- Fraud under investigation: The Enforcement Directorate (ED) has attached assets worth over Rs 757 crore of one of the country’s most known multi-level marketing (MLM) and direct-selling companies, Amway India, as part of a money-laundering investigation. The federal agency, alleged that the company was perpetrating a “scam” by running a pyramid “fraud” in the guise of direct-selling MLM network.
- Property attached: The ED issued a provisional order under the Prevention of Money Laundering Act (PMLA) for attachment of assets worth Rs 757.77 crore belonging to Amway India Enterprises Private Limited. The attached properties include land and factory buildings of Amway located in Dindigul district of Tamil Nadu, plant and machineries, vehicles, bank accounts and fixed deposits. Of the total attachment value, immovable and movable properties are worth Rs 411.83 crore, while the remaining amount of Rs 345.94 crore is deposited in 36 bank accounts “belonging” to Amway, the agency said.
- ED Investigation: Amway said the ED action was with regard to an investigation dating back to 2011. The money-laundering probe found out that Amway brought Rs 21.39 crore as share capital in India during 1996-97 and till the financial year 2020-21, it remitted a “huge” amount of Rs 2,859.1 crore in the name of dividend, royalty and other payments to their investors and parent entities. Companies like Britt Worldwide India Private Limited and Network Twenty One Private Limited also played a “major role” in promoting Amway’s pyramid scheme by conducting seminars for joining members under the guise of sale of goods by enrolment of members in the chain system, it alleged. The agency said the company collected a total amount of Rs 27,562 crore from its business operations during 2002-03 to 2021-22 and of this, “paid” a commission of Rs 7,588 crore to its distributors and members in India and the United States from 2002-03 to 2020-21.
- Amway: Amway is the world’s largest direct selling company* ($8.8B reported sales, 2018). It manufacture and distribute nutrition, beauty, personal care and home products—which are exclusively sold in 100 countries through Amway Independent Business Owners (IBOs). Amway relies on what it calls “independent business owners,” or IBOs, who pay fees and buy its merchandise to sell to others, historically friends and neighbors.
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Previous litigation: Amway in the year 2010 announced a deal to pay $34 million in cash and provide $22 million worth of products to settle a 2007 class-action suit alleging the company and some of its top-level distributors operate an illegal pyramid scheme. The suit alleged the company used unfair and illegal business practices that mislead distributors about their ability to make money and how much it would cost to be part of the business. The case was filed in California in 2007 by former distributors for Quixtar, the name multilevel marketing giant Amway used for its U.S.-based operation at the time.
- The Directorate of Enforcement is mainly concerned with the enforcement of the provisions of the Foreign Exchange Management Act and Rules and Regulation issued there under to serve the objectives of the Act. The officers of the Directorate perform adjudication function so as to impose penalty on persons for contravention of the Act.
- It is responsible for enforcement of the Foreign Exchange Management Act, 1999 (FEMA) and certain provisions under the Prevention of Money Laundering Act. Work relating to investigation and prosecution of cases under the PML has been entrusted to Enforcement Directorate. The Directorate is under the administrative control of Department of Revenue for operational purposes; the policy aspects of the FEMA, its legislation and its amendments are within the purview of the Department of Economic Affairs. Policy issues pertaining to PML Act, however, are the responsibility of the Department of Revenue. Before FEMA became effective (1 June 2000), the Directorate enforced regulations under the Foreign Exchange Regulation Act, 1973.
Functions:
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- To collect, develop and disseminate intelligence relating to violations of FEMA, 1999, the intelligence inputs are received from various sources such as Central and State Intelligence agencies, complaints etc.
- To investigate suspected violations of the provisions of the FEMA, 1999 relating to activities such as “hawala” foreign exchange racketeering, non-realization of export proceeds, non-repatriation of foreign exchange and other forms of violations under FEMA, 1999.
- To adjudicate cases of violations of the erstwhile FERA, 1973 and FEMA, 1999.
- To realize penalties imposed on conclusion of adjudication proceedings.
- To handle adjudication, appeals and prosecution cases under the erstwhile FERA, 1973
- To process and recommend cases for preventive detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA)
- To undertake survey, search, seizure, arrest, prosecution action etc. against offender of PMLA offence.
- To provide and seek mutual legal assistance to/from contracting states in respect of attachment/confiscation of proceeds of crime as well as in respect of transfer of accused persons under PMLA.
