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Why is the Enforcement Directorate so much in the news lately?

Those of us who read the salmon-pink financial newspapers regularly, would’ve read and referenced the term Enforcement Directorate or ED quite regularly in the recent past. If one were to profile the usage of this term on a time-period basis, I’d bet it has grown phenomenally in the last five years and like never before. Even for starters, it would be evident that the term refers to some agency in the government performing some law enforcement role somewhere. So, what does this agency do? And why has it become so spoken about recently.

ED is the agency entrusted with administering the anti money laundering law in India. Now, what is money laundering? Yes - break it apart - laundering of money, or making some dirty money clean. We’re referring here to money that has been ill-gotten or earned by violating some law of the land. When this money is put through a process or system so that on the other end it comes out (or at least, appears to have come out) clean or ‘white’, we’d say money laundering has been successfully done. Now, this is the ED playground. An obvious conclusion: where a law is broken without money being involved, there could be no money laundering and you won’t find the ED engaged.

I mentioned two things above as the ingredients of money laundering: first, there should be a violation of some law (let’s take kidnapping for instance), and second, the money that comes along (ransom, in our example) should be cleaned or laundered. Both these ingredients have to be present. So, when at the transaction spot the kidnapper hands over custody of the victim in exchange of ransom and is nabbed by the police instantly, he doesn’t get the opportunity to clean the money. Here, no money laundering has taken place; the ransom hasn’t been put through a system to cleanse it. Alternatively, if he is nabbed, say, a day later when in the meantime he finds the opportunity of putting aside the ransom for a cleaner future use, money laundering has happened. Remember, we already have a justice system which has been taking care of the first ingredient - offenders have been caught and punished for kidnapping since ever by the police and courts respectively. But money laundering is the ED’s domain.

Money laundering is a worldwide phenomenon and we have anti money laundering laws in nearly every country now. The way India has chosen to define the scope of its anti money laundering law is interesting. If each violation of every law in the country was to be treated as involving money laundering, it would be an arduous task to accomplish to control it. Thus, the scope had to be curtailed for better focus and administration. Thus, India identifies only a few serious or grave laws to be covered under the anti money laundering enforcement. For instance, offences such as murder, drug-trafficking, terrorism, cheating, frauds, forgery, criminal conspiracy, besides several others are covered within the scope of the anti money laundering law. Evasion of income-tax is also a crime in India, but not considered serious enough to keep it under the anti money laundering tab. Here’s our first pointer - what attracts ED’s time would always then be a serious offence only and nothing else.

Now, every crime is to be met and responded with a heavy and forceful hand. The remedy thus has to be quick and effective. The anti money laundering law in India is designed just this way. Firstly, the ancient adage that we’re all familiar with - ‘innocent till proven guilty’ - is turned on its head. If someone is accused of having carried out money laundering, he’ll be presumed to be ‘guilty till proven innocent’. Secondly, the money (or, property) involved in the offence is swiftly taken away by way of attachment and de-possession (in many other laws, an attachment by some government authority might not result in de-possession). Thirdly, if the accused is arrested (maybe for interrogation or to ensure that he doesn’t tamper the evidence), it is relatively more difficult to get bail than in case of an arrest under other laws. Fourthly, statements or confessions recorded by the ED officers are admissible as evidence in any court, unlike statements given to a police officer during interrogation which have absolutely no value in court. Thus, our next inference - the statutory powers that the ED enjoys to rectify money laundering are swingeing in nature and degree and not normally available to other agencies. (Those in Mumbai would recall the times of the Mumbai organised crime scene in the 80s and 90s - the law that is credited with suppressing it granted similar powers to the state police.)

I’ll write some more points randomly as they come to mind. Being a central government agency, the mandates are often supervised centrally from Delhi. The knowledge exchange, hence, is better and jurisdictional issues are minimal. Then, the selection of cases recently has been (and correctly so I believe) influenced by the quantum of money involved - we hear and read daily of thousands of crores in bank defaults and siphoning of public money. The ED is busy in cases where the public money is at stake and these cases are bound to hit the headlines. Further, besides the anti money laundering law, the ED also administers the foreign exchange law. Thus, where money laundering has been effected across the borders, the investigation is jointly carried out under both the laws by a single agency and a meaningful result could be reached. In fact, in several cases, the starting point of the investigation lies in the foreign exchange law and when layers are peeled away, the crime of money laundering is revealed. And who’d deny that cross-border money flow for ulterior purposes always catches the media and public eye.

To conclude without ascribing a rationale to the above would leave this note incomplete. Courts have repeatedly held that economic crimes are far more serious than crimes against individuals as they injure the economic and social fabric of the society. The realisation globally is that these crimes are to be dealt with differently and the consequences for the offender have to be severe. He is to be deprived of his property that he has amassed from the wrongdoing, the relaxed test of innocence and guilt is not to be made available to him, and he should not be let loose from custody easily. Match this with today’s times when skeletons of economic crimes are being exhumed each day while fresh such crimes are being committed as often, and we might have an answer to our moot question - why is the Enforcement Directorate always in the news (lately)?


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