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European Report Says Vatican Makes Progress in Policing Its Bank European Report Says Vatican Makes Progress in Policing Its Bank
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VATICAN CITY — The Vatican has made significant efforts to implement financial reforms complying with international transparency standards and money-laundering controls, but its internal watchdog agency needs to step up its oversight of the Vatican’s financial institutions, according to a report issued Thursday. VATICAN CITY — The Vatican has made significant efforts to comply with international controls to combat terrorism financing and money laundering, but needs to step up oversight of its financial institutions to ensure that new laws drafted to fight financial crimes are being properly implemented, according to a report issued Thursday.
The report by Moneyval, a committee of financial experts that evaluates measures to combat money laundering and terrorist financing, concluded that “a very wide range of legislative and other measures have been taken in a short time by the Holy See” to remedy numerous deficiencies highlighted in a Moneyval report issued in July 2012. The latest report was backed by the Council of Europe, an international organization that monitors human rights and the rule of law. The report by Moneyval, a European monitoring agency, concluded that “a very wide range of legislative and other measures have been taken in a short time by the Holy See” to remedy numerous deficiencies in its financial practices highlighted in a Moneyval report issued in July 2012. The latest report was backed by the Council of Europe, an international organization that monitors human rights and the rule of law.
But the committee said these measures, though “much improved,” still needed to be tested. These measures, however, still need to be tested, the report said, adding that it was “somewhat surprising” that
Pointing out that has so far been no formal inspections of the Institute of Works of Religion, as the Vatican Bank is formally known, or the Administration of the Patrimony of the Apostolic See, which manages the Vatican’s real estate holdings and financial portfolios, Moneyval called on the Holy See’s oversight agency, the Financial Intelligence Authority, to carry out inspections to test customer files for potential money laundering. so far, no formal inspections of the Institute of Works of Religion, as the Vatican Bank is formally known, or the Administration of the Patrimony of the Apostolic See, which manages the Vatican’s real estate holdings and financial portfolios, had been carried out. Moneyval called on the Holy See’s internal regulator, the Financial Intelligence Authority, to carry out inspections and test customer files for potential money laundering as soon as possible.
It also called on the Vatican to increase the resources available to the Financial Intelligence Authority, which was recently also entrusted with prudential supervision of the institutions, by hiring “experienced professionals” to allow it to carry out more effective and thorough controls “in the light of current and projected workloads.” Under Pope Benedict XVI and his successor, Pope Francis, the Vatican has made concerted efforts to open up the Vatican Bank and its affiliated financial organizations, traditionally secretive institutions that have made headlines when financial scandals have come to light.
Under Pope Benedict XVI and his successor, Pope Francis, the Vatican has made concerted efforts to open up the Vatican Bank and its affiliated financial organizations, traditionally secretive institutions that emerged from the shadows when financial scandals came to light. Last summer, Paolo Cipriani, the director general of the bank, and his deputy Massimo Tulli both resigned in the wake of the arrest of Msgr. Nunzio Scarano, a priest who worked at the watchdog agency. The priest is being investigated for his role in a failed smuggling scheme that prosecutors say involved moving millions of euros from Switzerland into Italy. Investigators are also looking into other financial transactions involving the accounts that Monsignor Scarano managed.
Last summer, Paolo Cipriani, the director general of the bank, and his deputy, Massimo Tulli, both resigned in the wake of the arrest of Msgr. Nunzio Scarano, a priest who worked at the watchdog agency. The priest is being investigated for his role in a failed smuggling scheme that prosecutors say involved moving millions of euros from Switzerland into Italy. Investigators are also looking into other financial transactions involving the accounts that Monsignor Scarano managed. In line with his stated mission to reform the church, Francis has kept a close watch on the Vatican’s financial institutions, issuing several papal documents that impose closer oversight. Over the summer he formed two commissions to scrutinize financial activities, and last month he appointed one of his personal secretaries to oversee the commissions, effectively forging a direct liaison with the pontiff.
In keeping with his broader vision to reform the church and its institutions, Pope Francis has issued several papal documents strengthening supervision of the Vatican’s financial institutions, including one in August that extended the powers of the Financial Intelligence Authority. After the 2012 Moneyval report raised questions about the effectiveness and independence of the Financial Intelligence Authority, the pope significantly broadened its regulatory authority.
Last month, the pope appointed one of his personal secretaries, Msgr. Alfred Xuereb, to supervise the two commissions he formed in recent months to scrutinize the Vatican’s economic structures and make sure they are in accord with the church’s mission. “Over all, the legislative change is strong,” said John Ringgunth, executive secretary of Moneyval, particularly since “there was nothing in place at all” three years ago, when Benedict began enacting measures to rid the Vatican of its murky financial reputation.
The Vatican Bank was established in 1942 by Pope Pius XII mainly to handle accounts for religious orders, Vatican offices and employees and individual religious people. In its earlier recommendations, Moneyval had called on the Vatican to monitor more carefully the identity and financial transactions of the account holders in all of the Holy See’s financial institutions. In its earlier report, Moneyval called on the Vatican to monitor more carefully the identity and financial transactions of the approximately 19,800 account holders at the Vatican Bank, which was established in 1942 by Pope Pius XII mainly to handle accounts for religious orders, Vatican offices and employees, dioceses, individual religious people and religious educational institutes.
The Moneyval report noted that under the Financial Intelligence Authority’s supervision, some accounts were closed and a significant number of suspicious transaction reports were issued in 2013. But it called on the Vatican to draft rules to better vet people working in Vatican financial institutions to assess their fitness for the job and examine potential conflicts of interest. By October, about 30 percent of its customers had been reviewed, with inspectors focusing on categories that posed the highest risk to the bank, according to a progress report the Holy See provided to Moneyval. The rest should be completed by early 2014.
Since the appointment of Ernst von Freyberg as its president in February, the Vatican Bank has hired a number of outside consultants to advise it and help it meet international standards. In October, it published its first report ever. The Moneyval report said that under the Financial Intelligence Authority’s supervision, some accounts were closed and a “significant” number of reports of potential money laundering were issued in 2013 — 105, compared with 6 in 2012. But it called on the Vatican to draft rules to better vet people working in Vatican financial institutions to assess their fitness for the job and examine potential conflicts of interest.
In a sign of further transparency under the Vatican’s new chief, Ernst von Freyberg, the bank published its first report ever in October.
The Vatican will report back to Moneyval in two years. In a statement earlier this week, the Vatican said it was “fully committed” to building a well-functioning system capable of preventing financial crimes.