Vatican Banking News

THIS IS THE HIGHEST RESPECTED RELIGIOUS ORGANIZATION IN THE WORLD AND IT SHOULD BE SPOTLESS! SO, WHY IS IS NOT? THIS IS NO EXAMPLE OF SINLESS BANKING! THEY SHOULD HAVE A CLEAN SLATE!

A history of the Vatican Bank

Banking

By Jules Gray Friday, September 5th, 2014 Email: jules.gray@worldfinance.com
The Vatican Bank is undergoing yet another series of reforms in an effort to shed the scandals of the past. Jules Gray looks at the history of the Catholic Church’s troubled financial arm

Cardinal George Pell during a sermon at the Papal Basilica of St Paul’s Cathedral in Rome, Italy


The Vatican Bank is undergoing yet another series of reforms in an effort to shed the scandals of the past. Jules Gray looks at the history of the Catholic Church’s troubled financial arm

Perhaps more than any other, the Vatican Bank should be expected to maintain the highest of moral standards in the way it conducts its business. However, despite its saintly links, the bank that acts on behalf of the Catholic Church has developed a reputation for corruption, scandal and mismanagement over the last few decades.

Murder, bribery, suspicious deaths, money laundering, and many other nefarious acts have been linked to the bank that is officially known as The Institute for Works of Religion (IOR).

However, when Pope Francis began his term as leader of the Catholic Church in early 2013, he made it clear that one of his goals was to reform the way the Vatican Bank is run, bringing about a series of reforms that would restore confidence and trust in the financial arm of the church. But seeing through the changes to such a secretive institution was always going to prove a difficult task, and one that has been unsuccessfully attempted previously.

Past scandals
Like the Catholic Church, the Vatican Bank has been steeped in mystery for much of the time it has been in operation. Founded in 1942 as a means to manage money on behalf of the Catholic Church, its main purpose was to ‘provide for the safekeeping and administration of movable and immovable property transferred or entrusted to it by physical or juridical persons and intended for works of religion or charity.’ It was plunged into disrepute in the late 1970s after many years of rumours about money laundering on behalf of the mafia.

When Pope John Paul I died in 1978 in apparently mysterious circumstances, many conspiracy theories suggested it might have had something to do with his desire to clean up the affairs of the Vatican Bank. The scandal intensified a few years later, when in the early 1980s a bank that it had a majority stake in called Banco Ambrosiano hit the news for all the wrong reasons.

Its leaders were accused of transferring money out of the country into shady overseas banks, as well as being linked to an illegal masonic loge known as Propaganda Due (P2), which had ties to the mafia. Banco Ambrosiano was investigated and its Chairman, Roberto Calvi, was arrested, trialled, and sentenced to four years in prison. After being released on appeal, Calvi fled Italy, before being discovered hanging under London’s Blackfriars Bridge shortly after. It marked a dark period in the history of the Catholic Church, leading to the scandal forming the basis for the plot of the third instalment of the Godfather trilogy.

Pope Francis

After the shocking resignation of Pope Benedict XVI in February 2013, the Catholic Church set about a frantic search for a new leader after what had been a deeply troubling few years. Child abuse scandals had been in the headlines for all of Benedict’s reign, but there had also been plenty of trouble with the Vatican’s financial affairs. Argentinian Cardinal Jorge Mario Bergoglio was selected as the church’s first non-European leader in 1,272 years, becoming Pope Francis I. Born in Buenos Aires in 1936, he has been praised for his dedication to modernising the church and attempts to restore
its reputation.

Ettore Gotti Tedeschi

As the Vatican Bank sought to draw a line under the corruption scandals of the past, it installed a series of directors to oversee reform. Italian economist and banker Ettore Gotti Tedeschi was installed in 2009 as the head of the IOR, alongside other directors that included banker Paolo Cipriani. It was hoped that they would install a series of reforms at the bank, but they were both soon embroiled in scandals themselves. Tedeschi was investigated in 2010 or money laundering, although no charges were brought. In May 2012 he was replaced after a vote of no confidence, while Cipriani followed in July 2013.

