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Report No. 161

4.3. Constitution of the Enforcement Directorate.-

Section 3 of the Foreign Exchange Regulation Act, 1973 provides for appointment of Directors of Enforcement, Additional Directors of Enforcement, Deputy Directors of Enforcement and Assistant Directors of Enforcement. Section 4, inter alia, deals with appointment of the aforesaid officers. According to section 4, the Central Government is the appointing authority for the aforesaid four class of officers, while other officers of Enforcement can be appointed by any of the above four category of officers as may be authorised by the Central Government.

The Enforcement Directorate implements FERA, which is an Act to consolidate and amend the law relating to certain payments and dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interest of the economic development of the country. According to the IRC Report, the total sanctioned strength of ED is 798 and its budget is Rs. 10.37 crores per annum. The ED functions through seven zones at Delhi, Calcutta, Chennai, Mumbai, Ahmedabad, Bangalore and Jalandhar and 12 field units/subzonal offices.

The IRC Report further states that with the introduction of policy of economic liberalisation, the functions of ED have undergone a qualitative change. It is now concentrating on cases pertaining to large illegal cash flows in the nature of money-laundering where the funds have been generated either through evasion of income-tax, sales tax, excise or gains from illicit narcotics apart from organised financial crimes involving over-invoicing, under-invoicing for routing such illegally generated money either for laundering or retention abroad. Indeed the recent events show that even some politicians and bureaucrats have received monies, whether knowingly or unknowingly, which are proceeds of money laundering activities.

It appears further that the working of the ED may undergo significant change with the proposed enactment of the Foreign Exchange Management Act (FEMA) which is supposed to replace the present FERA. The IRC was also informed that the Government is contemplating a Money Laundering Law which would create a new offence in relation to the gains of crime for certain serious offences like trafficking in drugs and psychotropic substances, narco-terrorism, heinous offences under Indian Penal Code and certain offences under the Prevention of Corruption Act, which also may be placed within the jurisdiction of the ED.

It is equally obvious that for carrying out the directions of the Supreme Court relating to ED, certain amendments are called for in the present law i.e. FERA. While drafting the FEMA which is supposed to replace FERA, it is obvious that the aforesaid directions of the Supreme Court have to be kept in mind and implemented.

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