SOE's Foreign Currency Transactions

Abstract

This article provides an account of the work of the Finance (D/Fin) Directorate of the Special Operations Executive in acquiring foreign currency for use by the British intelligence community and the service departments during the Second World War. This activity earned SOE the gratitude of the Bank of England, which had experienced mounting difficulties in the acquisition of such currency. SOE's involvement in such financial operations also played a significant part in Lord Selborne's response to the JIC enquiry into SOE of December 1943. This article suggests that the significance of these financial operations is missed when SOE is examined through a geographical, country section, perspective, and argues that greater attention needs to be given to SOE's non-geographical sections.

Notes

William Mackenzie, Secret History of SOE (London, 2000) p.722; Ian Dear, Sabotage and Subversion: Stories from the Files of the SOE and OSS (London, 1996) Ch.13; Richard Aldrich, Intelligence and the War against Japan (Cambridge, 2000) pp.286–7; Robert Bickers, ‘The Business of a Secret War: Operation “Remorse” and SOE Salesmanship in Wartime China’, Intelligence and National Security 16/4 (2001) pp.11–37; Charles Cruickshank, SOE in the Far East (Oxford, 1983) Ch.9. Bickham Sweet-Escott briefly raised the subject, noting that it was the ‘fertile brain’ of Walter Fletcher that saw SOE's Force 136 engage in currency transactions: ‘no C.B.E. was better earned than Walter Fletcher’s’. Baker Street Irregular (London, 1965) p.254.

Quoted in A.P. Dobson, The Politics of the Anglo-American Special Relationship 1940–1987 (Sussex, 1988) pp.20–22.

R.S. Sayers, The Bank of England 1891–1944 Vol. 2 (London, 1976) pp.588–9.

A Bank in Battledress: Being the Story of Barclays Bank (Dominion, Colonial and Overseas) during the Second World War 1939–45 (London 1948) p.10. For further information on the origins of the Defence (Finance) Regulations see The National Archive, United Kingdom, Public Record Office (hereafter PRO). T/231/188.

For further details of the establishment of the Committee, see PRO. T196/1.

Bank of England Archive (hereafter BoE), C43/853, Memorandum: Provision of Foreign Currency Notes for Government Departments, 6 January 1942. Further Bank of England papers reveal contacts with both SOE and SIS, while the identity of the third ‘special friend’ remains unclear, although was probably MI9. Foot and Langley note that in the summer of 1940 MI9 was allocated ‘up to £5,000 in foreign currency, most of which was spent in providing aircrew with purses containing about £12 a man among their other escape needs. More was provided when it was needed’. M.R.D. Foot and J.M. Langley, MI9: Escape and Evasion 1939–1945 (London, 1979) p.39.

Some idea of the money involved can be found in papers detailing the purses used by Combined Operations. These purses were colour coded: Red (2,000 French francs); Yellow (1,000 French francs, 350 Belgian francs, 20 Dutch guilder); Black (100 Norwegian kroner, 150 Danish kroner); Mauve (105 Norwegian kroner); Green/Blue (1,000 French francs). PRO. WO208/3267, ‘Contents of Purses and Aid Boxes’, January 1943.

At this point, the Bank strongly advised the War Office to make a request to the Bank to ‘obtain now any that happen to be available’. The War Office complied and made a request for 26,000 kroner. Charles Key to V.C. Tong, 31 August 1940. BoE. C43/429. A note scribbled on the top of the letter notes that ‘No opportunity of obtaining these arose’.

Memorandum: Provision of Foreign Currency Notes for Government Departments, 6 January 1942. BoE. C43/853.

‘Requirements & Foreign Currency Notes for Special Purposes’, 13 May 1942. BoE. C43/853.

Secret Memorandum, Dealing & Accounts Office, 1 June 1942. BoE. C43/853.

Secret Memorandum, Dealing & Accounts Office, to Mr Gurney, Mr Beale, 30 June 1942. BoE. C43/853.

Ibid.

PRO, HS8/344, D/FIN to CD, 29 Oct. 1940.

PRO, HS8/130, Draft letter from The Minister to Sir A Sinclair, 12 May 1942.

