:

Suggestions/ Improvements:

Enforcement Directorate FAQs

When was the Enforcement Directorate formed?

Under which ministry does the Enforcement Directorate function?

What is the role of the Enforcement Directorate?

How is the director of the Enforcement Directorate appointed?

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