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Vatican Bank mired in laundering scandal

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posted on Jan, 9 2011 @ 01:36 PM
Vatican Bank mired in laundering scandal

By Nicole Winfield, Victor L. Simpson

Associated Press

Posted December 8, 2010 at 12:01 p.m.

AP Photo
US Archbishop Paul C. Marcinkus, a former head of the Vatican Bank. Behind the centuries-old facade of the Institute for Religious Works -- better known as Vatican Bank -- is a history of secrecy and scandal. Italian investigators were able to move against Vatican Bank as the Bank of Italy classifies it as a foreign financial institution operating in Italy. However, in one of the 1980s scandals involving the death of bankers, prosecutors were unable to arrest then bank head Paul Marcinkus, an American archbishop, because Italy's highest court ruled he had immunity. Marcinkus, who died in 2006 and always proclaimed his innocence, was the inspiration for Francis Ford Coppola's character Archbishop Gilday in "Godfather III."

VATICAN CITY (AP) — This is no ordinary bank: The ATMs are in Latin. Priests use a private entrance. A life-size portrait of Pope Benedict XVI hangs on the wall.

Nevertheless, the Institute for Religious Works is a bank, and it's under harsh new scrutiny in a case involving money-laundering allegations that led police to seize €23 million ($30 million) in Vatican assets in September. Critics say the case shows that the "Vatican Bank" has never shed its penchant for secrecy and scandal.

The Vatican calls the seizure of assets a "misunderstanding" and expresses optimism it will be quickly cleared up. But court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws "with the aim of hiding the ownership, destination and origin of the capital." The documents also reveal investigators' suspicions that clergy may have acted as fronts for corrupt businessmen and Mafia.

The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew €650,000 ($860 million) from an Italian bank account but ignored bank requests to disclose where the money was headed.

The new allegations of financial impropriety could not come at a worse time for the Vatican, already hit by revelations that it sheltered pedophile priests. The corruption probe has given new hope to Holocaust survivors who tried unsuccessfully to sue in the United States, alleging that Nazi loot was stored in the Vatican Bank.

Yet the scandal is hardly the first for the centuries-old bank. In 1986, a Vatican financial adviser died after drinking cyanide-laced coffee in prison. Another was found dangling from a rope under London's Blackfriars Bridge in 1982, his pockets stuffed with money and stones. The incidents blackened the bank's reputation, raised suspicions of ties with the Mafia, and cost the Vatican hundreds of millions of dollars in legal clashes with Italian authorities.

On Sept. 21, financial police seized assets from a Vatican Bank account at the Rome branch of Credito Artigiano SpA. Investigators said the Vatican had failed to furnish information on the origin or destination of the funds as required by Italian law.

The bulk of the money, €20 million ($26 million), was destined for JP Morgan in Frankfurt, with the remainder going to Banca del Fucino.

Prosecutors alleged the Vatican ignored regulations that foreign banks must communicate to Italian financial authorities where their money has come from. All banks have declined to comment.

In another case, financial police in Sicily said in late October that they uncovered money laundering involving the use of a Vatican Bank account by a priest in Rome whose uncle was convicted of Mafia association.

Authorities say some €250,000 euros, illegally obtained from the regional government of Sicily for a fish breeding company, was sent to the priest by his father as a "charitable donation," then sent back to Sicily from a Vatican Bank account using a series of home banking operations to make it difficult to trace.

The prosecutors' office stated in court papers last month that while the bank has expressed a "generic and stated will" to conform to international standards, "there is no sign that the institutions of the Catholic church are moving in that direction." It said its investigation had found "exactly the opposite."

Legal waters are murky because of the Vatican's special status as an independent state within Italy. This time, Italian investigators were able to move against the Vatican Bank because the Bank of Italy classifies it as a foreign financial institution operating in Italy. However, in one of the 1980s scandals, prosecutors could not arrest then-bank head Paul Marcinkus, an American archbishop, because Italy's highest court ruled he had immunity.

Marcinkus, who died in 2006 and always proclaimed his innocence, was the inspiration for Francis Ford Coppola's character Archbishop Gilday in "Godfather III."

The Vatican has pledged to comply with EU financial standards and create a watchdog authority. Gianluigi Nuzzi, author of "Vatican SpA," a 2009 book outlining the bank's shady dealings, said it's possible the Vatican is serious about coming clean, but he isn't optimistic.

"I don't trust them," he said. "After the previous big scandals, they said 'we'll change' and they didn't. It's happened too many times."

He said the structure and culture of the institution is such that powerful account-holders can exert pressure on management, and some managers are simply resistant to change.

The list of account-holders is secret, though bank officials say there are some 40,000-45,000 among religious congregations, clergy, Vatican officials and lay people with Vatican connections.

The bank chairman is Ettore Gotti Tedeschi, also chairman of Banco Santander's Italian operations, who was brought in last year to bring the Vatican Bank in line with Italian and international regulations. Gotti Tedeschi has been on a very public speaking tour extolling the benefits of a morality-based financial system.

"He went to sell the new image ... not knowing that inside, the same things were still happening," Nuzzi said. "They continued to do these transfers without the names, not necessarily in bad faith, but out of habit."

It doesn't help that Gotti Tedeschi himself and the bank's No. 2 official, Paolo Cipriani, are under investigation for alleged violations of money-laundering laws. They were both questioned by Rome prosecutors on Sept. 30, although no charges have been filed.

In his testimony, Gotti Tedeschi said he knew next to nothing about the bank's day-to-day operations, noting that he had been on the job less than a year and only works at the bank two full days a week.

According to the prosecutors' interrogation transcripts obtained by AP, Gotti Tedeschi deflected most questions about the suspect transactions to Cipriani. Cipriani in turn said that when the Holy See transferred money without identifying the sender, it was the Vatican's own money, not a client's.

