HC Deb 11 June 1928 vol 218 cc634-46
53. Sir W. DAVISON

asked the Home Secretary whether he can now inform the House as to the result of his inquiry into the sour yes from which the Russian Soviet authorities finance subversive propaganda and political activities in this country; and what action he proposes to take to prevent similar activities on the part of the Soviet authorities in future?


asked the Home Secretary whether he can give the House any further information as to the transmission of money to Communist agents by a Russian bank in this country?


asked the Home Secretary if he has now received full information regarding the £10 bank notes found on ',he persons of men arrested as Irish gunmen; and if he has any evidence showing that, the notes had come directly to these persons from one of the Russian banks in other than the ordinary course of circulation and that the bank acted as an agent of the Soviet authorities and passed payment on their behalf?


In view of the obvious importance of Members being in a position to put supplementary questions, would it not be more convenient to read the answers now?


It is very long, but perhaps, with Mr. Speaker's assent, I could read it at the end of Questions.

At end of Questions


Can the right hon. Gentleman now give the answer?


It has been known for some years past that the Communist organisations in this country have been subsidised by gifts of money other than the subscriptions received from their own members. According to the Communist Party's own reports, in the first two years of its existence, after its formation in August, 1920, it received from outside sources £61,500 and from internal subscription £699 1s. 0d. In their cash account for the year ending 31st December, 1926, Workers' Publications Limited, the Company which publishes the "Sunday Worker," showed donations of £13,387 and for the year ending 31st December, 1927, donations of £9,899 and loans of £3,530. In 1925 I received information that the Communist International had allocated £16,000 to the Communist Party of Great Britain for that year, and that by the autumn they had already received £14,600. This and other information supported my suspicions that some, at all events, of the money disbursed by Communist organisations came from Russian sources and recent open statements of well-known Communists have made no secret of the fact that they-derive a large part of their finances from Russia.

During the past six or eight months, under my direction, the Commissioner of Police has been making inquiries to ascertain, if possible, the channel through which some of these funds passed, and as a result the police were able to furnish me with very valuable information indicating that money for various Communist organisations in this country had passed through the Moscow Narodny Bank, London. I need hardly say that the information supplied to me by the Commissioner of Police did not purport in any sense of the term to be an exhaustive catalogue of the moneys reaching these organisations, but it indicated with absolute certainty that the Moscow Narodny Bank was the channel through which during the past six or eight months large sums had passed to Communist organisations.

On the 19th April, 1928, a question was put to me by the hon. and gallant Member for Hitchin (Major Kindersley) as to whether, in view of the fact that Bank of England notes found on persons described as "Irish gunmen" arrested before Easter for being in illegal possession of firearms had been traced to a Russian banking institution in this country, I would make inquiries as to whether any of the moneys standing to the credit of Russian trading organisations in this country were being used in attempts to foment and organise revolutionary action in this country, and I answered that my hon. and gallant Friend's information was correct and that I was satisfied that Russian money was being used as suggested in the question.

Thereupon the two Russian banks trading in this country, the Bank for Russian Trade and the Moscow Narodny Bank, wrote to me challenging my statement and offering facilities for investigation. So far as the Bank for Russian Trade is concerned, the matter was a very small one and related to two £10 Bank of England notes which had been found in the possession of Michael Burke, alias Smith, when he was arrested on the 17th March, 1928. My inquiries have established definitely that these notes passed through the Bank for Russian Trade and the bank informed my representatives that on the 9th November, 1927, they despatched them by registered post, with other notes amounting in all to £9,800, to the Guarantee and Credit Bank, another Soviet institution, in Berlin. The subsequent movements of these two notes have not yet been traced. As regards the Moscow Narodny Bank, I had information from police sources of far more extensive transactions, in the course of which large quantities of .21 Treasury notes passed through the bank to various Communist organisations in this country. On the 19th April, 1928, the bank wrote to me as follows:—

"To the Home Secretary.


I have seen from this evening's Press that you suggested in Parliament some connection between the Russian Banks in this country and the operations of certain Irish gunmen.