PRO, HS8/1017, D/FIN to DCD, 22 May 1942.

PRO, HS9/1524/7, CD to SO, 23 June 1942.

PRO, HS8/1016, ‘Note of a conversation with CFC at the Bank of England, 04.06.42’; ‘Notes of talks at the Treasury, 02.06.42.'

BoE, C43/853, Secret Memorandum, Dealing & Accounts Office, to Mr Gurney, Mr Beale, 30 June 1942.

‘Foreign Currencies: Review of S.O.E.'s Activities’, 4 July 1943, pp.1–2. PRO. HS8/354. The meeting was attended by representatives of SOE, SIS, the Treasury, Foreign Office and War Office.

Memorandum: Foreign Currency Notes Purchased Abroad, 25 July 1942. BoE. C43/853.

‘Foreign Currencies: Review of S.O.E.'s Activities’ (note 16) p.3.

Ibid.

Ibid. p.4.

Lithiby to Fraser, 19 April 1943. BoE. C43/853.

‘Foreign Currencies: Review of S.O.E.'s Activities’ (note 16) pp.4–5.

Ibid., p 2.

Statements of Accounts for the months ending 20 February 1942, 20 March 1942, 20 April 1942, 20 May 1942, 20 July 1942 and 20 August 1942. PRO. HS6/958.

HA to H, 8 June 1942. PRO. HS6/958.

HA to A/DP (Copy to D/FIN and A/DW), 2 July 1942. PRO. HS6/958.

Ibid.

D/Fin to HM, 6 August 1942; HA to D/IP, 24 July 1942; HM to D/Fin, 28 July 1942; HY to H, 4 July 1942; HY to D/Fin (Copy to H), 8 July 1942. PRO. HS6/958.

HY to D/Fin (Copy to H), 8 July 1942. PRO. HS6/958. The need for further firms soon became apparent as the arrangement entered into with Grahams ran into difficulty. Waite warned London that ‘Grahams are reluctant to give us any more money because of the delay in effecting the sterling payment of the last £10,000’. He noted that he would ‘point out that it was really the Bank of England which was the bugbear but that all future transactions should be effected promptly’, and appeared confident that he would be able to ‘talk them round’. HY to H, 19 August 1942. PRO. HS6/958.

HY to D/Fin, 31 July 1942. PRO. HS6/958.

DF Section was ‘entrusted with the clandestine sale, in the Peninsula, of diamonds, in order to obtain large sums of foreign currency’. See ‘Schedule “H”: Clandestine Communications’, p.7. PRO. HS7/163. ‘Clandestine Communications Section, Resume of Activities – 1st Jan to 31st Dec 1943’. PRO. HS8/192. However, the sale of diamonds was fraught with difficulties, for while they were easier to smuggle than cash, they required ‘the recruiting of a neutral who is prepared to carry the stone and can be trusted by us to sell it at a fair price and deliver the proceeds to a cut out address’. Such agents were difficult to find, and ‘the fluctuation of the market coupled with the difference between official and black market rates of exchange’ meant it was difficult to decide on ‘a reasonable price, acceptable to both parties of the transactions’. ‘Creation and Organisation of Clandestine Communication Section’, p.33. PRO. HS8/151.

‘Creation and Organisation of Clandestine Communication Section’ (note 31) pp.31–2. PRO. HS8/151. The account of DF Section activity noted that the transfers took place ‘by registered post between two neutral countries’, the money being insured and ‘therefore should it be lost, stolen or stopped by the censorship the loss is borne by the insurance company and not by S.O.E.’ Ibid. p.33.

Upon receipt of Mackenzie's first outline for his History of SOE (note 1), Venner complained that the work of his Finance Directorate had not been properly acknowledged. He wrote to Mackenzie, noting that although discussions with the Treasury had arrived at the conclusion that ‘no reference whatever should be made to the amount of expenditure from the Secret Vote’ reaching SOE, he was keen to ensure that this would not mean the total absence of SOE's financial dealings from the main narrative: ‘I think that covert financial operations are just as much operations as, for instance, political subversion and should therefore be included in the body of the History rather than in an Appendix’. Venner rewrote Mackenzie's outline paragraph on finance since he felt it ‘desirable to include some account of the financial operations (Foreign Exchange transactions etc.) carried out by the Organisation over a long period. These lie somewhat apart from S.O.E.'s normal work but they were of great importance to many Departments’ (PRO. HS8/430, D/FIN to Mackenzie, 27 November 1945). Venner's suggestions were not taken on board. Although Venner intended to write a brief history of the directorate to guide Mackenzie's History, the pressure of other work appears to have prevented him from fulfilling this task (D/Fin to D/His.1, 12 Dec. 1945. PRO. HS7/163).

