From obscurity to centre stage, how ED got wings
This now ubiquitous federal agency started asserting its powers when P Chidambaram was the union finance minister. But when PM Modi took charge, it got wings.
New Delhi: A group of broadcast journalists were enjoying their evening tea at Mandi House on a quiet December 2008 evening. A colleague from print media briefly joined them. While leaving, he said, “See you guys. I have to rush to the ED office”. One of the TV journalists in the group asked, “What’s ED?”
That’s how insignificant this now ubiquitous federal agency was till about 12-13 years ago that even journalists not covering finance-related beats were oblivious to its existence and powers.
However, things changed at a fast pace since the central agency began taking up Prevention of Money Laundering Act (PMLA) cases having political links – such as the Commonwealth Games scandal, 2G spectrum allocation, coal blocks allocation irregularities, probe against Baba Ramdev, among others.
Prior to that, Enforcement Directorate (ED) restricted itself mostly to cases against corporates. Politically sensitive cases were considered a domain of the Central Bureau of Investigation (CBI).
The agency started asserting its powers when P Chidambaram, who himself along with his son Karti is currently being investigated for money laundering in Aircel-Maxis and INX Media cases, was the union finance minister.
But when Prime Minister Narendra Modi came to the power in 2014 with a thumping majority, it got wings.
The shift under NDA
Union minister of state for finance Pankaj Chaudhary last week shared data on ED probes, saying the directorate carried out 3010 raids and attached proceeds of crime worth R99,356 crore under the Prevention of Money Laundering Act (PMLA) during 5$3 last eight years, since National Democratic Alliance (NDA) government took power.
In contrast, there were only 112 raids and attachment of just R5,346 crore proceeds of crime between 2004-05 and 2013-14, the tenure of the United Progressive Alliance (UPA).
Similarly, ED took up 22,320 investigations pertaining to violations of foreign exchange law (Foreign Exchange Management Act) in the last eight years, compared to only 8,586 such probes between 2004-05 and 2013-14.
“Increase in the number of searches shows government’s commitment to preventing money laundering and improved systems for gathering financial intelligence through use of technology, better interagency 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.
Over the last eight years, ED has aggressively gone after businessmen, politicians and companies involved in money laundering by violating the rules laid down by the government and regulatory authorities. A special focus has been on white-collar criminals and laundering activities which affect the national security of the country.
The agency believes that the ultra-rich create corporate structures across various foreign jurisdictions to transfer unaccounted funds and delay investigations in case the law catches up with them, an argument lately presented by it in the courts as well in multiple cases.
For example, while filing a charge sheet against Ratul Puri, nephew of former Madhya Pradesh chief minister Kamal Nath, in November 2019, ED said “the high net-worth individuals or HNIs create or use entities maintained with the Hawala operators or others who are close associates. Then, to instruct the transfer of proceeds of crime, alternate email IDs, which cannot be tracked back to them, are created and efforts are undertaken to ensure that no evidence leads to them so that in case law catches up, they can deny ownership of the same as no footprints are available to trace these entities and email IDs to them.”
A free hand
Given a free hand by the government, ED has lately taken the proactive approach while dealing with the white-collar criminals in the courts as well. It has on the payrolls several special public prosecutors to counter the accused seeking bail, trying to de-freeze properties or planning foreign visits on health grounds.
Subsequently, Solicitor General Tushar Mehta appears for the agency every now and then - be it defending the PMLA in the Supreme Court, opposing bail to former finance minister P Chidambaram or seeking custody of Delhi’s former health minister Satyendar Jain among other multiple cases.
The top law officer last year even appeared in the apex court to defend the government’s decision to extend the tenure of ED chief Sanjay Kumar Mishra beyond his retirement, saying “he has done a good job”.
The PMLA boost
When the country’s top legal minds challenged the provisions of PMLA terming the law as draconian and actions of ED as “opaque, arbitrary and violative” of the constitutional rights of an accused, the Supreme Court last week gave the agency a shot in the arm by upholding the provisions.
