Update 1-italian Court Keeps Block on Vatican Bank Funds

October 20, 2010

ROME, Oct 20 (Reuters) - An Italian court on Wednesday rejected a request by the Vatican Bank to lift a block on 23 million euros ($31.66 million) of funds frozen as part of an investigation into suspected money laundering.

The Vatican said it had heard of the original decision by the court to block the funds with "amazement". The bank's directors expected to be able to clarify the matter fully with authorities.

"This is a formal problem of interpretation," it said in a statement on Wednesday.

Last month, Rome magistrates put the two top officials of the bank, formally known as the Institute for Works of Religion (IOR), under investigation and froze 23 million euros of its funds in two Italian banks over suspicions of money laundering.

The Vatican says the fund movements were no more than internal bank transfers and it denies any wrongdoing by the IOR.

Judicial sources said the Rome court had rejected the Vatican Bank's request to have the funds released. Investigators had widened their investigation into the bank's operations.

They are looking into the source of cheques for 300,000 euros deposited in an IOR account at a branch of UniCredit (CRDI.MI) and a withdrawal of 600,000 euros from an account with Intesa SanPaolo (ISP.MI).

The prosecutors have questions over the beneficiary and purpose of the withdrawal, which was indicated only vaguely in the original documentation, the sources said.

The Bank of Italy's financial controls unit had been notified about both operations and had passed the information on to Rome prosecutors.

The IOR mainly manages funds for the Vatican and religious institutions around the world, including charity organisations, religious orders and Catholic hospitals. Reporting by Rome Newsroom; Writing by James Mackenzie; editing by Ralph Boulton)


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