Despite Lowest Conviction Rate, How Enforcement Directorate Spread Its Wings After 2014

Since the enactment of the Prevention of Money Laundering Act (PMLA) in 2002 which empowered the ED and gave its officers more leverage to operate, it has conducted thousands of searches, especially since 2005, it did over 3086 searches till February this year.

The figures from the ED raise questions about whether probing by this agency has become a tool of harassment and is the agency misusing the PMLA.  (File Photo)

NOT many even were aware of a central agency like Enforcement Directorate (ED) in India before the recent past. CBI was something whose sleuths would be seen raiding premises and arresting people, it was a sole central agency that was seen as a pivot to the redressal of the cases from criminal to money laundering to terrorism and whatnot.

However, since the Bhartiya Janta Party formed the national government, Enforcement Directorate seems to have emerged as a major force in money laundering cases, many times also on an infamous note.

The organization has been an eye of the storm, a nightmare in the recent past for thousands, more so for those in the Opposition. A look at the data procured by India Ahead suggests that from 2004 to 2014 the Enforcement directorate conducted just 112 searches. At the same time, it had attached properties worth a little over 5300 crores.

Since the enactment of the Prevention of Money Laundering Act (PMLA) in 2002 which empowered the ED and gave its officers more leverage to operate, it has conducted thousands of searches, especially since 2005, it did over 3086 searches till February this year. A massive jump against the last phase of 10 years preceding 2014.

However, when compared to the searches, the conviction rate is very low. Just 23 people have been convicted by the ED to date since the passing of the PMLA act. The conviction rate, thus, is not even one per cent.

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The PMLA act was enacted by the NDA government in 2002 to check the money laundering within the country. It has been amended over time and its scope has been broadened over years. Another act is the Foreign Exchange Management Act (FEMA), earlier known as the FERA OR Foreign Exchange Regulation Act (FEMA). While PMLA does lend power to the ED to arrest people however the FEMA does not allow it. In its earlier version, FERA did allow the arrests however this clause was done away with the introduction of FEMA where now only the monetary penalty will be imposed on the criminal, and that too to the tune of the 300 per cent of the sum involved in the contravention.

In all these 17 years, that is from 2005, the ED has according to the data with India Ahead registered 4964 enforcement case information reports (ECIR). This is something similar to an FIR as the ED directly is not empowered to register an FIR. Also, to begin probing any case, there should be an FIR either by the police or by CBI first, but this too has seen exceptions.

The data shared by the government with the parliament also shows clearly how there has been an uptick in its working after Prime Minister Modi took over. “During 2004-14, 112 searches were carried out which resulted in attachment of proceeds of crime of rupees 5346.16 crores and filing of 104 prosecution complaints”, ED has said.

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It also added that after 2014 and up to 2022, 2974 searches were conducted, which resulted in the attachment of “Proceeds of Crime” of rupees 95,432.08 crores and the filing of 839 prosecution complaints.

So, a comparison between these phases shows there has been an increase of 1780 per cent in property attachment by the ED after 2014. Even if we average it on the yearly basis, ED was attaching properties worth rupees 534.6 crores, a year from 2004 to 2014. This has been increased to attaching properties worth rupees 11,929 each year after 2014 till date.

Minister of State for Finance Pankaj Chaudhry said on this “Searches in the course of investigation of money laundering cases are very important from the perspective of a collection of evidence”. He added that an “increase in a number of searches shows the government’s commitment to preventing money laundering”.

“Improved systems for gathering financial intelligence through use of technology, better inter-agency cooperation and exchange of information both domestically and internationally, concerted efforts to complete pending investigations in old cases and investigations in complex money laundering cases that have multiple accused requiring multiple searches are some of the reasons for the increase in the number of searches,” Chaudhary said.

However, the figures from the ED raise questions about whether probing by this agency has become a tool of harassment and is the agency misusing the PMLA. 

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“As of date, 4,700 cases are being investigated, this number is given, right from the inception, by the Directorate of Enforcement. The number of cases taken up for investigation each year in the last five years varies from 111 cases in 2015-16 to 981 in 2020-21. This is the average number of cases,” Solicitor General Tushar Mehta told the Supreme Court in February this year while countering a petition challenging PMLA.

However, in all the cases taken up by the agency to date from enacting PMLA in 2002, only 313 people have been arrested for the alleged offences.

While a lot of debate has been surrounding the misuse of the PMLA, Mehta has said that the act itself has prevented the harassment. “I can tell you at the outset, right from 2002, the year in which the PMLA Act was enacted, to date, there are only 313 arrests. From 2002 till date, in 20 years, 313 arrests,” Mehta.

There is also the data by the government that in all the 4700 cases investigated since its inception in 1956 as a unit to look into money laundering, over 2186 have been taken up in just the last five years. The government especially NDA has been repeatedly mulling expanding the scope of the PMLA and the finance minister Nirmala Sitharaman also successfully proposed amending the act in 2019. This widened the scope of its sleuths to operate. NDA has time and again prayed to the court that decisions which it gave especially in the cases of billionaires who flew away led to “unimaginable” erasure of the evidence as benches did not allow a “coercive action”.

Meanwhile, in 2019, the government brought eight amendments to the PMLA – most to remove the “confusion, grey area or ambiguity which might exist” in the original act and one actually to try the criminals booked by different courts separately. “A new proviso is being added to only make sure that where a case exists in one court and the hearings are going on there, and wherein a different court there could be proceedings happening, these two cannot be clubbed together and treated as one,” Sitharaman said in the Lok Sabha.

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This lends different courts power to try the accused in different courts under different sections. While the amendment has been challenged, the final decision on this remains pending.

All these amendments were brought to parliament as money bills thus needing no larger debate. Over 200 petitions have challenged these provisions of the PMLA.

Senior Advocate Kapil Sibal who represented the ones challenging the act said PMLA does not require the ED to abide by the rules for arrest and investigation as laid down in the Code of Criminal Procedure (CrPC). “This allows the ED to operate without procedural safeguards to protect the rights of accused persons,” he argued in court.

He has also said that the amendments to PMLA brought in by the Finance Act, 2019 got many more crimes under the ED’s umbrella. This, he said was contrary to the original intent of the PMLA which was designed for a narrow set of offences mostly about large-scale money laundering. “The Parliament’s widening of the scope of the PMLA, facilitated a more rampant use of the ED’s powers, regardless of the gravity of offence”, he said. 

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