Money-Laundering Inquiry Touches Vatican Bank

By Rachel Donadio
New York Times
September 21, 2010,%28Q25Q7BQ2A%28mqQ51Q25Il

Italian financial police officers in front of St. Peter's Square in Rome. The Vatican bank's top two officials face a money-laundering investigation.

ROME —Italian monetary authorities officials said Tuesday they had impounded $30 million from the Vatican bank and placed its top two officers under investigation in connection with suspected money laundering. The announcement amounted to another potential storm confronting the papacy of Benedict XVI, who is still struggling with the effects of a priestly abuse scandal.

In a statement, the Vatican expressed “perplexity and surprise” that the bank’s chairman, Ettore Gotti Tedeschi, and its general director, Paolo Cipirani, had been placed under investigation. It added that it had the “greatest trust” in the two men and had been working for greater transparency in its finances.

The investigation is the first into the Vatican bank since the early 1980’s, when it was famously implicated in the collapse of an Italian bank whose director, nicknamed “God’s banker,” was mysteriously found dead, hanging from Blackfriars Bridge in London.

Italian authorities have historically shied away from investigating the Vatican's finances - owing as much to a sense of deference to the church as to the complex relationship between Italy and the Holy See, a sovereign state.

"The era of omerta is over," said Gianluigi Nuzzi, the author of the 2009 best seller "Vaticano S.p.A.," using the Italian term for the code of silence. S.p.A. stands for joint-stock company in Italian.

The investigation was undertaken because of a new practice by the Bank of Italy. Aimed at preventing the financing of terrorist groups and money laundering, it requires all foreign banks operating in Italy, including the Vatican bank, to provide detailed information about the origins of the money they transfer.

Officials said Mr. Gotti Tedeschi and Mr. Cipriani were under investigation for having failed to adequately explain the origins of funds transferred from one account held by the Vatican bank to two others it holds. They said that the seizure of money was preventive and that neither man had been formally charged or placed under arrest. In the coming months, a judge is expected to rule on whether to proceed with the investigation.

The investigation could potentially blight the record of Mr. Gotti Tedeschi, a well-respected banker and a former head of operations in Italy for Banco Santander in Spain. He was brought in by the pope last year to help make the finances of the Vatican bank more open. The private bank, formally known as the Institute for Religious Works, manages funds aimed at charitable activities.

The new investigation appeared more mundane than the 1980s inquiry, but it appeared to be potentially no less explosive.

Officials said they had opened the investigation on Monday after the Bank of Italy, adhering to anti-money-laundering directives issued by the European Union, alerted them to two suspicious transfers on Sept. 6 from an account held by the Vatican bank at a Rome branch of Credito Artigiano S.p.A., a bank based in Northern Italy.

One transfer of $26 million was directed to an account held by the Vatican bank at a Frankfurt branch of the American bank J. P. Morgan, and a transfer of $4 million was directed to an account it held at a Rome branch of Banca del Fucino.

Magistrates in Rome opened the investigation because the account from which the funds were sent was in Rome.

Last year, the same magistrates opened up a broader investigation into Italian bank accounts thought to be receiving transfers from the Vatican bank.

In both cases, investigators bypassed the sovereignty of the Holy See by looking into Italian accounts that had received funds from the Vatican Bank.

In its statement, the Holy See expressed "perplexity and surprise at the initiative taken by the Rome court, considering that all the necessary data were already made available to the competent office at the Bank of Italy and similar operations are ongoing with other Italian credit institutions."

It added that the funds were transfers originating within the Vatican bank itself, and that the bank was working to join the "white list" of the Organization for Economic Cooperation and Development, the highest ranking on its transparency charts.

In the early 1980s, the Vatican bank was involved in a scandal at an Italian bank, Banco Ambrosiano, which collapsed after the disappearance of $1.3 billion in loans to companies in Latin America. The Vatican bank denied wrongdoing but paid $250 million to Banco Ambrosiano's creditors.

The new investigation appeared to show a more aggressive stance by the Bank of Italy, a player in the complex power dynamics of contemporary Italy. "It has a central role, whereas before it had a subaltern role," said Mr. Nuzzi, the author.


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