[Answered] Evaluate the ethical and legal challenges in the enforcement of money laundering laws in India, considering recent judicial observations on the ED’s functioning and the potential for abuse of authority.

The origin of the Enforcement Directorate (ED) dates back to May 1, 1956, when an ‘Enforcement Unit’ was established within the Department of Economic Affairs. Its initial purpose was to address violations of Exchange Control Laws under the Foreign Exchange Regulation Act (FERA). Over time, the ED has evolved into a multi-dimensional organization, now tasked with investigating economic offenses under various laws, including the Prevention of Money Laundering Act (PMLA), Fugitive Economic Offenders Act, Foreign Exchange Management Act, and FERA.

Ethical and Legal Challenges in enforcement of money laundering laws in India

• Jurisdiction Overreach: Criticism of the Enforcement Directorate’s overreach was especially noted in the case Pankaj Bansal vs Union of India, where the Supreme Court highlighted issues with the ED’s actions, including searches, seizures, and arrests, which have been deemed outside its powers & criticized the ED for not exercising its powers with probity, fairness, and consistency.
• Limited Interpretation by the Supreme Court: The Supreme Court, in the Vijay Madanlal Choudhary and Ors vs Union of India and Ors. (2022) case, interpreted the PMLA in a way that restricts its application to “wrongful and illegal gain of property” resulting from criminal activity related to scheduled offenses. The court emphasized the necessity for the property to qualify as “proceeds of crime” under Section 2(1)(u) of the 2002 Act.
• Selective Targeting and Abuse of Process: There have been concerns about the ED’s selective targeting of individuals in states governed by the Opposition. There have been instances where the ED has conducted inquiries into offenses not covered by the PMLA, such as the alleged illegal mining of sand, which falls under state jurisdiction.
• Impact on Federalism: Absolute powers given to CBI & ED have eroded the principles of federalism as investigating agencies target states based on political considerations, potentially damaging the foundations of the Constitution.

Conclusion        

Concerns related to the ED’s conduct, selective targeting, potential abuse of authority, and violations of federalism demand a closer examination of practices and actions of the enforcement agencies particularly by Constitutional bodies like courts to prevent further erosion of democracy and emphasize the need to uphold constitutional values.