KAAND 25: The Enforcement Directorate Kaand TACTIC: ED as a negotiating tool — how cases are used, dropped, accelerated depending on political alignment
THE TACTIC IN ONE PARAGRAPH The Enforcement Directorate (ED) investigates financial crimes under the Prevention of Money Laundering Act (PMLA), a law that grants it sweeping powers to attach assets, arrest individuals, and prosecute without bail for years. The tactic lies in the selective deployment of these powers: cases are initiated, stalled, or dropped based on the political alignment of the accused. The ED’s discretion—backed by a law that presumes guilt until proven innocent—creates leverage. A case can be used to extract compliance, silence dissent, or force a business into a favorable deal. The threat of investigation alone is often enough; the actual prosecution is a last resort, reserved for those who refuse to cooperate. The mechanism is simple: compliance buys leniency, defiance invites escalation.
HOW IT WORKS IN INDIA SPECIFICALLY This tactic thrives in India due to three structural features: the design of the PMLA, the institutional weakness of the judiciary, and the concentration of political power. The PMLA reverses the burden of proof—once the ED alleges money laundering, the accused must prove their assets are untainted. This shifts the onus from the state to the individual, making it easier to harass without conviction. Second, India’s overburdened courts take decades to resolve cases, so even a frivolous ED investigation can freeze assets and destroy reputations long before a verdict. Third, the ED operates under the Ministry of Finance, which reports to the ruling party, creating a direct channel for political influence. Unlike in jurisdictions where financial crime agencies are independent, India’s ED lacks statutory autonomy, making it vulnerable to executive direction. The absence of a robust whistleblower protection framework further ensures that insiders who could expose misuse remain silent.
THE HISTORICAL RECORD The tactic has been documented in multiple cases where the ED’s actions correlated with political shifts. In 2014, the ED attached assets worth ₹7,000 crore in the Saradha chit fund scam, targeting entities linked to opposition parties in West Bengal. The case stalled after the state’s political alignment changed in 2021, with no convictions to date. In 2018, the ED raided the offices of a media group critical of the government, attaching assets under PMLA. The case was later dropped after the group’s editorial stance softened. In 2020, the ED investigated a pharmaceutical company for alleged foreign exchange violations; the probe accelerated when the company’s promoter publicly criticized government policies. The case was quietly closed after the promoter withdrew his remarks. In each instance, the ED’s actions followed a pattern: initiation when the target was politically inconvenient, and de-escalation when compliance was secured.
THE INSTITUTIONS THAT ENABLED IT No tactic of this scale operates in isolation. The ED’s powers are amplified by the compliance of other institutions. Banks, for instance, routinely freeze accounts on the ED’s mere suspicion, often without legal orders, due to the fear of regulatory backlash. Auditors, bound by confidentiality clauses, rarely flag ED investigations in financial statements, leaving investors in the dark. Rating agencies, which assess creditworthiness, do not factor in the risk of politically motivated enforcement, treating ED cases as one-off events rather than systemic threats. The judiciary, while occasionally critical of the ED’s overreach, has upheld the PMLA’s draconian provisions, including the denial of bail. Parliamentary committees have noted the ED’s lack of accountability but stopped short of recommending structural reforms. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have overlapping jurisdictions but no mechanism to challenge the ED’s actions, even when they disrupt markets.
THE CURRENT STATE The tactic remains in active use, with no meaningful reforms to curb its misuse. The PMLA’s provisions remain intact, and the ED’s budget has grown, expanding its reach. In 2022, the Supreme Court upheld the PMLA’s constitutionality, including its bail provisions, despite concerns over its potential for abuse. The only change has been the ED’s increased transparency in filing chargesheets, but this does little to address the core issue: the agency’s lack of independence. For the tactic to become ineffective, the PMLA would need to be amended to restore the presumption of innocence, the ED would need statutory autonomy, and the judiciary would need to fast-track PMLA cases. None of these are on the horizon.
WHAT TO WATCH FOR Three red flags indicate this tactic may be in play. First, a sudden ED raid or asset attachment following a public disagreement between a business and the government. Second, a pattern of cases being dropped or de-prioritized after the target aligns with the ruling party’s interests. Third, a company’s accounts being frozen without a clear legal order, often justified as "preventive action" under PMLA. If you see these signs, assume the investigation is not about justice but leverage—and act accordingly.
This newsletter describes documented business tactics and systemic patterns based on public records, regulatory orders, and published financial journalism. It does not make allegations against any individual or entity. Readers are encouraged to consult primary sources and form their own conclusions.