Vatican Bank Needs More Inspections, Finance Watchdog Says

By Chiara Vasarri and Alessandra Migliaccio
Bloomberg Businessweek
December 12, 2013

http://www.businessweek.com/news/2013-12-12/vatican-must-keep-improving-controls-finance-watchdog-says

The Vatican has made progress in improving financial transparency, though it still needs to carry out more internal controls, according to a European report on the city-state’s efforts to prevent money-laundering.

Moneyval, the Council of Europe’s body that monitors money laundering and terrorism financing, approved a progress report on the Vatican following an initial evaluation in July 2012. The watchdog praised financial transparency agreements signed by the Vatican with other countries as well as its efforts to bring to light suspicious transactions.

“We still think that it’s very necessary that they actually proceed and have formal inspections,” John Ringguth, executive secretary of Moneyval, said in a phone interview.

Moneyval recommended more checks be carried out by the Vatican’s Financial Information Authority, or FIA, and said staff should be more experienced and better trained. The fact that the Vatican bank, also known as the Institute for Works of Religion, and the Holy See’s administrative body, APSA, weren’t subject to formal inspections is “surprising,” Moneyval said in the report.

“It is important that the forthcoming inspections of IOR and APSA proceed now as planned,” the report said. “These inspections should include risk-focused sample testing of customer files.”

Rocked by Scandals

The Vatican bank, which was set up in 1942 and oversees about 7.1 billion euros ($10 billion) in assets, is trying to overcome three decades of scandals ranging from the involvement in the Banco Ambrosiano’s collapse in the 1980s to the freezing of 23 million euros by Italian prosecutors in 2010.

In June, Monsignor Nunzio Scarano, a former top accountant at APSA, was arrested together with a secret agent and a broker on suspicion of trying to bring 20 million euros into Italy from Switzerland in a private jet as part of a tax scam. The bank’s director general Paolo Cipriani and his deputy resigned a few days later.

Earlier this year Pope Francis, who has made cleaning up the Vatican’s financial reputation one of the main goals of his pontificate, increased FIA’s supervisory powers over the bank and other Holy See’s departments involved in financial activities. He also set up a special committee to look into the IOR. Since his appointment in February, the bank’s new president Ernst von Freyberg has also tried to improve transparency and this year the bank published its balance sheet for the first time.

Moneyval’s recommendations are used by the Organization for Economic Cooperation and Development to decide whether a nation should be included on the so-called white list of countries complying with international standards on financial transparency.

To contact the reporters on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net; Alessandra Migliaccio in Rome at amigliaccio@bloomberg.net

To contact the editor responsible for this story: Jerrold Colten at jcolten@bloomberg.net