Only two people have been convicted in 12 years since July 2005 under the provisions of the Prevention of Money Laundering Act (PMLA), through which the Enforcement Directorate (ED) enforces its mandate. Lack of inter-agency coordination among the prosecution agencies and a crippling shortage of staff in the ED are cited among the reasons for the abysmal rate of convictions.
The first conviction by the special PMLA court in Ranchi came on 31 January 2017, when it delivered the judgement in connection with the Madhu Koda case and held Hari Narayan Rai, a former minister from the state, guilty of laundering Rs 3.7 crore earned through corruption. The minister has been sentenced to seven years of imprisonment, the maximum sentence available under PMLA.
The second conviction of Alauddin under the PMLA came on 27 March 2017 in Kolkata for his illegal involvement in the opium trade in the state.
“Since the ED was assigned to operate under PMLA, it has managed to seize over Rs 27,000 crore under the PMLA in a decade, as suspected haul from money laundering, but it has mostly failed to link the money trail against anyone successfully in court,” said a senior ED official. The agency has claimed to have seized almost Rs 7,500 crore as black money after the demonetisation announcement of 8 November last year.
However, the Financial Action Task Force (FATF), a leading international tracking agency for economic crimes, has said that though the total amount of seizures by the ED seems impressive, it is actually not so.
The ED had just 682 employees in March 2015, a third of its sanctioned strength of 2,064. Filling vacancies is a nightmare for top-level officers, who mostly arrive from the police and the revenue services.
The big names in the “ED net”, since a case against Ramalinga Raju of the erstwhile software company Satyam was registered in 2009, include Hassan Ali Khan, a stud farm owner; former Deputy Chief Minister of Maharashtra, Chhagan Bhujbal; liquor baron Vijay Mallya; former IPL boss Lalit Modi; A. Raja; businessman Karti Chidambaram, son of former Finance Minister P. Chidambaram; former bureaucrat from Uttar Pradesh, Yadav Singh; and Bahujan Samaj Party (BSP) supremo Mayawati’s brother Anand Kumar, amongst others.
“The ED has tried hard to act against money laundering and the illegal use of foreign exchange, but due to the lack of inter-agency coordination among the prosecution agencies and a crippling shortage of staff, it has not managed to crack through a stretched out judicial process,” a senior ED official said.
“The ED had just 682 employees in March 2015, a third of its sanctioned strength of 2,064 and the numbers are not rising. Filling them up is a nightmare for top-level officers, who mostly arrive from the police and the two revenue services,” the official added.
“Over 9,000 cases registered under money laundering and foreign exchange violation charges are pending investigation in the country. Almost in half of these cases, the ED has not even filed the charge-sheet,” a lawyer who practises in the PMLA Special Court in Delhi said.
The problem is in making the charges stick. Another ED official, speaking on the condition of anonymity said that in most cases, they are quite successful in collecting evidence of money laundering from the records of financial agencies, but are obstructed in gathering details from abroad.
The ED has two laws under which it prosecutes offenders. Of these, the Foreign Exchange Management Act does not carry any criminal liability. It is the PMLA through which the ED mostly enforces its mandate.