In a comprehensive judgment, a bench headed by justice AM Khanwilkar, with justices Dinesh Maheshwari and CT Ravi Kumar as members, ruled that the power given to ED for making arrests, conducting search and seizures and attaching proceeds of crime are constitutionally valid and do not suffer from the vice of arbitrariness.
Formed in 1956 to handle exchange control laws violations under Foreign Exchange Regulation Act (FERA) – replaced by FEMA (Foreign Exchange Management Act) in 2000 – the central agency restricted itself mostly to businessmen and companies but had no powers to arrest people or take them in custody under FEMA.
In 2002, the Atal Bihari Vajpayee government introduced PMLA to deal with money laundering. It came into existence in 2005 only when the Manmohan Singh government issued a notification.
Initial years after PMLA came into existence were slow due to various reasons, especially with the agency having a massive staff crunch and inadequate training to deal with high-profile money laundering cases.
Karnal Singh, former ED director said, “There had been a huge manpower shortage in the ED for a long time. For example, when I joined as ED director (2016), the organisation had only 700-odd personnel out of sanctioned strength of 2,048. A slew of other measures was also taken up – including improving the quality of investigation by establishing the training centre of the ED, establishing an in-house cyber lab and focusing on filing prosecution complaints (the equivalent of charge sheets). All this resulted in improving the capabilities of the ED, and as a result, it started taking up more and more cases,” Singh said.
Despite all these improvements, what makes ED unique is its powers to arrest anyone, admissibility of a statement recorded under section 50 of the PMLA against that individual and most importantly, attaching the properties of the launderers. The law puts the burden of proof on the accused.
Officers in multiple agencies acknowledge these provisions put ED above the Central Bureau of Investigation (CBI) in terms of influence and inducing fear in the minds of white-collar criminals.
Some of the high-profile cases handled or currently under investigation by the ED include the AgustaWestland VVIP chopper scam, in which it has filed about half a dozen charge sheets and got British middleman Christian Michel extradited from the UAE; aggressively tracing the properties of bank loan defaulters – Vijay Mallya, Nirav Modi and Mehul Choksi – in countries such as the UK, France, the US and getting successes in extraditions of Mallya and Modi in London. While Nirav Modi has challenged the decision, Mallya is still in the UK on account of asylum application.
Is it a political tool?
Various political parties have repeatedly accused the ED of targeting only the opposition politicians in non-Bharatiya Janata Party (BJP) ruled states.
For example, accusations have been levelled for arresting and attaching the properties of Shiv Sena MLAs and members of parliament including Sanjay Raut, Anil Deshmukh, Anil Parab etc in Maharashtra, DK Shivakumar in Karnataka, raids on Rajasthan chief minister Ashok Gehlot’s brother Agrasain Gehlot, arrest of Delhi’s former health minister Satyendar Jain, and consistent action on Trinamool Congress leaders in West Bengal in various scams such as coal mining, cattle smuggling and teachers’ recruitment irregularities.
Recent questioning of Congress interim president Sonia Gandhi and her son Rahul Gandhi in Delhi in the National Herald money laundering case led to massive protests across the country, with ED facing allegations of being a “political tool”.
Karnal Singh says money laundering not only impacts the victims directly affected by the crime but others who have nothing to do with it as well. “For example, if two persons are involved in some business, and one has invested his legitimate money while the other has put illegitimate money, the purposes of both are different. For the person having legitimate money, the purpose is to earn some profit while the person with the ill-gotten, the purpose is to conceal the origin of the proceeds. In such a competition, the person with legitimate money will be a loser, and therefore money laundering has an adverse impact on the law-abiding citizens of the country.”
He added that money laundering is also a threat to national security and that’s why money laundering has been considered very important world over and it led to the formation of the FATF (Financial Action Task Force), which monitors the implementation of the money laundering act in different countries and enforces international cooperation.
However, for all the hype around money laundering, the conviction under the law is dismal. Government data shared by Chaudhary last week states only 23 persons have been convicted since 2005.