Note: This article was originally published on July 12, 2023 and is being republished on July 26, 2023 in light of the Union government’s petition to the Supreme Court.
New Delhi: In an unprecedented move, the Union government on Wednesday moved the Supreme Court reiterating its stand that Enforcement Directorate chief Sanjay Mishra is required to stay at the helm. The Centre said Mishra should be allowed to continue till October 15 because a country review of the UN’s Financial Action Task Force for India is currently underway.
The government wants the court to modify its July 11 verdict by which Mishra’s term was curtailed to July 31 instead of November 30. At the last hearing, the court had termed an earlier extension given to Mishra as being illegal and a violation of the Supreme Court’s 2021 judgement. At the earlier hearing too, the Union government insisted that the FATF review is of crucial importance and the role of Mishra is central to this.
However, a deep dive by The Wire into what really goes behind an FATF review reveals an interesting story.
The FATF is an international terror-financing watchdog.
At the last hearing, the government simply said the review is at a critical stage. It omitted to mention that it began earlier this year and will continue up to the end of 2024, well past the November 2023 retirement date that the government had it mind for Mishra. A detailed timeline has been given in Wednesday’s affidavit.
The Centre told the court that “It is extremely essential that Enforcement Directorate is in the state of full readiness during this period till on-site (visit in November.) During this period, agencies are often required to provide responses, statistics, case studies etc in short spans of time to provide better understanding to assessment team…For this purpose, guidance and leadership at a very senior level is required…The intricacies of complex money laundering investigation may also need to be explained to them which can be done only by a person with hands-on experience…The present Director, Directorate of Enforcement has been engaged in preparation of documents …since beginning of year 2020, accordingly, his continuation in this ardous and delicate process is essential”.
What the Solicitor General Tushar Mehta refrained from telling the court is that a country is judged on at least 40 parameters and the Enforcement Directorate’s remit of money laundering and terror financing is just one of those 40.
In fact, the FATF website says the lead ministry or authority for FATF is the Department of Economic Affairs. The other key authorities are Central Board of Excise and Customs, Financial Intelligence Unit (FIU) and the Union law ministry.
The ED reports to the Department of Revenue.
To make a comparison, the FIU chief, Pankaj Mishra, in place since 2016, moved out of the department after having been prematurely repatriated in 2022. FIU is a key department dealing with, amongst other laws, the Prevention of Money Laundering Act 2002, just like the Enforcement Directorate.
Mishra reports to the Revenue Secretary and since 2019 the department has had three secretaries. The Department of Economic Affairs has followed a similar trajectory. “Secretaries to the department play a key role and not a director of an investigative agency,” said an official privy to the FATF review.
The FATF review is done every 10 years by a mutual assessment team drawn from the 40 member countries. The review is within an 18-month time frame and began early this year. The final report will not be submitted before the end of 2024. India is a rare country whose FATF review has been postponed at least once on account of COVID-19.
A petitioner to the Supreme Court had, in fact, cited FATF as the very basis for not giving an extension to the director. “To avoid the sudden break in continuity that would arise in November 2023, it would be more prudent to recruit a new Director as soon as possible so as to afford him/her the maximum possible time before the mutual evaluations,” the petitioner had said.
The mutual evaluation team’s key meeting in India is in November when the assessors will be doing an on-site visit to “verify and assess whether the systems in place are effective or not,” as per the FATF website. It is during this visit that assessors talk to government and private entities in order to evaluate a country’s performance. Or as SG Mehta told the court on a previous hearing, “Experience has shown that having the laws in the books is not enough, the main focus is now on effectiveness.”
It is this effectiveness that has the government worried, going by the ED’s performance statistics. Of the nearly 6,000 cases filed since inception, there has been a conviction in 24 out of 25 cases in which a Prevention of Money Laundering Act trial was completed. Or as the ED would like to see the glass full, it has a conviction rate of 94%.
A report in The Wire says, between 2018-19 and 2021-22, cases registered by ED rose by 505%, from 195 cases in 2018-19, to 1,180 in 2021-22. The number of searches the ED conducted rose by a huge 2,555% between 2004-14 and 2014-22.
As per the Union finance ministry’s own data, 112 searches were carried out by the ED between 2004 and 2014 resulting in attachment of proceeds of crime worth Rs 5,346 crore.
The Wire had sent a questionnaire to the ED. There are several questions that it did not respond to. For example, in how many cases has investigation been completed so that trial can commence? How many cases have been registered and closed by way of discharging or quashing or acquittal?
How many accused have been discharged after a complaint was filed in court? Of the properties attached, how many have been confiscated so far by the ED?
At a June 2013 plenary meeting, the FATF had “decided that India had reached a satisfactory level of compliance with all of the core and key Recommendations and could be removed from the regular follow-up process” – according to the 8th follow-up report on the mutual evaluation of India.