ED to Intensify Focus on FEMA Violations in 2025 -Strategic Insight for Businesses

The Enforcement Directorate (ED) has declared that 2025 will see a sharpened focus on violations under the Foreign Exchange Management Act (FEMA), according to its Director, Rahul Navin. This marks a significant regulatory shift: FEMA compliance is being elevated to become a core enforcement priority for the agency. ED’s renewed mandate underscores its commitment to enforcing rules laid down by the Central Government and the Reserve Bank of India (RBI), including FEMA circulars, cross-border transaction norms, and foreign exchange regulations.

Director Navin outlined key offence categories that the ED will closely monitor: manipulation in export-import operations, breaches of Foreign Direct Investment (FDI) norms, misuse of External Commercial Borrowings (ECBs), non-resident landownership violations, and unauthorized overseas fund transfers. In cases where defaults are identified, the ED plans to leverage its powers to investigate, adjudicate, and impose penalties. Importantly, the agency also intends to promote voluntary compliance through the compounding mechanism — encouraging defaulters to settle their contraventions by paying a specified penalty, instead of undergoing a lengthy litigation process.

This approach reflects a balanced enforcement strategy: penal action when required, but also an openness to corrective resolution. The goal, ED says, is not just punishment, but enhancing financial discipline and encouraging businesses to proactively align with FEMA’s legal requirements.

Beyond FEMA, Director Navin highlighted the ED’s broader enforcement achievements under the Prevention of Money Laundering Act (PMLA). From 2014 to 2024, over 5,100 PMLA investigations were initiated. In the financial year 2024-25 alone, 775 new investigations began, 333 prosecution complaints were filed, and 34 individuals were convicted. The ED also ramped up its asset-attachment activity — issuing 461 provisional attachment orders valued at over ₹30,000 crore. As of March 31, 2025, assets under provisional attachment stood at a massive ₹1,54,594 crore.

Navin emphasized that while many of these attached assets have been identified, their final confiscation remains a slow and time-consuming judicial process. To accelerate resolution and unlock economic value, the ED is pushing for restitution of assets under “non-conviction based confiscation” laws, working in collaboration with banks, financial institutions, state governments, and law officers. In FY 2024-25, restitution of ₹15,261 crore was approved by courts in 30 cases.

Implications for Businesses

• Heightened FEMA Risk: Companies involved in cross-border trade, foreign investments, or international financing must reassess their FEMA risk exposure.
• Documentation & Reporting Readiness: With the risk of ED investigations increasing, ensuring robust documentation and timely reporting becomes more critical than ever.
• Compounding as a Strategy: The ED’s focus on compounding offers a pathway for remediation — early engagement may reduce penalties and avoid litigation.
• Governance Reboot: Organizations may need to strengthen their internal governance frameworks, including compliance teams and policies, to proactively manage FEMA-related risk.

How Sriya Enterprise Can Help?

At Sriya Enterprise, we are closely monitoring this development and its potential impact on businesses. Our expert FEMA advisory services include:

• Risk assessment and gap analysis for FEMA exposure
• Preparing or improving compliance frameworks
• Advising on compounding strategy and managing ED interactions
• Training export/import teams, finance, and legal functions
• Conducting mock audits and compliance health checks

Conclusion

The ED’s increased attention to FEMA violations signifies a turning point — not just as a legal risk, but as a governance imperative. Businesses that act proactively to strengthen their FEMA compliance frameworks will be best positioned to navigate enforcement pressures and build resilience for cross-border operations.

Source: ET News