The Government recently listed 16 entities — including the Competition Commission of India (CCI), the Directorate General of Foreign Trade (DGFT), Ministry of External Affairs, state police departments among others — which will have to mandatorily share information with the Enforcement Directorate (ED) under Section 66 of the Prevention of Money Laundering Act (PMLA). The move can bolster smart governance, as it can lead to coordinated functioning between regulators, ministries and a central investigation agency mandated to probe money laundering and violations of foreign exchange regulations.
Indeed, including state police departments is an important step, as the ED’s role comes into the picture only after registration of an offence, the ‘predicate’ offence, by a local police station or a central agency like the CBI. Once the investigating officer with the local police or the CBI finds that a case of theft or Disproportionate Assets has generated proceeds of crime over and above ₹1 crore, he forwards the details to the ED which then registers an Enforcement Case Information Report (ECIR) and probes the money laundering aspect under the PMLA. Collaboration between ED and the State police is, therefore, a logical step towards proper enforcement of the PMLA. With more information at its disposal, the ED can marshal facts efficiently for investigation.
But the challenge before the ED lies in showing prudence and professionalism in the exercise of its powers. This concern can come up, for example, with respect to the use of sensitive information shared by the CCI. Information sought by the CCI on, say, matters such as M&A is often market sensitive and the regulator routinely deploys confidence-building measures to ring-fence such information. But the regulator, established under a civil statute, has been asked to share such information with an agency probing criminality. Anxieties over sensitive information being leaked or misused should be addressed.
Such concerns may indeed not have arisen, had it not been for the activism displayed by the ED in recent times. The Government informed Parliament during the Budget session that raids carried out by the ED have jumped nearly 27 times to 3,000 in 2022 as compared to a mere 112 in 2014. The most worrisome aspect of the ED’s expanding powers is the stringent procedure under the PMLA where even to be granted bail, the accused must prove his innocence even though he might well be unaware of the allegations against him as it is not obligatory for the agency to supply him with the ECIR. Despite this, the number of convictions secured by the ED in the last six years is 23 out of 888 chargesheets filed i.e. approximately 2.59 per cent. This is not to say that the ED cannot be trusted with information. Nor is a toothless watchdog for financial misdemeanours a great idea. The key lies in the responsibility with which the ED uses the information at its command.