File No. 763.72112/5251
[Enclosure]
Circular Letter from the Governor of the
Federal Reserve Board (
Harding) to the Federal Reserve Banks
Washington,
May 10, 1917.
Dear Sir: The board is in receipt of a
letter from the Counselor for the Department of State, calling
its attention to the desirability of guarding against transfers
of banking credits to neutral countries for account of alien
enemies, and against the use of domestic credits for similar
purposes.
The board is informed that the State Department is not concerned
in the ordinary commercial transactions and routine bank
accounts of aliens of whatsoever nationality, resident in the
United States, with banks situated therein. It is suggested by
the Department, however, that each banker doing business in this
country should scrutinize with particular care such accounts as
may be held by his bank for any resident alien enemy, and in the
event any suspicious transactions occur in connection with such
accounts, that they be reported immediately to the board for
transmission to the proper department.
The transactions which are interesting to the State Department
may be divided into three classes:
- (1)
- Foreign exchange transactions between banks in this
country and banks in neutral countries in Europe;
- (2)
- Ordinary banking transactions such as the obtaining of
credits by alien enemies resident in the United
States;
- (3)
- Banking transactions between this country and Mexico,
or Central American and South American countries.
The State Department is especially interested in preventing all
transfers of money by cable, by draft, or by shipments of
currency or otherwise to neutral countries in Europe for the
account of alien enemies.
It is, of course, difficult for a bank to determine offhand
whether or not a transfer is for the account of alien enemies,
when it is asked by an individual or corporation in this country
to make a transfer to a bank in a neutral country.
The board is advised, however, that the State Department is
anxious that bankers throughout the country should be warned
that they should scrutinize most carefully every application
made to them involving the transfers of funds to neutral
European countries, which transfers seem intended to give aid to
the enemies of this country, either directly or indirectly.
The board is further advised that the State Department is
interested in banking transactions between this country and
Mexico or other Latin American countries, as there is some
evidence in its possession that alien enemies operating either
as individuals or through the instrumentality of an American
corporation, or otherwise, are desirous of fomenting trouble
between this country and other Republics of this hemisphere, and
in order to further their plans they must rely upon financial
assistance through the form of credits opened in their behalf in
this country. It is, of course, true that many accounts held by
banks in this country for the benefit of alien enemies resident
in countries adjacent to the United States, are ordinary
commercial accounts, and up to the present time the State
Department has disclaimed any disposition to interfere with the
free operation of such accounts, being interested only in such
transactions as may appear to the bankers who are requested to
facilitate the same as being of a suspicious character.
The board is of the opinion that, in view of your intimate
contact with member banks in your district, you are in a
position to secure their cooperation in scrutinizing and
supervising financial transactions made or attempted to be made
for the benefit of alien enemies. Reports of suspicious
transactions coming to the notice of banks should be made to the
board by wire, in order that the officials of the proper
department may be advised and immediately make
investigations.
There are, of course, many trust companies, State banks, and
private bankers with which your bank has no intimate
relationship. The board believes, however, that if an appeal
should be made to
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these banks and bankers, they would readily observe such
precautionary methods as you may, with the approval of the
board, ask your member banks to comply with. Express companies
and telegraph companies doing a banking business in transmitting
currency or credits by express or by wire should also be asked
to cooperate on the lines suggested above.
The attention of the Comptroller of the Currency has been called
to this letter and he has been asked to enlist the cooperation
of the large force of national bank examiners working under his
supervision. It is believed that their assistance will be of
great value in securing the information desired and in further
enlisting the cooperation of the banks with which they come in
contact in their work. You are requested to urge the banking
departments of the States in your district to cooperate in the
same manner through their bank examiners.
It is requested by the board that a copy of this letter be sent
to all banks and trust companies in your district, in order that
they may understand that, while innocent transactions of a
domestic character with alien enemies are unobjectionable, no
business of a nature calculated to give aid or comfort to the
enemy directly or indirectly will be countenanced.
Very truly yours,
[No signature indicated]
