The Enforcement Directorate is a multidisciplinary institution tasked with enforcing the terms of two special fiscal laws: the Foreign Exchange Management Act (FEMA) of 1999 and the Prevention of Money Laundering Act (PMLA) of 2002. Hence, it is important to lay down the penalties for the offenses under both Acts. Further, it is also important that a person charged under any of these Acts is well aware of the nature of the liability of the offenses of both Acts along with the burden of proof and provisions of bail if any.
Penalties under the Foreign Exchange Management Act (FEMA), 1999
If any person contravenes any provision of the Act, Rules, Regulations, Notifications, or Orders, they may be penalized with:
An amount up to three times the sum involved if the amount is quantifiable, or
An amount up to Rs. 2 lakhs if the amount cannot be quantified,
If the contravention is a continuing one, the additional penalty may extend to Rs. 5,000 for each day during which the contravention continues.
Civil Liability under FEMA: FEMA was preceded by the Foreign Exchange Regulation Act (FERA), 1947, which was repealed and FEMA was introduced. FERA had a stricter amount of penalty than FEMA and any contravention under FERA was termed as a criminal offense. After FEMA came into existence, the amount of penalty was reduced and the Act only provided for civil imprisonment. A person who contravenes any provision of FEMA shall be liable to civil imprisonment only if they have not paid the penalty.
Criminal Liability under PMLA: Money laundering in India is a criminal offense. A person accused of money laundering in India shall be liable to be punished with both imprisonment and a fine. The Union Government has, in the past, considered making money laundering a separate criminal offense, which the Enforcement Directorate could investigate regardless of an investigation undertaken by any other agency.
The Burden of Proof under FEMA and PMLA
FEMA: It is a well-settled principle of law that the onus of proof, whether in civil or criminal law, is on the prosecution and not the accused. Before the law, an accused person is innocent until proven guilty by the prosecution.
PMLA: The accused person or the person charged with money laundering must prove in the court that they are innocent since in this case, the court assumes the guilt of the accused.
FEMA, unlike PMLA, does not impose a reverse burden of proof on an accused person.
Section 45 of the Prevention of Money Laundering Act, 2002 governs the issuance of bail for people accused of money laundering. Furthermore, because money laundering is a cognizable but non-bailable violation, bail can only be granted if the accused faces a sentence of fewer than three years in jail. Otherwise, persons facing a sentence of more than three years must apply for a bail bond, which the court will approve after receiving financial assurance from them that they will attend in future court proceedings.
Important things to consider while defending yourself in a probe by ED
1. Contacting a lawyer:
It is important to contact an experienced criminal lawyer if the case relates to money laundering, and a civil lawyer if the case relates to FEMA. It is important to contact a lawyer who has knowledge of PMLA, FEMA, and other economic laws of the country. Further, it is not advisable to talk about the case with anyone but your lawyer. Any and all evidence that the accused person can present in their defense must be kept safely. These may include financial records, receipts, bank statements, and any other important documents.2. A statement made before ED is not binding:
A person who is called upon to make a statement before the ED while the investigation of the case continues cannot be said to be an accused of that offense. The investigation is conducted only to gather evidence. The statements so made will, however, be admissible in evidence, i.e., it will be considered as evidence. The Supreme Court, in A. Tajudeen v. Union of India held that if an accused made a statement before the ED, such statement shall not be the sole basis of establishing the guilt of the accused.3. Attachment of property:
An interim order relating to the attachment of the property of an accused person does not mean that the property will be seized immediately. A person can continue to reside on their property while the matter is pending. Such order of the ED is valid for 180 days. The objective behind attaching the property of an accused is to deprive them of the benefits of the assets that are attached. Usually, properties in use are not out of bounds for the accused until there is a logical conclusion to the case.4. If the ED probe relates to money laundering:
It is important to establish that the money was in fact derived from criminal activity. It must also be proved that the accused person was aware that the criminal activity had resulted in the procurement of the money. Mere acceptance of money without the knowledge that it was obtained through criminal activity. It is not necessary to prove that the accused person was aware of the specific crime involved. It must also be established that a financial or monetary transaction was involved. This usually means that the person must have done something with the money obtained.