As acting chairman of the Moscow Narodny Bank, Ltd., which has carried on the banking transactions of the Russian Co-operative movement in this country with English and other Banks for the past 12 years, I desire to state most emphatically that the Bank is solely engaged in ordinary banking and commercial transactions, and has to its knowledge had no dealings at ail with Irish or other gunmen.

All its transactions are audited twice yearly by Messrs. Deloitte, Plender, Griffiths and Co. The Bank is prepared immediately to give all facilities to this firm or to any other first-class firm of Accountants to satisfy themselves as to whom and in what circumstances all payments have been made by it at any period you please.

But the Bank has no knowledge of, and cannot, of course, take any responsibility for, what happens to banknotes after they have been paid across its counters in the ordinary course of business.

Yours faithfully,

(Sgd.) A. Gorituvirrcn."

I caused the following reply to be sent:

"A Gourevitch, Esq.,

The Moscow Narodny Bank, Ltd.


In reply to your letter of the 19th instant, I am directed by the Secretary of State to inform you that he has taken note of your assurance that the Moscow Narodny Bank is solely engaged in ordinary banking and commercial transactions, and observes with satisfaction that the Bank is prepared to give facilities for an investigation into the circumstances in Which particular payments may have been made by it.

Apart from the incident which gave rise to the recent Questions in Parliament, the Secretary of State has cognisance of certain recent transactions of your Bank which prima facie do not fall within the category of ordinary banking and commercial transactions, and he welcomes the opportunity of ascertaining the explanation which the Bank have to offer of the circumstances in which they were undertaken. He assumes from the terms of your letter that the Bank would be ready to afford the fullest facilities for inquiry into these matters, and he would suggest that the necessary particulars should be ascertained by members of the Home Department nominated by him to visit the offices of the Bank for this purpose. Any assistance which the auditors of the Bank can furnish in this connection would, of course, be welcomed.

I am, Sir,

Your obedient Servant,


To this suggestion the Bank agreed and I accordingly detailed two members of my staff to attend at the Bank and make certain investigations. The information furnished to me by the police proved to be extremely accurate and it was of the greatest assistance to my representatives in the course of their enquiry.

The abject of the enquiry being to ascertain the channels through which certain Treasury notes known to have passed through the Bank had reached various Communist organisations, my representatives began by asking from what source the Bank obtained its supplies of Treasury notes. They were assured that all supplies of £1 Treasury notes required by the Bank were obtained against cheques drawn on the Bank's account with Lloyds Bank, High Holborn. Their enquiries have established, however, that, in addition to the Treasury notes obtained as above, large quantitie3 of Treasury notes, amounting in all to aver £17,000 have been obtained by messengers of the Bank against exchanges of Bank of England notes at the Bank of England, Lloyds Bank, High Holborn, and the Midland Bank (Overseas Branch). They found that since the 4th Mai oh, 1927, no record of the numbers of Bank of England notes had been kept, by the cashier with the exception of new notes obtained from Lloyds Bank. These transactions, therefore, did not appear fully, as they should have done, in the records of the Bank, and it was on13 by degrees that information regarding these transactions was extracted from the cashier and the messengers of the Bank after repeated assurances that no supplies of Treasury notes had been drawn otherwise than against cheques from Lloyds Bank, High Holborn, or in small sums from the Bank of England. The purpose of these large exchanges of Bank notes for Treasury notes will presently appear.

From tie outset the information given by the Bank officials was that they were quite unable to connect any transactions of the Thank with the payments to Communist organisations of which my repro- sentatives furnished particulars. Their enquiries, have, however, brought to light two series of transactions, which were undoubtedly the channels through which money was supplied to Communist organisations during the period July, 1927, to April, 1928:

(1) The transactions of W. B. Duncan.

