Vatican makes progress policing bank

The Vatican has been praised for improving its financial crime legislation. Photo / AP
The Vatican has been praised for improving its financial crime legislation. Photo / AP

European inspectors gave the Vatican a mixed report card in its efforts to comply with international norms to fight money laundering and terror financing: they praised the speedy overhaul of its legal code, but said the jury was still out on how well those new laws are being implemented.

The chief complaint in the report by the Council of Europe's Moneyval committee was that the Holy See's financial watchdog agency has yet to inspect the embattled Vatican bank, a true test of whether the new laws to fight financial crimes are being enforced at the Church's main financial institution.

That said, the system does seem to be working: the report revealed that 105 suspicious transactions had been flagged to the financial watchdog agency in 2013 as potential cases of money-laundering - a significant increase from 2012, when only half a dozen were reported. The increase stemmed from a review by the bank - formally called the Institute for Religious Works - of all its accounts.

Three of those cases were forwarded to Vatican prosecutors for investigation, including one that made headlines this year: the case of the Vatican accountant, Monsignor Nunzio Scarano, who was arrested in June after he allegedly tried to smuggle 20 million ($33 million) from Switzerland into Italy.

The Scarano affair prompted the bank's top two managers to resign and laid bare the lax controls that for years fuelled the bank's reputation as an offshore tax haven where money could be laundered. Scarano is also under investigation for alleged money-laundering in a separate case involving his Vatican bank accounts.

John Ringguth, the executive secretary of the Moneyval committee, said the Vatican's progress in addressing shortcomings in its financial crime legislation was "enormous" given it had essentially no laws on the books before 2010.

But given that Moneyval's evaluation was primarily a desk-based review and that the Vatican's financial intelligence authority had not conducted an inspection, "we're not in a position to really make a judgment about the effectiveness of implementation", Ringguth said.

Rene Bruelhart, who as director of the Vatican's financial intelligence agency is spearheading the Vatican's compliance efforts, said the report was very positive in highlighting achievements over the past year and an on-site inspection of the bank would be conducted shortly.

He said he chose to build a "proper legal and institutional framework" for the Holy See, while conducting the review of the Vatican bank accounts at the same time, before carrying out an inspection.

- NZ Herald

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