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Vatican bank scrutinized in money-laundering case
$30 million in assets seized
VATICAN CITY | This is no ordinary bank: The ATMs are in Latin. Priests use a private entrance. A life-size portrait of Pope Benedict XVI hangs on the wall.
Nevertheless, the Institute for Religious Works is a bank, and it’s under harsh new scrutiny in a case involving money-laundering allegations that led police to seize $30 million in Vatican assets in September. Critics say the case shows that the “Vatican Bank” has never shed its penchant for secrecy and scandal.
The Vatican calls the seizure of assets a “misunderstanding” and expresses optimism it will be quickly cleared up. But court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws “with the aim of hiding the ownership, destination and origin of the capital.” The documents also reveal investigators’ suspicions that clergy may have acted as fronts for corrupt businessmen and the Mafia.
The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew $860,000 from an Italian bank account but ignored bank requests to disclose where the money was headed.
The allegations of financial impropriety could not come at a worse time for the Vatican, already hit by revelations that it sheltered pedophile priests. The corruption probe has given new hope to Holocaust survivors who tried unsuccessfully to sue in the United States, alleging that Nazi loot was stored in the Vatican Bank.
Yet the scandal is hardly the first for the centuries-old bank.
In 1986, a Vatican financial adviser died after drinking cyanide-laced coffee in prison. Another was found dangling from a rope under London’s Blackfriars Bridge in 1982, his pockets stuffed with money and stones. The incidents blackened the bank’s reputation, raised suspicions of ties with the Mafia, and cost the Vatican hundreds of millions of dollars in legal clashes with Italian authorities.
On Sept. 21, financial police seized assets from a Vatican Bank account at the Rome branch of Credito Artigiano SpA. Investigators said the Vatican had failed to furnish information on the origin or destination of the funds as required by Italian law.
Prosecutors alleged the Vatican ignored regulations that foreign banks must communicate to Italian financial authorities where their money has come from.
All banks have declined to comment.
In another case, financial police in Sicily said in late October that they uncovered money laundering involving the use of a Vatican Bank account by a priest in Rome whose uncle was convicted of Mafia association.
Authorities say some $331,000, illegally obtained from the regional government of Sicily for a fish-breeding company, was sent to the priest by his father as a “charitable donation,” then sent back to Sicily from a Vatican Bank account using a series of home banking operations to make it difficult to trace.
The prosecutors’ office stated in court papers last month that while the bank has expressed a “generic and stated will” to conform to international standards, “there is no sign that the institutions of the Catholic church are moving in that direction.”
It said its investigation had found “exactly the opposite.”
Legal waters are murky because of the Vatican’s special status as an independent state within Italy. This time, Italian investigators were able to move against the Vatican Bank because the Bank of Italy classifies it as a foreign financial institution operating in Italy.
However, in one of the 1980s scandals, prosecutors could not arrest then-bank head Paul Marcinkus, an American archbishop, because Italy’s highest court ruled he had immunity.
Archbishop Marcinkus, who died in 2006 and always proclaimed his innocence, was the inspiration for Francis Ford Coppola’s character Archbishop Gilday in “Godfather III.”
The Vatican has pledged to comply with EU financial standards and create a watchdog authority.
“I don’t trust them,” he said. “After the previous big scandals, they said ‘we’ll change’ and they didn’t. It’s happened too many times.”
He said the structure and culture of the institution is such that powerful account holders can exert pressure on management, and some managers are simply resistant to change.
The bank chairman is Ettore Gotti Tedeschi, also chairman of Banco Santander’s Italian operations, who was brought in last year to bring the Vatican Bank in line with Italian and international regulations.
Mr. Gotti Tedeschi has been on a very public speaking tour extolling the benefits of a morality-based financial system.
“He went to sell the new image … not knowing that inside, the same things were still happening,” Mr. Nuzzi said. “They continued to do these transfers without the names, not necessarily in bad faith, but out of habit.”
It doesn’t help that Mr. Gotti Tedeschi himself and the bank’s No. 2 official, Paolo Cipriani, are under investigation for alleged violations of money-laundering laws. They were both questioned by Rome prosecutors on Sept. 30, although no charges have been filed.
In his testimony, Mr. Gotti Tedeschi said he knew next to nothing about the bank’s day-to-day operations, noting that he had been on the job less than a year and only works at the bank two full days a week.
According to the prosecutors’ interrogation transcripts obtained by AP, Mr. Gotti Tedeschi deflected most questions about the suspect transactions to Mr. Cipriani. In turn, Mr. Cipriani said that when the Holy See transferred money without identifying the sender, it was the Vatican’s own money, not a client’s.
Mr. Gotti Tedeschi declined a request for an interview but said by e-mail that he questioned the motivations of prosecutors.
The Vatican Bank was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. The bank, located in the tower of Niccolo V, is not open to the public.
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