Why do you need a lawyer?
Any successful defense, whether civil or criminal, is based on a sound strategy. It is significant to lay down an effective way to counter the prosecution's case which can only be done with the help of a criminal lawyer. A case in the hands of the Enforcement Directorate can be extremely complicated and a lawyer well-versed with civil and criminal laws will enable the accused to defend their case effectively. Therefore, it is exceedingly significant for an accused to contact a lawyer as soon as they are charged with an offense under either Act.Advocate Jaspreet Singh Rai provides service in various fields of law including civil and criminal law. With 18 years of experience in the field of law, he has provided advisory and legal consultancy services to numerous clients. He also specializes in matters pertaining to corruption and CBI cases.
Testimonials
1. “ My brother was falsely accused of money laundering when he obtained a large amount of money as a part of his income. However, a false FIR alleging that the money was in fact obtained from a crime led to an investigation by the ED. Only after consulting with a lawyer were we able to defend my brother in the case and get a favorable outcome.”
-Mr. Om Khanna
2. “ I was charged with money laundering and as a result, the ED attached my residential property. I immediately contacted a lawyer from LawRato.com who developed an effective defense for my case and enabled me to get my property back. The case is still pending, but with the help of my lawyer I have been able to defend myself in the money laundering case and secured substantial evidence to present in court.”
-Mrs. Mira Bhatt
3. “ My sister was falsely charged with violating the FEMA Act. I immediately consulted a civil lawyer who helped me understand the technicalities of the law. He helped my sister in defending her case and she was saved from paying a hefty amount of penalty for the offense.”
-Ms. Sushila Sibal
The Enforcement Directorate is a multidisciplinary institution tasked with enforcing the terms of two special fiscal laws: the Foreign Exchange Management Act (FEMA) of 1999 and the Prevention of Money Laundering Act (PMLA) of 2002. Hence, it is important to lay down the penalties for the offenses under both Acts. Further, it is also important that a person charged under any of these Acts is well aware of the nature of the liability of the offenses of both Acts along with the burden of proof and provisions of bail if any.
Penalties under the Foreign Exchange Management Act (FEMA), 1999
If any person contravenes any provision of the Act, Rules, Regulations, Notifications, or Orders, they may be penalized with:
An amount up to three times the sum involved if the amount is quantifiable, or
An amount up to Rs. 2 lakhs if the amount cannot be quantified,
If the contravention is a continuing one, the additional penalty may extend to Rs. 5,000 for each day during which the contravention continues.
Offenses and Penalties under the Prevention of Money Laundering Act (PMLA), 2002
Under the Act, any person who commits the crime of money laundering shall be punished with:
Imprisonment for a period of at least 3 years extendable up to 7 years, and
A penalty of Rs. 5 lakhs.
The imprisonment period may also be extended to 10 years.
Civil Liability under FEMA: FEMA was preceded by the Foreign Exchange Regulation Act (FERA), 1947, which was repealed and FEMA was introduced. FERA had a stricter amount of penalty than FEMA and any contravention under FERA was termed as a criminal offense. After FEMA came into existence, the amount of penalty was reduced and the Act only provided for civil imprisonment. A person who contravenes any provision of FEMA shall be liable to civil imprisonment only if they have not paid the penalty.
Criminal Liability under PMLA: Money laundering in India is a criminal offense. A person accused of money laundering in India shall be liable to be punished with both imprisonment and a fine. The Union Government has, in the past, considered making money laundering a separate criminal offense, which the Enforcement Directorate could investigate regardless of an investigation undertaken by any other agency.
The Burden of Proof under FEMA and PMLA
FEMA: It is a well-settled principle of law that the onus of proof, whether in civil or criminal law, is on the prosecution and not the accused. Before the law, an accused person is innocent until proven guilty by the prosecution.
PMLA: The accused person or the person charged with money laundering must prove in the court that they are innocent since in this case, the court assumes the guilt of the accused.
