Rep. Benjamin S. Rosenthal (D-N.Y.) said yesterday that American banks probably are failing to report to the Commerce Department thousands of checks from Arab banks that bear a statement that the checks are not negotiable in Israel.
The Commerce Department has ruled that checks carrying such inscriptions are reportable as "boycott requests" under the Export Administration Act, and the Commerce Department official in charge of administering the anti-boycott rules said he believes banks are complying with the law.
Boydan Denysyk said his agency has received "thousands" of reports a year from U.S. banks. "The banks are complying to the extent we know," he said.
Theodore J. Jacobs, general counsel to Rosenthal's commerce, consumer and monetary affairs subcommittee, said, "We're not charging that anyone has done anything wrong," but that Commerce Department officials estimate U.S. banks process 40,000 to 50,000 such checks annually and that at best about one-half are reported.
In response to a letter from Rosenthal, officials of most of the nation's biggest banks said the legend on the checks has no significance, and many said they have not to their knowledge processed a check with an inscription that prohibited the check from being cashed in Israel.
However, most of the banks said that because they process checks automatically, it would be nearly impossible to detect such a check before cashing it.
Chemical Bank said it did not believe the inscribed checks constituted a "boycott request" under Commerce Department regulations. Bankers Trust said it has occasionally encountered such checks, and after consulting with the Commmerce Department, has forwarded them to the anti-boycott office of the agency.
Most of the checks in question are drawn on private banks in Kuwait, Qatar and Bahrain, but they are paid on deposits the banks have with U.S. banks. For example, a Kuwaiti importer might pay an American supplier for goods shipped. The importer's bank would issue a check in U.S. dollars drawn on its deposits at, say, Chase Manhattan. The likelihood of the check being processed in Israel is virtually nil.