An ED team raiding the Viviana Mall in Thane | PTI photo
An ED team raiding the Viviana Mall in Thane (representational image) | PTI photo
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Enforcement Directorate has 3 money laundering convictions in 13 years — involving amounts from Rs 4 crore to Rs 3 lakh. 

New Delhi: If its track record is anything to go by, the Enforcement Directorate (ED) faces an uphill task in making any headway in the Rs 13,600 crore PNB scam involving fugitive diamantaire Nirav Modi.

Over the last 13 years, the economic intelligence and prosecuting agency investigating financial fraud worth several thousands of crores, has managed just three convictions under the Prevention of Money Laundering (PMLA) Act, 2005.

And even these involve relatively small amounts – from Rs 4 crore to Rs 3 lakh.

All three convictions have come in the last two years, the first in January 2017, 12 years after PMLA was enacted.

Although the ED was formed in the 1950s to tackle foreign exchange-related violations, a civil provision, its mandate extended to money laundering, a criminal offence, after the introduction of PMLA.

The three convictions

The first conviction by a special PMLA court came in a case involving a former minister of Jharkhand, Hari Narayan Rai, who was accused of laundering ill-gotten wealth to the tune of Rs 3.7 crore. He was sentenced to seven years in prison.

The second followed two months later, in March 2017, and pertained to a drug trade case against Kolkata resident Allauddin Sk. He was sentenced to eight years of rigorous imprisonment and fined Rs 2 lakh.

The Narcotics Control Bureau had seized 30 kg of opium and 550 kg of poppy husk from him. Investigation revealed that the money earned from drug sales was invested in property.

That is when the Enforcement Directorate took up the investigation and traced two immovable properties, valued at Rs 3 lakh, which were later attached.

Also read: Interpol to issue red corner notice against Mehul Choksi after tough response by ED

The third conviction came just this month, when a special court in Patna sentenced a man named Mohammad Naushad to five years in prison, including a year’s rigorous imprisonment, for trading illegal arms.

The Enforcement Directorate had launched its investigation against Naushad in 2013. The agency subsequently seized fake Indian currency with a face value of Rs 1.4 lakh from Naushad’s residence, and it was also found that he used his ill-gotten wealth to purchase property valued at Rs 22.6 lakh.

His assets were confiscated and he was also ordered to pay a fine of Rs 5 lakh.

How agency deals with PMLA investigations

There are 29 laws and 160 sections under which the Enforcement Directorate can book an individual.

If any person commits a crime under these sections, the money accrued from it qualifies as “proceeds of crime”.

If that money is then used to purchase assets, or invested overseas, the case falls under the Prevention of Money Laundering Act and the ill-gotten wealth can be confiscated.

However, while the agency can attach assets of individuals or companies involved in cases under the PMLA, only courts can confiscate them. Confiscation is when the court takes possession of assets attached by the investigative agencies, until further orders.

Once an ‘enforcement case information report (ECIR)’ is filed with the agency, investigators work to establish a money trail to see where the ill-gotten wealth was invested, its source, and where it was distributed.

After assets are attached by the ED, the decision is confirmed by an adjudicating authority. Once the attachment is verified by the adjudicating authority (to say that it was fair), the agency files a prosecution complaint in court within 60 days.

Lack of coordination

The poor rate of conviction under PMLA is often blamed on the lack of coordination among agencies and limited flow of information from abroad.

According to investigators, eight out of 10 countries approached for information on alleged money laundering in the 2G case — Russia, UAE, Norway, Cyprus, Mauritius, Libya, Isle of Man, British Virgin Islands, France, and Singapore — did not respond to the letters rogatory (LRs).

An LR is a formal communication from a competent court to a foreign court, processed by the Ministry of External Affairs on behalf of investigative agencies, to obtain information such as financial details and returns on individuals and entities offshore.

One example of this was the case involving the allegedly illegal allocation of 2G spectrum where the money trail was reportedly traced to several foreign countries. The case eventually fell in court.

Also read: 8 of 10 countries did not respond to India’s request for help in 2G probe

“A case needs to be built on circumstantial evidence,” an officer explained. “It takes a lot of effort to decode a money trail as there are a hundred links that need to be looked into. For that, we require proper support from countries abroad, as, in most cases, the money is parked offshore.”

“If we do not get that support, how is it possible to build a strong case? And if a case is not built, it will not lead to a conviction,” the officer added.

Short-staffed

Since PMLA was enacted, more than 2,500 ECIRs have been filed in the Enforcement Directorate, with over 1,000 cases where the investigation remains pending.

According to officials, a shortage of investigators plays a big role in this pendency. While the sanctioned staff strength for the agency is 2,300, there are only 1,000 officials, including investigators, record-keepers and administrators.

“One reason for the pendency of cases is lack of staff, and the other is limited availability of information,” an officer said. “We are managing with less than 50 per cent [of the sanctioned staff strength].”

Most attachments made in cases of bank fraud

Between 2005 and March 2018, the agency attached assets worth Rs 27,000 crore, of which Rs 14,000 crore, a little over 50 per cent, pertains to cases of bank fraud.

The second highest share, Rs 8,000 crore or around 36 per cent, comprises cases of corruption.

“The highest number of assets attached is in cases of bank fraud, since the amount involved in these cases is huge,” an officer said.

In all of these cases, however, the attachments are provisional and have not led to any confiscation.

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