These transactions extended from the 27th October, 1927, to the 20th April, 1928, and were carried out by W. B. Duncan, a clerk in the Foreign Exchange Department of the Bank. Some of them at any rate were known to the Directors on the 20th April, since, as a result of a Committee of Inquiry appointed by them on that day—that is subsequent to the question in the House—Duncan was dismissed from the Bank. This fact was, however, not disclosed to my staff on their first visit to the Bank on Friday, the 27th April, and it was not until towards the close of their second visit on Monday, the 30th April, when they asked a direct question regarding a particular payment to Duncan, of which they found a record in the Counter Cash Book, that they were told of Duncan's dismissal a week before. It must have been obvious that Duncan's transactions were prima facie of the very kind which they had been appointed to investigate, and I do not understand why their attention was not drawn to them in response to their first inquiries.

Duncan's procedure was to sell large quantities of dollars to Foreign Exchange Brokers or to the Cashier of the Bank. He instructed the Moscow Narodny Bank messengers to take the Bank notes, received as a result of his sales to brokers, to the Bank of England, the Midland Bank or Lloyds Bank and exchange them for Treasury notes. This procedure continued from the 27th October, 1927, down to the 15th February, 1928, on which date he opened an account with the Moscow Narodny Bank. Into this account he paid the proceeds of his sales, and he obtained supplies of Treasury notes by immediate withdrawals against cheques. The total sum involved in Duncan's transactions from the 27th October, 1927, to the 20th April, 1928, amounted to at least 814,202. On the 20th April, as a result of the publicity given to certain allegations against the Bank, the Committee of Inquiry referred to above was set up by the Bank, and their attention having been called to Duncan's account they called upon him for an explanation. He was unable to give one that was satisfactory and was accordingly dismissed. My representatives saw Duncan, and his explanation to them was completely at variance with the facts. Of the real nature of his transactions there can be no doubt; for a considerable number of the Treasury notes received by Duncan from the Moscow Narodny Bank or its messengers have been definitely traced as having passed within a few days into the hands of the Communist party of Great Britain and its allied bodies.

(2) The transactions of F. Quelch and F. Priestley.

At various dates from the 5th July, 1927, to the 20th November, 1927, some £10,000 worth of £5 Bank of England notes, in batches of £500 to £2,000, were exchanged for £1 Treasury notes over the counters by the cashiers of the Bank at the request of two employes of Centrosoyus Limited, F. Quelch and F. Priestley. In addition bank notes to the value of £1,500 were paid into a joint account in the names of Quelch and Priestley, which my staff were told was for the purpose of clearing up the affairs of Mestkom (the Union of Soviet Employes). Priestley told them that the notes paid into the joint account were given to him by Alexander Squair, the Secretary of Mestkom. These payments were offset by large withdrawals of £1 Treasury notes, so that. in effect, these were also exchanges through the Bank. On the 9th and 20th September, 1927, Quelch sold dollars to the value of £2,666 to the cashier of the Moscow Narodny Bank, and received payment in £1 Treasury notes; and on the 13th October, 1927, through the medium of Priestley's personal account, he exchanged for £1 Treasury notes eight £100 notes, which were probably the result of a sale of dollars. The total sum involved in Quelch and Priestley's transactions from the 5th July to the 20th November, 1927, amounted to at least £13,796.

Lieut.-Commander KENWORTHY

Is that in addition to the £14,000?


Yes, it is an addition. A considerable number of £1 Treasury notes received by Quelch or Priestley from the Moscow Narodny Bank as a result of the exchanges described above were definitely traced, within a few days, to the Communist party of Great Britain and its allied bodies. After the inquiries of my representatives had elicited this information the Board of Centrosoyus called upon Messrs. Quelch and Priestley to give an explanation of their transactions. This they were unable to do satisfactorily, and they have accordingly been dismissed.

