The Vatican, still picking up the pieces after the global paedophilia scandal, has been rocked by news that the heads of its bank are under investigation in connection with a £20m money laundering probe.
Vatican Bank president Ettore Gotti Tedeschi and director-general Paolo Cipriani are being investigated following two transactions that were reported as "suspicious", police sources said.
The transactions on 15 September are thought to involve €20m sent to the German bank JP Morgan in Frankfurt, and €3m sent to a central-Italian bank, the Banca del Fucino. The funds have been seized by Italian authorities.
It is the first time such action has been taken against the Vatican Bank, which is officially known as the Institute for Religious Works (IOR). But the bank has faced scrutiny of its activities for some time.
Investigators are checking if bank officials breached money laundering regulations by failing to reveal key account details of those involved in the transactions.
In a statement, the Vatican expressed consternation at the developments. "The Holy See is perplexed and astonished at the action taken by the Rome prosecutor," it said, adding that it had "complete faith in the president and in the director-general of the IOR."
Mr Gotti Tedeschi is a member of the ultra-conservative religious movement Opus Dei, and an outspoken advocate of the need for greater morality in finance.
Today's revelations, which come just days after Pope Benedict completed his controversial tour of Britain, are only the latest in a series of incidents that have raised doubts about the financial integrity of the bank, however.
In June, magistrates said the Vatican Bank, along with 10 other lenders, was being investigated for alleged fraud, according to La Repubblica newspaper.
The magistrates leading the investigations, Nello Rossi and Stefano Rocco Fava, who are also running the current inquiry, suspect that IOR officials may have used the bank, and its status as a non-Italian institution, to avoid taxes as well as launder money.
A few months earlier, investigators had said they were focusing on one or more accounts the IOR opened with UniCredit, Italy's biggest bank, into which some A60m had poured in three years. The accounts were opened at a branch of UniCredit, then Banca di Roma, a stone's throw from St Peter's Square, but in Italian territory.
Magistrates said the probe was centred on clarifying the "opaque screen" which hid the identity of the person, persons or organisations that had actual control over the IOR accounts.
Yesterday, some observers suggested that the announcement of Mr Gotti Tedeschi's and Mr Cipriani's formal involvement in money laundering inquiries might be the judiciary's way of pressuring the Vatican into being more open about its finances.
The Vatican Bank, after a series of scandals stretching back to the fraudulent bankruptcy of Banco Ambrosiano in the 1980s, is under pressure to adopt new financial standards following a 2009 push by the G20 nations for greater transparency.
The IOR said it been working "for some time" with the Bank of Italy and the Organisation for Economic Cooperation and Development "for the Holy See's inclusion in the so-called White List" - an OECD designation for countries that apply international tax regulations.
The Bank of Italy has declared that transactions with banks such as the IOR, which are not on the White List, will be subject to greater scrutiny.
The bank's reputation was most badly damaged, however, by the collapse in 1982 of Banco Ambrosiano, in which it was a major shareholder. The Vatican paid around £150m to compensate Ambrosiano's account holders - without admitting any wrongdoing.
The then head of the bank, Archbishop Paul Marcinkus, was indicted but was able to claim diplomatic immunity as a high-ranking Vatican official.
Events became much murkier when Banco Ambrosiano's chairman Roberto Calvi, known as "God's Banker", was found hanging from Blackfriars Bridge in London, his clothes stuffed with bricks and £10,000 in his pockets.
After initially being labelled suicide, Calvi's death was later reclassified as murder, following two coroner's inquests and an independent investigation.
Prosecutors said he was killed for stealing Mob money, a verdict repeated by the Italian Court of Appeal this year, even as they cleared three suspects for lack of evidence.
The Vatican Bank, located in a tower just inside the gates of the Vatican City, manages assets for religious works or works of charity. It also manages the pension system for the Vatican's thousands of employees.
Its leadership is composed of five cardinals, but the day-to-day operations are headed by Mr Gotti Tedeschi and the bank's council.