The Enforcement Directorate (ED)! Sounds like a heavyweight champion and it definitely is! It is an agency that fights against Economic crimes in India. It falls under the Ministry of Finance and is headquartered in New Delhi. It has been one of the most active agencies throughout this pandemic, dealing with the Late Sushant Singh Rajput’s case by summoning people for interrogation in connection to the money laundering angle. Today’s blog is about the 4 laws that guide the functioning of the ED, along with examples of its high profile on-going cases.
1) Foreign Exchange Management Act, 1999 (FEMA): As the name suggests, FEMA facilitates external trade and payments from the rest of the world. It lays down laws and promotes the development of the FOREX market in India.
Case Study: On July 30th, ED carried out raids in 3 locations in Aurangabad and seized Rs. 62 Lacs cash and 7 Kg of gold bars and issued this as a case related to illegal dealing in foreign exchange. It is a very contemporary case and further investigation is under progress.
2) Prevention of Money Laundering Act, 2002 (PMLA): Money Laundering in simple words means to take your ‘dirty’ money and mix it with the company’s ethical cash flow. The filthy, dirty money is transformed into a nice, clean, taxable income.
Case Study: YES Bank had invested Rs. 3700 Cr. in short-term debentures of DHFL in 2018. It was later discovered that for which Rana Kapoor, Co-founder of YES Bank was allegedly paid Rs. 600 Cr. as kickbacks (bribery) by DHFL promoter Kapil Wadhawan. How was it paid? DHFL sanctioned a loan to DoIt Urban Ventures, a wholly-owned subsidiary of RAB Ventures in which Bindu Kapoor, wife or Mr Kapoor is a Director and 100% shareholder. This loan was given for collateral, worth Rs. 40 Cr. which was inflated and shown as Rs. 750 Cr. The loan was later turned into an NPA- Non-performing Asset.
ED arrested him on 8th March 2020, for 2-day jail custody and currently, the legal proceedings are on-going.
3) Fugitive Economic Offenders Act, 2018: It was set up in 2018 by Late Shri Arun Jaitely for economic offenders who are charged in offences above Rs. 100 Cr. and are evading prosecution by remaining outside the jurisdiction of Indian courts. It was made to preserve the sanctity of the rule of law in India.
Case Study: Vijay Mallya, Nirav Modi, Mehul Choksi, and 70 others all totalling to a fraud of Rs 70000 Cr. The Government & the Banks need them back!
4) Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA): It is an addition to FEMA for specific cases of trying to retain foreign currency and prevent smuggling. It came at a time when India appeared to be a heavenly abode for wrongdoers, such as Sukhar Narain Bakhia and Haji Mastan.
Case Study: Rutugna Trivedi, who is known for being a mastermind in smuggling gold from other countries to India. He was finally caught in 2019 with 24.5Kg of gold at Ahmedabad airport by the Air Intelligence Unit (AIU). He and his team were able to smuggle 1300 Cr. of gold in the past 5 years. It is said to be Gujarat’s largest gold smuggling operation.
To end with, Enforcement Directorate as had a big impact on controlling frauds and regulating matters related to FOREX and money laundering. Whenever some wrongdoer surfaces, the ED is there to bring economic justice in our country!
Author- Chaitya Sanghavi