Vatican Passes Key Financial Transparency Test

Philadelphia Inquirer
July 18, 2012

http://www.philly.com/philly/news/religion/20120718_ap_vaticanpasseskeyfinancialtransparencytest.html

Vatican Undersecretary for the Relations with States, Mons. Ettore Balestrero, who heads the Vatican delegation to the so-called Moneyval committee, speaks during a press conference at the Vatican Wednesday, July 18, 2012. The Vatican has passed a key European financial transparency test, but received poor grades for the effectiveness of its new financial watchdog agency and for the ability of its bank to track suspicious transactions. The report showed the Vatican had received compliant or largely compliant grades on nine of the 16 "key and core" internationally recognized recommendations to fight money laundering and terrorist financing. "We take both the praise and criticism contained in the report with seriousness," said Mons. Balestrero.

[MONEYVAL's first evaluation report on the Holy See - Council of Europe]

VATICAN CITY - The Vatican has passed a key European financial transparency test, but received poor grades for the effectiveness of its new financial watchdog agency and the ability of its bank to track suspicious transactions.

The Council of Europe report released Wednesday marked a milestone in the Holy See's efforts to shed its reputation as a shady tax haven long mired in secrecy and scandal.

The report showed the Vatican had received compliant or largely compliant grades on nine of the 16 "key and core" internationally recognized recommendations to fight money laundering and terrorist financing.

But seven other areas were found lacking, particularly concerning the Vatican's financial oversight agency, created amid much fanfare in 2010 to try to respond to international demands for greater financial transparency.

The report found that the agency had yet to conduct any inspections, and that its role, authority and independence needed clarification. It said its ability to share financial information with other governments was hobbled by the Vatican's insistence that it enter first into bilateral agreements.

The Holy See put that measure in place because it fears Italy, in particular, will make unreasonable demands for financial information from the Vatican bank, where Vatican officials, dioceses and members of religious congregations can hold accounts.

The so-called Moneyval committee praised the Holy See for making so much progress in a short amount of time to come into compliance with the norms, but said more work needs to be done. In particular, it said the Vatican bank, long the subject of rumor and scandal, should be independently supervised and should make rules about who is actually eligible to keep accounts there.

It said the bank's customer due diligence measures were lacking in some areas, particularly concerning high-risk transactions. And it found fault with the Vatican's procedures to report suspicious financial transactions.

The Vatican submitted itself to the Moneyval evaluation process more than two years ago after it signed onto the 2009 EU Monetary Convention. Since then, it has written and rewritten a law criminalizing money laundering, created a financial watchdog agency and ratified three anti-crime U.N. treaties, among other measures.

Each of those moves is required by the Financial Action Task Force, the Paris-based policymaking body that helps countries develop anti-money laundering and anti-terror financing legislation. The Council of Europe's Moneyval committee rated whether the Vatican was compliant, largely compliant, partially compliant or noncompliant in each of the task force's recommendations.

Sixteen of the original 49 recommendations are considered "key and core," with a score of eight or more passing grades sparing the Vatican from a more intensive review and evaluation process in the future.

By scraping by with a 9-7 report card, the Vatican is solidly in the company of other countries that have been working for years, and gone through numerous rounds of Moneyval evaluations, to come into compliance with the FATF norms.

Pope Benedict XVI himself has said he wanted the Vatican's finances to follow international principles, saying peace in the world today is threatened by terrorism and an improper use of the global financial system.

The Vatican's Moneyval evaluation process has been the source of enormous attention and speculation in Italy, given that it corresponded with the eruption of the scandal over leaked Vatican documentation that alleged corruption in the Holy See's finances as well as infighting over whether the Vatican's efforts to comply with the anti-money laundering norms were on the right track.

As the process neared its end, the Vatican bank , known as the Institute for Religious Works , threw another wrench into the mix by firing its president who had been brought in by the pope's No. 2 specifically to usher in a new era of financial transparency at the Holy See. The bank's board accused him of actually being an obstacle to transparency and of failing to do his job.