Vatican Gets Critique on Finances

By Stacy Meichtry
Wall Street Journal
July 18, 2012

http://online.wsj.com/article/SB10001424052702304039104577534370025033112.html

ROME—The Vatican received a mixed report card from a key financial transparency watchdog on Wednesday as the Holy See seeks to lend credibility to its crackdown on potential money-laundering and other financial crimes.

The Vatican is undergoing evaluation by Moneyval, a committee of financial experts backed by the 47-nation Council of Europe, in a bid to persuade foreign lenders and their regulators that the Vatican bank and other Holy See financial institutions are financially transparent and adequately regulated. An Italian investigation into possible money-laundering at the Vatican bank—which the Holy See denies—has prompted some banks that traditionally handled the Vatican's financial transactions with the outside world to cut ties with the tiny sovereign state.

In a report released Wednesday, Moneyval gave the Vatican passing grades of "compliant" or "largely compliant" on 22 of the 45 guidelines used by the Financial Action Task Force, or FATF, to determine whether countries are at risk of becoming havens for money-laundering and terrorist financing. The report doesn't reflect a definitive judgment by Moneyval, which will continue to evaluate the Vatican's finances and the raft of rules the Holy See has adopted in recent years to clean up its financial operations.

"The Holy See has come a long way in a very short period of time," Moneyval said in a statement. "But further important issues still need addressing in order to demonstrate that a fully effective regime has been instituted in practice.

"The Holy See recognizes that moral commitments must be accompanied by the technical compliance and effective implementation of the international standards necessary to fight money laundering and the financing of terrorism," said a statement from the Vatican, which has scheduled a news conference to address the report.

Moneyval said the Vatican's newly created internal watchdog lacked clear "responsibility, authority powers and independence" to oversee the Holy See's finances. The Institute for Religion Works, the formal name of the Vatican bank, lacks a "prudential supervisor," Moneyval said. The organization also recommended the Vatican create a statute clarifying who is eligible to hold an account at the Vatican bank.