ED to intensify check on terrorist funding

The government plans to give more teeth to Enforcement Directorate to check terrorist funding by removing certain lacunae in the provisions of Foreign Exchange Management Act.

This has been necessitated as the FEMA, which replaced Foreign Exchange Regulation Act in May 2000, has diluted the powers of Enforcement Directorate.

With foreign exchange violations becoming civil offence under FEMA unlike in FERA where it was a criminal offence, the Enforcement Directorate can now only search and seize currency from persons suspected to be involved in hawala operations, but cannot arrest or prosecute them.

Any terrorist funding case now detected by Enforcement Directorate has to be handed over to the police for arrests, making investigation difficult, official sources said.

Along with FEMA, the government had planned to enact Prevention of Money Laundering Bill, but it was delayed having been referred to a Rajya Sabha select committee.

With the select committee having made its recommendations, the Money Laundering Bill is now expected to be passed either in the Budget or monsoon session.

Money Laundering Bill had provisions to deal with hawala transactions wherein Indian currencies are laundered into foreign currency. It did not have sufficient provisions to deal with foreign currency that were being laundered into Indian currency as in the case of terrorist funding.

It is in this context that the government proposes to plug the lacunae in FEMA by providing powers to ED to arrest terrorists suspected to be involved in hawala transactions in the interest of national security.

The sources said it was not clear as yet whether the amendments would be brought in through a presidential ordinance or a bill in the budget session of Parliament.

They also said the finance ministry is yet to formulate its thought on this issue. Once the amendment is drafted, it would go to law ministry for vetting.

An in-principle decision has been taken in this regard and the issue has also been discussed at the prime minister's office level.

PTI

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