Ernst von Freyberg

The Vatican Bank replaced Tedeschi in June 2012 with Ernst von Freyberg, initially to serve as an interim leader, before appointing him as President of the Board of Superintendents in February 2013. Born in Geneva in 1958, the German banker founded the finance house Von Freyberg in 1991, before a series of senior management roles at German firms. He quickly set about opening up the Vatican Bank and making it more transparent, as well as adopting a zero tolerance approach to suspicious activities. However, by July Jean-Baptiste de Franssu had replaced him, with little explanation as to why.

Jean-Baptiste de Franssu

The most recent person appointed to take the Vatican Bank forward is Frenchmanand former Invesco CEO Jean-Baptiste de Franssu. The sudden and unexpected announcement that von Freyberg would be replaced with Franssu in July has merely added to the sense that the job is a poisoned chalice that few are capable of seeing through. Whether Franssu has what it takes to steady the ship and restore faith in the Vatican Bank remains to be seen, but it is certainly a concern that concerns have already been raised over the fact that his son currently works for the organisation charged with investigating the IOR’s affairs.

The aftermath of the scandal rumbled on long after Calvi was found dead. Repeated attempts to prosecute individuals supposedly responsible proved unsuccessful. Bishop Paul Marcinkus, who led the Vatican Bank between 1971 and 1989, avoided prosecution, despite overseeing the darkest period in its history. Others included businessman Flavio Carboni, who was linked to the P2 lodge and mafia boss Pippo Calò. Both Carboni and Calò have been tried a number of times for the murder of Calvi, each time being cleared. They remain prominent figures in Italian business and politics, despite the controversies that have surrounded them.

History repeating itself
While the scandals of 30 years ago are yet to be fully put to bed, new ones have emerged in recent years that have sent the Vatican Bank back into the murky spotlight of before. In 2009 the bank was being investigated by authorities over money-laundering worth €180m. More allegations followed against then IOR President Ettore Gotti Tedeschi, leading to a police investigation, although charges were never brought.

Further allegations then emerged over money laundering – which led to US investment bank JP Morgan closing one of the Vatican Bank’s accounts – after it failed to provide sufficient information about the sources of the €1.8bn deposits. In response, Pope Francis established a new Pontifical Commission to study potential reforms for the bank, which later led to four senior cardinals being sacked.

Shortly before the shocking and unprecedented resignation of Pope Benedict XVI in February 2013, the Vatican Bank appointed a new President in Ernst von Freyberg as Tedeschi’s replacement. Tedeschi had been in the role just three years, but it was a period beset with scandal. He was eventually forced to step down in 2012 when a no-confidence vote among the board of directors was held, due to him failing “to fulfil the primary functions of his office.” However, after his departure, Tedeschi claimed that it was his push for greater transparency at the bank that led to his ousting, and specifically his looking into the accounts that were ‘non-religious’.

Von Freyberg, on the other hand, joined the IOR as a representative of an untainted new leadership that would help to transform its reputation. He called for a “zero tolerance” attitude to any transactions that were deemed suspicious, investigating all cases of potential tax evasion and money laundering. He also aimed to make the IOR much more transparent than it had ever been, opening it up to international regulatory standards.

Giuseppe Calo (right on screen) appears by video link from a prison in central Italy during the trial of the alleged murderer of Roberto Calvi, 23 years after his body was found in London

Giuseppe Calo (right on screen) appears by video link from a prison in central Italy during the trial of the alleged murderer of Roberto Calvi, 23 years after his body was found in London

Out with the old, in with the new
After Pope Francis took the reins of the Catholic Church there were many rumours that he would look to shake up the way it managed its finances. Rumours coming from the church hinted that changes were afoot for much of his first year in charge. They became true when Pope Francis made his first change in February, appointing Australian Cardinal George Pell as the Prefect for the Secretariat for the Economy, a newly created department that would oversee the annual budget of the Holy See and the Vatican.