D/Fin to SO (through CD), copies to V/CD, A/CD, L/WAD, 4 July 1943. PRO. HS8/354.

PRO. HS8/354, D/Fin to AD/S.W, 29 December 1943. PRO. HS8/354.

M.R.D. Foot, SOE in the Low Countries (London, 2001) pp.204–5.

‘S.O.E. Operations in Europe: Memorandum by the Minister of Economic Warfare’, 11 January 1944. PRO. HS6/749.

‘For incorporation in a letter being prepared by D/Plans to be written by S.O. to either Chiefs of Staff or Prime Minister in answer to a J.I.C. paper’, 8 January 1944. PRO. HS8/354. The paper included an up-to-date record of the amounts of foreign currencies obtained: 85 million French francs; 2¾ million Dutch guilder; 2½ million Danish kroner; 2½ million Norwegian kroner; 7¾ million Spanish pesetas; 4¼ million German Reichsmarks; ½ million Swedish kroner; ½ million Argentine pesos. Venner concluded by emphasizing that ‘Having regard to the fact that these notes have to be for the most part in small denominations, the difficulties of obtaining them clandestinely and ensuring their safe delivery by secret means to this country cannot be too strongly stressed’.

Annex: Comments on J.I.C.(43) 500 (0) and 517 (0), 11 January 1944. PRO. HS6/749.

D/Fin to CD, 14 January 1944. PRO. HS8/354.

Ibid.

D/Fin to CD (Copy to A/CD (for L/WAD)), 3 July 1944. PRO. HS8/354.

‘S.O.E. Activities: Summary for the Prime Minister. Quarter: April to June 1944’. PRO. HS8/899.

Ibid. ‘July to September 1944’.

Ibid. ‘October to December 1944’.

M.R.D. Foot, SOE: An Outline History of the Special Operations Executive 1940–1946 (London, 1999 edn.) pp.360–61.

Ibid. p.328; Mackenzie, Secret History of SOE (note 1) p.324.

Neville Wylie, ‘“ An Amateur Learns his Job?” Special Operations Executive in Portugal, 1940–42’, Journal of Contemporary History 36/3 (2001) p.441; David Messenger, ‘Fighting for Relevance: Economic Intelligence and Special Operations Executive in Spain, 1943–1945’, Intelligence and National Security 15/3 (2000) p.42.

E. O'Halpin, ‘“ Toys” and “Whispers” in “16-land”: SOE and Ireland, 1940–1942’, Intelligence and National Security 15/4 (2000) pp.1–18; E.D.R. Harrison, ‘British Subversion in French East Africa, 1941–42: SOE's Todd Mission’, English Historical Review 114/456 (1999) pp.339–69; E.D.R. Harrison, ‘The British Special Operations Executive and Poland’, The Historical Journal 43/4 (2000) pp.1071–91; Gerald Steinacher, ‘The Special Operations Executive (SOE) in Austria, 1940–1945’, International Journal of Intelligence and Counter Intelligence 15/2 (2002) pp.211–21. The combination of geographical area with a broader theme can be seen in Ian Herrington's ‘The SIS and SOE in Norway 1940–1945: Conflict or Co-operation?’, War in History 9/1 (2002) pp.82–101, while Philip H.J. Davies has examined the demise of SOE and its incorporation into SIS: ‘From Special Operations to Special Political Action: The “Rump SOE” and SIS Post-War Covert Action Capability 1945–1977’, Intelligence and National Security 15/3 (2000) pp.55–76.

Richard Aldrich, ‘“ Grow Your Own”: Cold War Intelligence and History Supermarkets’, Intelligence and National Security 17/1 (2002) p.148.