FEMA, unlike PMLA, does not impose a reverse burden of proof on an accused person.
Provision of Bail under the PMLA
Section 45 of the Prevention of Money Laundering Act, 2002 governs the issuance of bail for people accused of money laundering. Furthermore, because money laundering is a cognizable but non-bailable violation, bail can only be granted if the accused faces a sentence of fewer than three years in jail. Otherwise, persons facing a sentence of more than three years must apply for a bail bond, which the court will approve after receiving financial assurance from them that they will attend in future court proceedings.
Important things to consider while defending yourself in a probe by ED
1. Contacting a lawyer:
It is important to contact an experienced criminal lawyer if the case relates to money laundering, and a civil lawyer if the case relates to FEMA. It is important to contact a lawyer who has knowledge of PMLA, FEMA, and other economic laws of the country. Further, it is not advisable to talk about the case with anyone but your lawyer. Any and all evidence that the accused person can present in their defense must be kept safely. These may include financial records, receipts, bank statements, and any other important documents.2. A statement made before ED is not binding:
A person who is called upon to make a statement before the ED while the investigation of the case continues cannot be said to be an accused of that offense. The investigation is conducted only to gather evidence. The statements so made will, however, be admissible in evidence, i.e., it will be considered as evidence. The Supreme Court, in A. Tajudeen v. Union of India held that if an accused made a statement before the ED, such statement shall not be the sole basis of establishing the guilt of the accused.3. Attachment of property:
An interim order relating to the attachment of the property of an accused person does not mean that the property will be seized immediately. A person can continue to reside on their property while the matter is pending. Such order of the ED is valid for 180 days. The objective behind attaching the property of an accused is to deprive them of the benefits of the assets that are attached. Usually, properties in use are not out of bounds for the accused until there is a logical conclusion to the case.4. If the ED probe relates to money laundering:
It is important to establish that the money was in fact derived from criminal activity. It must also be proved that the accused person was aware that the criminal activity had resulted in the procurement of the money. Mere acceptance of money without the knowledge that it was obtained through criminal activity. It is not necessary to prove that the accused person was aware of the specific crime involved. It must also be established that a financial or monetary transaction was involved. This usually means that the person must have done something with the money obtained.
Why do you need a lawyer?
Any successful defense, whether civil or criminal, is based on a sound strategy. It is significant to lay down an effective way to counter the prosecution's case which can only be done with the help of a criminal lawyer. A case in the hands of the Enforcement Directorate can be extremely complicated and a lawyer well-versed with civil and criminal laws will enable the accused to defend their case effectively. Therefore, it is exceedingly significant for an accused to contact a lawyer as soon as they are charged with an offense under either Act.Advocate Jaspreet Singh Rai provides service in various fields of law including civil and criminal law. With 18 years of experience in the field of law, he has provided advisory and legal consultancy services to numerous clients. He also specializes in matters pertaining to corruption and CBI cases.
Testimonials
1. “ My brother was falsely accused of money laundering when he obtained a large amount of money as a part of his income. However, a false FIR alleging that the money was in fact obtained from a crime led to an investigation by the ED. Only after consulting with a lawyer were we able to defend my brother in the case and get a favorable outcome.”
-Mr. Om Khanna
2. “ I was charged with money laundering and as a result, the ED attached my residential property. I immediately contacted a lawyer from LawRato.com who developed an effective defense for my case and enabled me to get my property back. The case is still pending, but with the help of my lawyer I have been able to defend myself in the money laundering case and secured substantial evidence to present in court.”
-Mrs. Mira Bhatt
3. “ My sister was falsely charged with violating the FEMA Act. I immediately consulted a civil lawyer who helped me understand the technicalities of the law. He helped my sister in defending her case and she was saved from paying a hefty amount of penalty for the offense.”
-Ms. Sushila Sibal
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Advocate Jaspreet Singh Rai provides service in various fields of law including civil and criminal law. With 18 years of experience in the field of law, he has provided advisory and legal consultancy services to numerous clients. He also specializes in matters pertaining to corruption and CBI cases.
Greater Kailash - 1, Delhi
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