The Indian financial landscape is wrought with terms like Foreign Exchange, FEMA, COFEPOSA, ED, FEOA among others. These abbreviations represent key financial regulations and organizations aimed at maintaining fiscal order within the country. Recently, India’s Supreme court upheld the constitutional validity of the Prevention of Money Laundering Act, 2002, underscoring that the presumption of a defendant’s innocence can be interrupted by legislative law.
Supreme Court Ruling: Insights and Implications
The Supreme court’s recent ruling has some critical points to consider. It clarifies Enforcement Case Information Report (ECIR) is an internal document of the Enforcement Directorate (ED), and it’s not obligatory to provide an ECIR in every case. As per Section 3 of the PMLA Act 2002, the offence of money laundering is considered independent of the proceeds gained from a criminal act. The authorities cannot prosecute any person merely based on assumptions unless registered with jurisdictional police and under enquiry.
The Prevention of Money Laundering Act, 2002: In-Depth Look
The Prevention of Money Laundering Act, 2002, lays the framework for India’s legal approach to combat money laundering. It applies to all financial institutions, banks, insurance companies, and their intermediaries. The amendment in 2012 introduced the ‘reporting entity’ concept, encompassing banking companies, financial institutions, intermediaries, etc and removed the upper limit of Rs 5 lakh for penalties. It also allowed for the provisional attachment and confiscation of property involved in these activities.
Enforcement Directorate: A History
The Enforcement Directorate (ED) is responsible for investigating economic crimes and violations of foreign exchange laws. It was formed on 1st May 1956 as an ‘Enforcement Unit’ in the Department of Economic Affairs. With the implementation of the Foreign Exchange Management Act, 1999 (FEMA) and Fugitive Economic Offenders Act, 2018 (FEOA), it has gained more responsibilities on its shoulders to combat economic crimes.
Roles and Functions of the Enforcement Directorate
The ED enforces various fiscal laws and regulations. Under the PMLA, it investigates and traces assets derived from proceeds of crime for attachment, prosecution, and confiscation through Special court. It also investigates suspected contraventions under FEMA, adjudicates, and imposes penalties. The FEOA mandates ED to attach properties of fugitive economic offenders and provide for their properties’ confiscation by the Central Government. It also sponsors preventive detention cases regarding contraventions of FEMA under COFEPOSA.
Relevance for UPSC Civil Services Examination
Understanding these financial instruments is crucial for aspirants of the UPSC Civil Services Examination. Questions related to these topics have been part of both prelims and mains examination in previous years. For instance, understanding the composition of India’s foreign exchange reserves or how emerging technologies and globalization contribute to money laundering are some areas which aspirants need to be well-versed with.
