Paper Trail of Nazi Gold Leads To US and Canadian Banks

Jewish leaders find records of transactions between Switzerland and Portugal assisted by N. Americans

Previously secret World War II documents show that Canada's central bank and the Federal Reserve Bank of New York may have aided Hitler's war machine by transferring gold wealth taken from Nazi-occupied countries.

Investigators for the World Jewish Congress found the gold-transfer records recently among newly declassified documents in the National Archives in Washington. It is uncertain whether bank officials in the US or Canada knew of the gold's tainted origin.

But it is the first time that recently exposed Swiss collaboration with the Nazis has been found to have North American links.

How gold wealth was transferred

No gold was physically moved. Rather, the Canadian and US banks assisted in paper transfers of gold holdings from Switzerland to Portugal. In one June 1942 transaction, the Canadian bank helped in the transfer of 4.02 metric tons of gold. The practical effect, say World Jewish Congress officials, was to enable a "neutral" Portugal to continue trading with Germany despite Allied warnings not to do so.

From the Bank of Canada's perspective, all it was asked to do was a paper transaction transferring ownership of four tons of gold, held in Canadian vaults, from Switzerland to Portugal, says Elan Steinberg, executive director of the World Jewish Congress. While the swaps may have been legal, he says deeper moral questions should be asked now.

"This was the height of World War II and we should ask: Did they turn a blind eye? Should they have known?" he wonders. "Those are just as important questions to answer."

Not unlike the "laundering" of drug-profit money today, gold looted by the Germans and held by the Swiss came out the other end of the process looking legitimate and untainted. "Making dirty assets into clean assets was precisely the point of this operation," Mr. Steinberg says.

"The aim of this particular transaction was to camouflage the fact that looted goods were being transformed. With a few strokes of the pen the bad guys won all around," he adds.

Banks respond

Gordon Thiessen, Canada's central banker, was advised of the alleged "laundering" last week in a letter by the Canadian Jewish Congress. In a July 11 response he promised a full investigation. The Federal Reserve Bank of New York also said its investigations into the bank's war-time transactions were ongoing.

A spokesman for the Federal Reserve Bank of New York, Dahlia Harmon, said the bank has been "aggressively investigating activity during that war period" but that the investigation was "not specific to that transaction."

"That's just one of many transactions that took place during that time," she said. "We're taking an overall look."

But the transaction with Canada may have been only the proverbial tip of the iceberg, Mr. Steinberg says. In fact, it may answer "one of the great mysteries of World War II," which he says is the unanswered question of how Portugal, one of the world's poorest nation's at the start of the war, somehow amassed tons of gold.

As of Jan. 1, 1939, Portugal had no gold in the Federal Reserve Bank of New York. Yet by the time the war had ended in October 1945, Portugal had amassed 257 tons of gold.

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