As stated above, Quelch and Priestley exchanged through the Moscow Narodny Bank large quantities of notes in batches of £500 to £2,000. My representatives ascertained the serial numbers of these notes to the extent of £10,330, and by this means they were able to establish definitely that they formed part of a sum of £20,000 handed personally by the assistant cashier of the Moscow Narodny Bank to Mr. Shannin, Commercial Attaché of the U.S.S.R. at the Soviet Embassy, on the 25th May, 1927 —immediately after the Arcos transactions—as follows: £4,000 in £1 Treasury notes and £16,000 in £5 Bank of England notes. This payment was debited to an account with the Bank of the Edel Metalle Vertriehs A.G. of Berlin upon which Mr. Shannin apparently had authority to operate. I have no doubt that even more of the original £16,000 worth of £5 notes were also exchanged by Quelch and Priestley, but to demonstrate this it would be necessary to trace individual notes, and my representatives have not thought it necessary to delay their report for this purpose. It is obvious that the £16,000 in £5 notes which Mr. Shannin, the Soviet representative, received in May, 1927, must have been held by some person whose name l have not been able to find—Shannin is, of course, no longer in the country—who released them to Quelch and Priestley in batches of from £500 to £2,000 as required.

I find, therefore, that through these three persons, Duncan, Quelch and Priestley, a total sum of not less than £27,998 was disbursed for Communist purposes during the period 5th July, 1927, to 20th April, 1928, and that at least £10,330 of this sum was derived from a payment of £5 Bank of England notes made through the Moscow-Narodny Bank to the Commercial Attaché at the Soviet Embassy in May, 1927.

A full report of my investigations has been communicated to the directors of the bank, and I have received from them a detailed statement upon the matter, in the course of which the directors, individually and collectively, disclaim all knowledge of the transactions in question. I ought to add that they have also dismissed further members of their staff who were implicated in this matter. I hope the House will permit me to add a public expression of my appreciation of the admirable manner in which these difficult and protracted inquiries have been carried cut by my representatives.


I suppose, Mr. Speaker, we should all like to see it print this very interesting revelation of the sources of the moneys of the Communist party in this country. May I ask the Home Secretary two questions: Is the only transaction involving the Baal, for Russian Trade that to which he has made reference?


indicated assent.


Secondly, does he propose to consider any steps that can be taken as a result of the revelations?


The Bank for Russian Trade is not implicated in this at all, except that two £10 notes passed from them to Germany and back. In regard to the second part of the question, I cannot give a decision now, particularly in view of the very strong detailed statement from the directors, who have assured the Home Office that they personally had no knowledge of these transactions, and that they have taken all the steps they possibly could to put the affairs of their bank in order. They have offered to allow me to make any further investigations at any time that I desire.


Apart from the responsibility of the directors of the bank, is the Home Secretary in a position to say whether the receipt of this money by the three persons named by him constitutes an illegal act against the interests of the State?


That is a matter upon which at present I cannot give a decision. I am taking advice.


Will the Home Secretary take advice and ascertain whether that action is legal or illegal, and, if illegal, will he, in the interests of the State and on behalf of the Government, take the necessary steps to deal with it?


This investigation has taken a great deal of my time for some months, and, now that I have completed it, I shall place the whole matter before my legal advisers, and I shall act upon their advice.


In the interval, if statements are made that there is coming to this country Russian money used ostensibly for the purpose of injury to the State, will he either test that right out or stop those making the statements?


It is not possible to stop anybody making statements, as the right hon. Gentleman knows; but, if I find that money is coming into this country which, in the opinion of my legal advisers is a crime, I shall, naturally, take proceedings.


Will the right hon. Gentleman give a fair opportunity for an explanation of his statement, which is nothing but a series of banking transactions by persons responsible in charge of certain accounts? Was the right hon. Gentleman aware, and if he was not aware, did he not see a publication in March last by the Communist party in this country, that the Communist organisation is an international organisation, of which there are 41 international sections, with a total membership of 1,700,000, and that each one of these members is paying into the central bank in Moscow. I, for one, as the right hon. Gentleman can see from this card, month after month, as a member of that organisation, pay in my contributions to our central fund, and it is shown on my card. With respect to all the figures which the right hon. Gentleman gave, is he in a position to deny that they are perfectly legitimate remittances from the central office of a political organisation for disbursement to the several sections in different parts of Europe, and does he find anything objectionable or illegal in such transactions Has he, further, investigated the fact that if he went into the records of the Co-operative Society's bank in this country, he might find millions of pounds drawn out and put in by the Labour party—another political organisation? Has the right hon. Gentle- man also taken care to investigate into a bank in Berlin and into a bank in Amsterdam, and will he not find out how the International Federation of Trade Unions in Amsterdam meet their expenses, of which more than three-quarters, nearly four-fifths, come from the British Trade Union Congress and are sent to Amsterdam—


The hon. Member's question is developing into a considerable speech.