Shortly after his appointment, Cardinal Pell told reporters there needed to be considerable work on reforming the Vatican’s financial arm. “There needs to be changes in the economic area – not just with the so-called Vatican Bank – but more generally there is work there to be done [and] a need to ensure that things are being properly done.” Other, bigger changes took a few more months to be announced. In somewhat dramatic fashion in June, Pope Francis began by sacking all five members of the board of the Financial Intelligence Authority, which regulates the Vatican’s finances. The entirely Italian board had been due to head up the regulator until 2016, but Pope Francis decided that a new batch of board members, from across the globe, would help to give it new impetus. New members included Juan Zarate, a former national security adviser to former US President George Bush, and Singaporean civil servant Joseph Pillay.

Vatican Bank in figures

Loans and receivables securities:

€250.9m

Debt securities

Available for sale securities:

€13.9m

Equity securities

Held to maturity securities:

€574.8m

Debt securities

Other assets held by IOR:

€86.5m

Other assets

However, despite von Freyberg’s best efforts, his time in charge came to an abrupt – and surprising – end in July, with the news that he was being replaced by Frenchman Jean-Baptiste Franssu as IOR president. The 51-year old de Franssu immediately claimed that “Catholic, ethical investment” would be the focus of the bank in the future. However, Franssu was quickly accused of having a conflict of interest, when it emerged that the Promontory Financial Group had hired his son a few months before, which was in the midst of conducting an investigation into the bank’s operations and its relationships with clients.

Obstacles to change
How successful the new leadership of the IOR is in restoring the reputation of the bank remains to be seen. Certainly the words emanating from Pope Francis and his new appointees are encouraging, but it has proven difficult in the past to translate well-meaning words into meaningful actions. Author Philip Willan, whose book The Last Supper looked into the murder of Calvi and the scandals surrounding the IOR, told our sister publication European CEO magazine earlier this year that the bank needed to undergo some serious reforms, and that Pope Francis was serious about ensuring they were carried out. “I think Pope Francis has a sincere desire to turn the page on an embarrassing past and reform the way in which the Catholic Church handles money.”

However, he added that getting any meaningful reforms passed was likely to be difficult, with many people opposed to much change. “I don’t doubt, though, that there are powerful forces ranged against the reformists. The recent scandals show how a habit of flouting the law had become deeply ingrained among senior Vatican bureaucrats and their friends, something I examine in the last two chapters of the latest version of my book on the Calvi case.”

The scandals of the past reflect how corruption had infiltrated all aspects of Italy’s political and business class, and that meant a reluctance to pursue proper reforms. “The scandals show how even without the excuse of an ideological war against communism, Vatican officials continued to exchange favours with members of Italy’s political and business elite, simple greed supplanting ideology. It is remarkable how defendants from the Calvi murder trial, Flavio Carboni and Ernesto Diotallevi, have continued to have business contacts with people associated with the Vatican,” says Willan. “Paolo Oliverio, a financial consultant to the Camilliani, a religious order dedicated to the service of the sick, was arrested last year on suspicion of laundering money for the Calabrian mafia – Europe’s biggest cocaine traffickers. He is reported to have been in contact with both Carboni and Diotallevi, as well as their offspring. Carboni has also been shown to have cultivated contacts with members of Silvio Berlusconi’s inner circle in recent years, despite having been on trial for murder. A thorough reform of the church’s business culture will not be either easy or quick, but I think Pope Francis and his team are serious about pursuing it.”

