Holding the Bank to Account

By Robert Mickens
The Tablet UK
July 6, 2013

http://www.thetablet.co.uk/article/164384


First an inquiry announced, then an arrest, followed by major resignations. It has been quite a week at the Vatican Bank, the financial organisation that Pope Francis has in his sights. But can he and his allies really get to grips with what has been happening behind its closed doors and ensure transparency?

Baron Ernst von Freyberg insists that the so-called Vatican Bank is a “well-managed and clean financial institution” that merely suffers from a bad reputation linked to old scandals. The German aristocrat and industrialist was hired last February after an extensive search to be the president of the bank – officially named the Institute for the Works of Religion (IOR). And he recently began a media campaign to convince people that he and his team were well on the road to bringing greater transparency and propriety to the 71-year-old institution.

But a new and embarrassing scandal has caused a major obstacle to that journey and this past week the president was forced to admit that still more drastic measures were needed to truly clean up the IOR’s bad image and improve efforts undertaken in the past three years to combat money laundering and provide greater transparency.

“It is clear today that we need new leadership to increase the pace of this transformation process,” von Freyberg said in a communiqué issued late on Monday. The unusually timed note announced the sudden and surprising resignations of the two men in charge of the IOR’s daily operations – bank director Paolo Cipriani and his deputy, Massimo Tulli. Both stepped down (or were more likely forced out) after six years in their posts.

The resignations came just five days after Pope Francis established a five-member special commission of inquiry to get to the bottom of problems linked to the IOR’s structure and functioning. But even more poignantly they occurred only three days after Mgr Nunzio Scarano, a Vatican official who has at least two accounts at the IOR, was arrested along with two accomplices after being suspected of trying to smuggle €20 million (£17m) from Switzerland into Italy.

The arrest of Mgr Scarano, a former banker and now a chief accountant at the Administration for the Patrimony of the Apostolic See (Apsa), is said to have especially perturbed the Pope, who has often warned clerics (and others) to be wary of “money worshipping”. In fact, the Vatican had already suspended the monsignor several weeks ago after it learned he was also under investigation over financial dealings in his native Salerno, a port city just south of Naples.

The cardinals who elected Pope Francis gave him a mandate to reform the Roman Curia and the IOR, two institutions that last year’s VatiLeaks scandal portrayed as tinged with corruption and mismanagement. That was not the first time, either, that the bank, founded in 1942 by Pius XII as a private organisation providing religious institutions with banking facilities, had been mired in scandal. In 1982, it was implicated in a major political and financial crisis when the Banco Ambrosiano, of which it was the major shareholder, collapsed with US$4.7 billion debts. More recently, in 2010, the then president of the IOR, Ettore Gotti Tedeschi, was investigated over a money-laundering scandal and then later stepped down after a no-confidence vote by the bank’s directors. He claimed he was targeted because he wanted transparency and wanted to target the non-religious holders of bank accounts.

Pope Francis may well wish to close the bank but he would face stiff opposition from many people, not least the institute’s 114 employees and the many religious orders that keep their money there. For now the Jesuit Pope is working with existing Vatican staff and their methods to deal with the difficult situation he inherited. His first move, several weeks ago, was to see to that Mgr Battista Ricca, the director of the Santa Marta residence where he lives, be named as “prelate” ad interim of the IOR. The Commission of Cardinals (headed by Secretary of State Bertone) appoints the prelate to be its liaison with the lay-run board of directors (headed by von Freyberg) and he attends the meetings of both groups. 

Next, Francis chose five Vatican insiders to be part of his newly set up commission of inquiry. The president of the group is Italian Cardinal Raffaele Farina SDB, 79, head of the Vatican Library. Spanish Bishop Juan Ignacio Arrieta, a 62-year-old Opus Dei canon lawyer who is secretary at the Pontifical Council for Legislative Texts, is the commission’s coordinator. There is also French Cardinal Jean-Louis Tauran, 70, one of the Holy See’s best diplomats and currently its top official for interreligious dialogue, as well as a member of the cardinals’ commission that oversees the IOR. Mary Glendon, 74, the American lawyer who heads the Pontifical Academy for Social Sciences and is a former US ambassador to the Holy See, is also a member. And finally, Mgr Peter Wells, 50, the American who serves as “assessore” or No. 3 in the Secretariat of State, serves as the commission’s secretary. Glendon and Wells have strong personal connections to fellow American Carl Anderson, head of the very wealthy Knights of Columbus and a member of the IOR board of directors. It goes without saying that all five of these people have personal bank accounts at the IOR.

Anyone hoping that the commission of inquiry might be composed of people with outside objectivity and no inside personal interest would be very disappointed with this group. On the other hand, those likely to be most threatened by such a commission and the Pope’s reforms might feel some reassurance by the names on this list.

Pope Francis has asked the commission of inquiry to present him with some canonical and legal options for restructuring the IOR so that its mission and ideals are more reflective of a Church than a bank. The Vatican has always denied allegations that the IOR has been used as an offshore financial institution (or worse, for money laundering) and most recently affirmed again that only its employees, religious orders and church officials can hold accounts. But many people are sceptical. That is because among the account holders there are also the papal gentleman, mostly well-to-do Italian businessmen, industrialists and aristocrats who assist at formal papal ceremonies. Over the years some of them have fallen foul of the law. Francesco La Motta, for instance, was arrested in mid-June for his alleged role in the disappearance of more than €10m (£8.5m) from an Interior Ministry account that he oversaw. The former high-ranking Italian secret-service agent has been a papal gentleman since 2007. Another, Angelo Balducci, was arrested in 2010 on corruption charges linked to building contracts. He was quietly removed from the ranks of the papal gentlemen. La Motta will probably meet the same fate. Both men had accounts at the IOR that provided a convenient way to hide money.

IOR officials say they have begun adopting more stringent international anti-money-laundering protocols  and Baron von Freyberg has even hired outside consultants from the United States to ensure they are implemented correctly. That will be essential in helping Pope Francis face perhaps his toughest challenge, the vast network of family and friends that make up the Vatican’s tightly knit workforce. Many have followed in the footsteps of fathers and grandfathers, cousins and uncles, as Vatican employees. Take the papal nuncio in Britain, Archbishop Antonio Mennini. His late father was the IOR’s long-time managing director. And his brother Paolo is currently in charge of the Apsa wing where Mgr Scarano has been working for many years. These types of intertwining relationships are typical of the complicated culture of the Vatican, and which can cause people to be resistant to reform.

So what is likely to happen? Most people believe Pope Francis will move like a good Jesuit superior. He will listen to the suggestions from his cardinal-advisers, as well as the commission of inquiry and other officials at the IOR. Then he will make up his own mind. Among his options might be to restructure the IOR into a sort of credit union, perhaps with more international and less Italian oversight. Another possibility is that he could choose to divest the Holy See of its entire interest in the institute’s ownership or management. In this case, perhaps he could even allow some Catholic group with a proven track record in financial operations (like the Knights of Columbus) to take control of the IOR. Of course, the most radical action that Papa Francesco could take would be to close the IOR all together and leave its clients to deposit their assets in regular banks.

Various cardinals and Vatican officials have said with assurance that closure is not an option. But they are the same people who think that the Pope will eventually move into the Apostolic Palace.