Considering the length of the statement made by the Home Secretary, every sentence of which is a statement of certain portions of facts but not the whole facts, and which conveys a very gross misunderstanding of the whole situation, are we not entitled to put to the right hon. Gentleman the real purpose of the investigation, which he has missed? Has he made his investigations only to supply copy to the Conservative Press, or has he made them in the fair spirit of a Home Secretary?


Does not the Home Secretary's statement and the supplementary questions of the hon. Member for Battersea, North (Mr. Saklatvala) show clearly that all dealings between the Soviet authorities and this country, of any kind or description, should be put an end to, trade being used simply as a blind in order to spread propaganda?


That is a matter for debate. We must deal only with the actual question.


I have not proceeded on the lines suggested by the hon. Member for Battersea, North. I have proceeded as the Home Secretary should proceed, with a desire to obtain the truth. With regard to the details for which he has asked me, I must ask him to give notice.


Will the Home Secretary be willing to take the full details either from myself or from some other responsible person, as to the very simple nature and the perfect legal procedure of these accounts which he has read out, before he comes to any definite decision and conveys an impression to the country which is an entirely false impression?


If the hon. Member will supply me with the missing links, which he is probably able to do, I should be grateful.


Will the right hon. Gentleman make it a criminal offence for any person or any body to receive foreign money for subversive purposes?


Does the Home Secretary realise that there is a matter of some constitutional importance involved in this question? Is it his view that the sources of a political party's finances are subject to scrutiny by his officers at any time he thinks fit, or does that attitude merely apply to a party, which is only represented by one Member in this House?


Neither to the one nor to the other. I have no authority to inquire into the accounts of any political party, whether represented by one or by 100 Members in this House, but when foreigners, aliens, are trading here, I have certain rights and in pursuance of those rights I am entitled to ask them to give me certain information, which they gave me very freely and very willingly.


Would the right hon. Gentleman dare to investigate the funds of the political party of which I am chairman in the way he has investigated these?


If I thought it desirable, I should dare to do anything.


Does the right hon. Gentleman assert that he is above the law of the land?


Not at all. As the hon. Gentleman knows perfectly well, I should always act within the law. All that I meant to imply was that I was not frightened of the hon. Member.

Lieut.-Commander KENWORTHY

The Home Secretary mentioned three names. Is there anything in the investigations and in the Report that implicates either the Moscow Bank or the Russian Bank for Foreign Trade or the Bank of Russian Trade in any way? Have they only carried out ordinary banking transactions, and is there any proof that they were aware of the use that was made of these particular moneys?


I will admit that my statement was very long, hut, if the hon. and gallant Gentleman reads it to-morrow, he will see that I made cer- taro comments about the absence of knowledge on the part of the directors. But, on the other hand, I accept the statement made by the directors that they were not cognisant of what was going on.

Several HON. MEMBERS rose


I think this Debate had better be adjourned till another day. There is plenty of opportunity for further question: to be put down.


On a point of Order. Is not the main point of this being lost sight of in that certain people—[HON. MEMBERS: "Order!"] Mr. Speaker will tell me if it is a point of Order. Evidently, there are too many competitors for the new Speakership. Is not the whole point being lost sight of, in that three individual names were mentioned to whom moneys were paid out, and is net the main question before the House, in relation to that question at any rate, what is being done, or is likely to be done, if those three individuals have been using that money for any ulterior purpose?


That is not a point of Order.


On a point of Order. I desire your ruling, Mr. Speaker. Would it be in order for me now to ask permission to raise this question on an Adjournment, as being a very important question which requires more explanation than what we have got?


Certainly, the hon. Member can raise it at Eleven o'Clock in the evening.


May I give notice to raise it?


Which day?


The most convenient time, when we may have more than half an hour.