Silvano Vittor, Roberto Calvi’s former driver and bodyguard, who was charged with his murder

Silvano Vittor, Roberto Calvi’s former driver and bodyguard, who was charged with his murder

http://www.worldfinance.com/banking/a-history-of-corruption-in-the-vatican-bank

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Vatican's Finance Report Card Gets Mixed Evaluation From Europe's Moneyval Committee

AP  | By NICOLE WINFIELD
Posted: 12/12/2013 11:04 am EST Updated: 01/25/2014 4:01 pm EST
VATICAN BANK

VATICAN CITY (AP) — European evaluators have given the Vatican a mixed report card in its efforts to comply with international norms to fight money laundering and terror financing, praising progress over the past year while highlighting delays and shortcomings at the Holy See's financial watchdog agency. Chief among them: its failure to inspect the embattled Vatican bank.

In the progress report released Thursday, the Council of Europe's Moneyval committee revealed that 105 suspicious transactions had been flagged to the financial watchdog agency in 2013 as potential cases of money-laundering — a significant increase over 2012 when only a half-dozen were reported. The increase stemmed from the bank's ongoing process to review all accounts at the Institute for Religious Works to make sure its customers and assets are clean.

Three of those cases were forwarded to Vatican prosecutors for investigation, including one that made headlines earlier this year: the case of the Vatican accountant, Monsignor Nunzio Scarano, who was arrested by Italian authorities in June after he allegedly tried to smuggle 20 million euros ($26 million) from Switzerland into Italy without declaring it at customs.

The Scarano affair prompted the bank's top two managers to resign and laid bare the lax controls that for years fueled the bank's reputation as an off-shore 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; Vatican prosecutors seized 1.98 million euros from his accounts as part of its own investigation, the report showed.

The Vatican submitted itself to the Moneyval evaluation process more than three years ago in a bid to shed its shady reputation and comply with the requirements of signatories to the 2009 EU Monetary Convention. Since then, the Vatican has written and rewritten laws criminalizing money laundering, ratified U.N. anti-crime treaties and created the financial watchdog agency to supervise its financial activities and work with other countries in cross-border investigations, among other measures.

Pope Francis has ramped up the reforms, forming two commissions of inquiry to try to rationalize the Vatican's opaque and often wasteful finances and make sure institutes like the bank are serving the church. Outside consultants have been brought in to help speed along compliance.

"It is clear from this review that much work has been done in a short time to meet most of the Moneyval technical recommendations," the report concluded, citing in particular legislative changes that clarified the role and autonomy of the financial watchdog agency, and measures taken to improve reporting of suspicious transactions.

But it said it was "somewhat surprising" that the Financial Intelligence Authority watchdog hadn't inspected the bank or the Vatican's other main financial institution APSA, where Scarano worked, and said a basic regulation to make sure criminals don't end up in management positions must be enacted quickly.

The report was the second from Moneyval: In July 2012, the Vatican passed the inaugural Moneyval test but received poor or failing grades for its bank and financial intelligence authority. This second round didn't revise those grades but merely evaluated how the Vatican had responded to recommendations made last year to improve compliance.

One area that had been singled out for criticism in the 2012 report was the bank's lax customer due diligence practices, which are necessary to make sure the bank knows who its clients are and where their money comes from. The revised report noted continued shortcomings — there's still no clear law about who can have an account at the IOR — and said only 30 percent of the bank's accounts had been reviewed by October; the review was to have been completed a year ago.

But the report said the bank, which was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works, is considering codifying such a law and is now closing accounts that "are not strictly related to the purpose of the IOR at the service of the Catholic Church."

The head of the Vatican delegation to the Moneyval committee, Monsignor Antoine Camilleri, said the report confirmed the "significant efforts" taken by the Vatican in the past year. "The Holy See is fully committed to continuing to improve further the effective implementation of all necessary measures to build a well-functioning and sustainable system aimed at preventing and fighting financial crimes," he said in a statement.

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Follow Nicole Winfield at www.twitter.com/nwinfield

http://www.huffingtonpost.com/2013/12/12/vatican-finance-report-card_n_4433039.html

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Code words and safe phones: anatomy of a money smuggling plot

By Philip Pullella

ROME Mon Jul 1, 2013 9:38pm IST

(Reuters) - To most people, a book is a book. But to Monsignor Nunizio Scarano, a Vatican official arrested on charges of money smuggling, a "book" was a code word for one million euros in cash, a report by the judge on the case said.

