Money Laundering And The Role Of Enforcement Directorate In India

The Supreme Court Judgment in the Vijay Madanlal Case has been the ‘talk of the town.’ The recent judgment has created a lot of bedlam in India. Here are the highlights of India’s Supreme Court judgment in the Vijay Madanlal case and what implications lie in the future of White Collar Crimes in India.

Conventus Law: India has been witnessing an escalation in the number of white-collar crime cases and a lot is being talked about the fabled PMLA 2002 and the Enforcement Directorate. The last few years have observed an unvarying surge in the actions taken by ED against many individuals and corporate houses.  With the recent judgment given by the Supreme Court in the Vijay Madanlal case, the speculations and apprehensions of individuals and corporates have soared too. Can you please take us through the palpable situation regarding the White Collar Crimes, the Laws against them and the lionized Enforcement Directorate in India?

Shreyas Mehrotra, Counsel at AK and Partners: The Directorate of Enforcement (ED) is tasked with investigating cases of money laundering and regulatory breaches involving foreign exchange laws. ED is tasked with enforcing the provisions of Foreign Exchange Management Act of 1999 (FEMA), the Prevention of Money Laundering Act of 2002 (PMLA), and  more recently the Fugitive Economic Offenders Act of 2018. The ED was established with the responsibility of securing the Proceeds of Crime under these laws. The primary responsibilities of ED are to investigate the contravention of provisions of any law resulting in financial fraud/crimes like Hawala transactions, money laundering, financing terrorist activities or others affecting the sovereignty and integrity of the nation. The ED is also authorised to prosecute suspected offenders and bring them to justice in accordance with all applicable laws. It exercises other investigative powers, such as issuance of summons, search warrants, and asset seizures, that are granted to the Income Tax Authority under the Income Tax Act of 1961. The ED also offers support to foreign states in relation to fugitive economic offenders in conjunction with the recently enacted FEOA law. It can further request reciprocal legal assistance from contracting states in relation to the confiscation of proceeds of crime and the transfer of suspects under the PMLA.

The organisational structure of the ED comprises a Director, Additional Director, Joint Director, Assistant Director and others.

In the case of Virbhadra Singh & Anr vs. Enforcement Directorate & Anr., the Delhi High Court went on to conclude that the PMLA aims to establish a mechanism for investigation and enforcement distinct from the traditional system of criminal inquiry exercised by police agencies. ED has all the necessary tools to conduct an effective investigation without the aid or assistance of the police. The ED can conduct surveys, search and seize, search persons, retain property or records, issue summons to enforce the attendance of any person and compel them to provide evidence or produce records, discovery or inspection, as well as the power to arrest, as conferred by various provisions of the PMLA. The PMLA authorities are endowed with the power to initiate a criminal prosecution, with the Court’s mandatory requirement that its cognizance be based on their complaint.

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