Vatican Bank Again in the Eye of the Storm after Probe

By Catherine Jouault
September 22, 2010

A panoramic view of St. Peter's Square in Vatican City

The Vatican's bank found itself fending off fresh accusations of wrongdoing Wednesday after Italian prosecutors opened a probe against senior executives for violating money laundering norms.

The investigation, launched against the bank's president and another manager, risks casting another shadow on the Vatican after the priest paedophilia scandal that has rocked the Catholic Church around the world.

And it is a fresh blow to the bank itself, whose reputation was badly hit by the 1980s Banco Ambrosiano scandal.

IOR president Ettore Gotti Tedeschi has been accused of violating laws put in place in 2007 that have tightened rules on disclosure of financial operations to the Italian central bank in a bid to stamp out money laundering.

Gotti Tedeschi, whose appointment in 2009 was greeted as a move towards greater transparency, said he was "profoundly humiliated and mortified" by the probe.

He previously Spanish banking giant Santander's representative in Italy and has the reputation of being an authority on the ethics of finance.

Prosecutors have also ordered the seizure of 23 million euros (30 million dollars) belonging to the the Istituto per le Opere di Religione (IOR).

The Vatican on Tuesday said the required information was already in the hands of the Bank of Italy and said it was "perplexed and astonished" at the investigation.

"The Holy See's authorities' evident willingness to be fully transparent regarding IOR's financial operations is well known," it added.

Gotti Tedeschi said IOR was being attacked just as it was doing its best to adhere to internationally accepted transparency standards.

"I am doing exactly what I was asked to do (when appointed), to make every IOR operation more transparent, all the time," Gotti Tedeschi told daily Il Giornale.

Scaramuzzi agreed, arguing that the current investigations could in any way be compared to the 1980s bank scandal under John Paul II.

"This pope has begun to change the rules of financial management at the Vatican," Scaramuzzi said.

In the 1980s, the Istituto per le Opere di Religione (IOR) was at the center of a banking scandal when Italian bank Banco Ambrosiano collapsed in 1982 amid accusations of links to organised crime and political militancy.

Ettore Gotti Tedeschi

The IOR was its main shareholder.

The current probe was launched after the financial intelligence office at the Bank of Italy noticed two IOR operations it deemed suspicious.

The first one was a transfer of 20 million euros to JP Morgan Frankfurt, while the other one was a three-million-euro transfer to Italian bank Banca del Fucino, Italian media reported.

Gotti Tedeschi says the operations were simply transfers of money between different IOR bank accounts in order to buy German bonds.

For Gianluigi Nuzzi, author of a best-selling book on the Vatican's finances, the news came as no surprise.

"It's inevitable that the IOR finds itself embroiled in these scandals as long as it does not adhere to anti money-laundering norms," told AFP.

The probe showed the Bank of Italy had recently been paying more attention to the IOR, he added.

"There has been an important change at the Bank of Italy on the Vatican, it put more focus and more attention on the IOR's activity" in the past few years after Mario Draghi was named at the head of the Bank of Italy in 2005.

The Bank of Italy this month asked Italian banks to impose stricter controls on IOR operations, reminding them it should be dealt with as a non-European Union bank.

But the Vatican said Tuesday that the IOR, which manages bank accounts for religious orders and Catholic associations, was working with the Bank of Italy and international organisations to adhere to tighter transparency standards.

"IOR authorities have long worked and met with the Bank of Italy and with the competent international organisations" to place the Holy See on a money laundering and terrorism white list, the Vatican said.

"The timing is unfortunate and these revelations come right after the pope's successful trip to the United Kingdom," Vatican expert Iacopo Scaramuzzi told AFP.

British commentators and the Vatican hailed last weekend's trip to Britain, during which Pope Benedict XVI met with sex abuse victims, as a success.


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