"Encyclopaedia," and "bookmarks" were among other code words that Scarano, who had close connections to the Vatican bank, used in phone conversations with secret service agent Giovanni Zito and broker Giovanni Carenzio, it said.

The three were arrested on Friday for allegedly attempting to smuggle 20 million euros in cash from Switzerland a year ago for Scarano's rich shipping industry friends in their home town of Salerno in southern Italy.

The contours of the plot are detailed in a 48-page judicial document that includes transcripts or summaries of wiretaps, emails, letters and cheques passed on to investigators by police. The document, in which Judge Barbara Callari approves magistrates' requests for the arrests, was obtained by Reuters.

"I think the more books you can bring the better it is," Scarano tells secret agent Zito, who was to have collected the cash from Carenzio in Switzerland and whisk it past customs controls when a private plane returned to Italy.

Scarano: "Can you bring 20-25 books?"

Zito: "Those for sure."

Scarano: "That is already a good goal, you understand, because it will allow us to do many things for ourselves."

All the conversations in the report came from official police transcripts of wiretaps. Scarano was interrogated by magistrates in Rome on Monday and one of his lawyers, Francesco Grimaldi, said he was cooperating with investigators, but declined to give any details of what he said.

The other two defendants had not yet been questioned by magistrates, Grimaldi said, and one of them, secret agent Zito, was in a military prison south of Rome. Neither of their lawyers could be reached.

VATICAN BANK CONNECTION

The document says Scarano controlled vast amounts of money and felt he could act with impunity because of his connections to the Vatican bank.

Scarano found an equally confident partner in Zito, a Carabiniere policeman seconded to the domestic secret services.

He assures Scarano: "The customs people will clear us on the plane for me. They won't do anything to me. They'll see my (official) passport and they'll say 'good day, sir, goodbye, everything is in order'".

The money never left Switzerland because Carenzio, the broker, did not carry out his part of the deal - to withdraw the money from a bank - even though Zito had gone to Locarno in July, 2012 to pick it up.

Scarano, who worked until recently as a senior accountant in the Vatican's financial administration, and who magistrates say owned various properties and had accounts in the Vatican bank, was the pivotal part of the plot and commanded respect.

In one of the conversations heard by police, Zito tells the monsignor, with whom he is on first-name terms: "Nunzio, I am your humble servant ... maybe you have not understood. I don't know what else to do for you. I am your humble servant".

In a conversation between Zito and Carenzio the secret services agent tells the broker to remember to "turn off (your cell phone) and remove the battery before you cross the border (into Switzerland)" when he drives to the country to arrange to withdraw the money.

The cell phones were bought with false identity documents, code named "bookmarks," and the phones were burned afterwards.

The judge's report includes an e-mail Carenzio received from a Swiss bank asking him for "a sworn statement" to "release the bank from anti-money laundering norms".

ORIGINAL AMOUNT WAS DOUBLE

That e-mail, which Carenzio forwarded to Scarano, referred to 41 million euros, the amount magistrates said the three defendants originally planned to move into Italy before settling on 20 million euros.

Even though the money never left Switzerland, Zito demanded his cut and Scarano begrudgingly complied.

The prelate gave Zito two cheques, one for 400,000 euros and another for 200,000 euros from his account in an Italian bank near the Vatican. Zito cashed the first cheque but Scarano blocked the second before Zito could cash it by filing a false report that it had been lost.

In her report, Callari wrote that Scarano felt safe "thanks to his relations with the Vatican bank". She said the monsignor saw the IOR as "the only safe and rapid instrument for financial and banking operations that could evade - if not outright violate - laws against money laundering and tax evasion".

