The Enforcement Directorate has got a renewed mandate in the arena of economic crime as it has been made the designated authority to track cases of money laundering.

The role of money laundering prevention authority was expected to be entrusted with the income-tax department, but in view of the ED's dwindling role after the Centre replaced the sweeping Foreign Exchange Regulation Act with the Foreign Exchange Management Act in 2000, which transformed foreign exchange violation from a criminal to a civil offence, the mandate has been given to it.

As the designated authority under the Prevention of Money Laundering Act, passed by Parliament in the Budget session, the ED will have far more powers than what was available to it under the erstwhile Fera. The Act seeks to track the flow of funds to India to finance terrorism and narcotics through illegal money transfer channels including hawala.

The Act also allows the ED to file criminal cases against entities who violate the provisions of fund transfer across the country. This includes the power to ask for identity of depositors of funds in domestic banks and also trace whether terrorist funds were reaching stock markets and to probe into any other illegitimate economic activity.

The Joint Parliamentary Committee on the stock market scam had supported the setting up of such an authority to check the flow of what it called "undesirable funds" into stock markets.

The Prevention of Money Laundering Act was passed as part of India's commitment to fight international terrorist financing. The Act had acquired more importance after the September 11 terrorist attacks with the United States government cooperating with India to check the flow of funds to terror groups.

For corporate India, the issue of foreign exchange violation was a major bugbear till recently with the threat of action from the ED hanging over them.

The Prevention of Money Laundering Act had given the ED a wider mandate to follow up cases of foreign exchange violations. It would have been more appropriate to keep the authority under the income-tax department, experts said.

While the rules for the authority are yet to be notified, it is expected that as per the JPC recommendations brokers may be asked to submit details of their funds invested in the stock market, including the source from which they have borrowed.