Microlesson · 5-min read

Enforcement of FEMA — Roles of ED and RBI

# Enforcement of FEMA

## Two-tier Architecture

FEMA is administered and enforced through a two-tier structure:

Authority	Role
Directorate of Enforcement (ED)	Vested with enforcement powers under FEMA — investigation, adjudication and action against contraventions.
Reserve Bank of India (RBI)	Exercises overall control over forex transactions — issues regulations, licenses Authorised Persons, frames operational rules.

## Additional Role of ED

The ED is also the enforcement authority under the Prevention of Money Laundering Act, 2002 (PMLA). Hence officers of the ED typically deal with both FEMA and PMLA matters.

## Quick Recap

Policy and regulation of forex transactions → RBI
Investigation and enforcement of FEMA violations → ED
Investigation of money-laundering offences → ED (under PMLA)

Worked example

### Example 1

Example: A resident remits USD 5 million abroad without permission. The ED investigates the contravention under FEMA and may impose penalty.

### Example 2

Example: RBI notifies new limits under the Liberalised Remittance Scheme (LRS). This is RBI's regulatory role, not ED's.

⚠️ Common exam mistakes

Confusing ED's role with RBI's — RBI regulates; ED enforces.
Believing FEMA enforcement is by police or CBI — it is the ED.
Forgetting that ED has a parallel mandate under PMLA.

Reference:

Definition of Authorised Perso

FEMA vs FERA — Key Differences

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