Magistrates have said there was no indication so far that the bank was directly involved in Scarano's attempt to smuggle the money into Italy for his rich friends.

The judge wrote that the investigations showed that Scarano had "very vast economic resources" and that "the prelate did not hesitate to use complicated stratagems and to involve many third parties to carry out financial operations without respecting norms against money laundering".

In an earlier investigation in his home town of Salerno, Scarano was accused of attempting to launder money by taking 560,000 euros in cash out of his Vatican account and giving various amounts to friends in exchange for cheques.

He then deposited the cheques into an Italian bank account to pay off a mortgage on a property, his lawyer, Silverio Sica, told Reuters. Sica said well-off friends had donated money to Scarano in order for him to build a home for the terminally ill.

Scarano wanted to use that money to pay off his mortgage so he could sell a property in Salerno and use the proceeds to build the care home, Sica said, adding that Scarano would "clear everything up". (Reporting By Philip Pullella; editing by Philippa Fletcher)

http://in.reuters.com/article/2013/07/01/vatican-bank-document-idINDEE9600EQ20130701

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Pope brings in lay experts to help reform Vatican

By Philip Pullella

VATICAN CITY Fri Jul 19, 2013 9:26am EDT


Pope Francis has his skull cap adjusted as he leads a Holy Mass at St. Peter's Basilica in the Vatican June 29, 2013. REUTERS/Alessandro Bianchi

Pope Francis has his skull cap adjusted as he leads a Holy Mass at St. Peter's Basilica in the Vatican June 29, 2013.

Credit: Reuters/Alessandro Bianchi

(Reuters) - Pope Francis has brought in international experts to help him overhaul the Holy See and move on from a series of scandals under his predecessor Benedict XVI.

Urged on by the cardinals who elected him four months ago, Francis set up a commission on Friday to help him reform the Vatican's administration and finances.

Made up of seven international lay experts and one cleric, the commission will report directly to the pope and advise him on economic affairs, improving transparency and enforcing accounting principles.

Its members will have the right to examine any paper and digital document in the Vatican.

Francis inherited a Church struggling to deal with priests' sexual abuse of children, alleged corruption and infighting in the central administration and conflict over the running of the Vatican's scandal-ridden bank.

Benedict left a secret report for Francis on the problems in the administration, which came to light when sensitive documents were stolen from the pope's desk and leaked by his butler in what became known as the "Vatileaks" scandal.

The documents accused Vatican insiders of corrupt dealings, including the award of contracts to outside companies at inflated prices.

The new commission's lay members are experts in economics, finance, management and law and come from Spain, Germany, Italy, Singapore, Malta and France, the Vatican said in a statement. The cleric will act as the commission's secretary.

It will draft reforms of the Holy See's institutions to simplify how they work and improve the way they manage their finances.

They will advise Vatican departments and find ways to "avoid the misuse of economic resources, to improve transparency in the processes of purchasing goods and services", the statement said.

BROAD POWERS

Francis ordered all Vatican departments to collaborate with the commission and bypass usual rules that oblige officials to respect the secrecy of their office.

In reporting directly to the pope, the commission, which Francis set up with a personal decree known as a "chirografo", will bypass the Vatican's Secretariat of State, its chief administrative office which itself has been hit by allegations of scandal and corruption.

The new commission was Francis' third bold move to reform badly tarnished Vatican institutions.

One month after his election, he set up an advisory board of cardinals from around the world to help him govern the Catholic Church and reform its administration.

Last month, in an attempt to get to grips with an institution that has embarrassed the Catholic Church for decades, he set up a special commission of inquiry to reform the scandal-plagued Vatican bank.

The new commission will coordinate its work with the advisory board of cardinals and hold its first meeting after Francis returns to Rome after his July 22-29 trip to Brazil.

(Reporting By Philip Pullella; editing by Barry Moody and Tom Pfeiffer)

http://www.reuters.com/article/2013/07/19/us-pope-vatican-reform-idUSBRE96I0KT20130719

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