Gotti Tedeschi declined a request for an interview but said by e-mail that he questioned the motivations of prosecutors. In a speech in October, he described a wider plot against the church, decrying "personal attacks on the pope, the facts linked to pedophilia (that) still continue now with the issues that have seen myself involved."

As the Vatican proclaims its innocence, the courts are holding firm. An Italian court has rejected a Vatican appeal to lift the order to seize assets.

The Vatican Bank was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. The bank, located in the tower of Niccolo V, is not open to the public, but people who use it described the layout to the AP.

Top prelates have a special entrance manned by security guards. There are about 100 staffers, 10 bank windows, a basement vault for safe deposit boxes, and ATMs that open in Latin but can be accessed in modern languages. In another concession to modern times, the bank recently began issuing credit cards.

In the scandals two decades ago, Sicilian financier Michele Sindona was appointed by the pope to manage the Vatican's foreign investments. He also brought in Roberto Calvi, a Catholic banker in northern Italy.

Sindona's banking empire collapsed in the mid-1970s and his links to the mob were exposed, sending him to prison and his eventual death from poisoned coffee. Calvi then inherited his role.

Calvi headed the Banco Ambrosiano, which collapsed in 1982 after the disappearance of $1.3 billion in loans made to dummy companies in Latin America. The Vatican had provided letters of credit for the loans.

Calvi was found a short time later hanging from scaffolding on Blackfriars Bridge, his pockets loaded with 11 pounds of bricks and $11,700 in various currencies. After an initial ruling of suicide, murder charges were filed against five people, including a major Mafia figure, but all were acquitted after trial.

While denying wrongdoing, the Vatican Bank paid $250 million to Ambrosiano's creditors.

Both the Calvi and Sindona cases remain unsolved.

AP reporter Martino Villosio contributed from Rome.

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edit on 9-1-2011 by orangeman dave because: (no reason given)

posted on Jan, 9 2011 @ 01:51 PM
It'll be interesting to see where this goes in the press. That's one big rabbit hole there. I would personnly not even LOOK down it. Glad someone else has their name on it.

posted on Jan, 9 2011 @ 06:20 PM
It is a very difficult role confronting a lot of the crime and corruption as it has been entrenched into all kinds of power systems around the world. I applaud them in their efforts and wish them well in their endeavours. It is good to hear that progress is being made.

posted on Jan, 20 2011 @ 03:38 PM
Prosecutors: Vatican Bank Covered for Mafia

Bank hid source of client funds, say officials By Mary Papenfuss, Newser Staff

Posted Dec 13, 2010 1:40 AM CST

The Vatican Bank knowingly hid money for the mafia, breaking money laundering laws in the process, prosecutors allege in documents filed in Italian court. Investigators also suspect that several members of the clergy have acted as fronts for mobbed-up businessmen. The allegations spring from a money-laundering probe into the Church’s bank, which led police to seize €23 million ($30 million) in September, the Independent reports.

The Vatican calls the probe a “misunderstanding” that it hopes will be resolved quickly. But this isn’t the first scandal for the holy bank, and a mob connection has been rumored ever since two Vatican financial advisers died in what looked suspiciously like hits in the ‘80s. Holocaust survivors are optimistic this latest probe could help them recover money stolen by the Nazis, which they have long believed hidden in the bank.

Vatican bank sets up money-laundering unit hoping to escape scandalNew rules on transparency come after Italian court froze €23m of Vatican funds in September

John Hooper in Rome, Wednesday 29 December 2010 20.10 GMT Article history

The Vatican bank, whose ATM is behind St Peter's Basicila, is promising new transparency in its dealings. Photograph: Paul Owen

The Vatican today announced new rules to make its financial dealings more transparent and bring it into line with international legislation designed to prevent money-laundering.

The move came after an Italian court in September froze €23m (£19.6m) of the Vatican's money over claims that its bankers were trying to move the cash across international borders without identifying its source, destination or purpose. The head of the Vatican bank, Ettore Gotti Tedeschi, and his deputy are still under investigation on suspicion of money-laundering, although no charges have been brought against the two men, who both deny wrongdoing.

Full details of the new measures are to be released today. But a statement made clear they would include the creation of a new compliance authority and the introduction of legislation to combat money laundering and the financing of terrorism.

The Vatican bank, known as the Institute for the Works of Religion, or IOR, is perhaps the world's most extraordinary financial organisation. Its reputedly state-of-the-art facilities are housed in a 15th century tower next to the pope's palace and its ATM behind St Peter's Basilica is in Latin (a cash withdrawal being "deductio ex pecunia").

In the 1980s the IOR was at the centre of a long-running scandal arising from its involvement in the $1.3bn collapse of Italy's largest private bank, Banco Ambrosiano, and the death of the bank's chairman, Roberto Calvi, whose body was found hanging under Blackfriars Bridge in London. The Vatican denied any wrongdoing but paid $250m to Ambrosiano's creditors. More recently, in October, police in Sicily said they had uncovered a money-laundering operation that involved the use of an IOR account opened by a priest with family connections to the Mafia.

The IOR was set up to look after the wealth of Catholic organisations, such as religious orders. Its statutes allow lay individuals to open accounts, but only if the purpose is to promote "works of religion or charity".

The new rules appeared designed to comply with a mutually agreed deadline of 31 December for the implementation of the EU's money-laundering directive. The Vatican had also undertaken to set up a financial watchdog body by the first day of 2011.

The Holy See's lawyers have twice tried, without success, to get the Italian courts to free the assets seized three months ago. But earlier this month an Italian judge criticised the Vatican bank for continuing to hide the identity of its clients.The Vatican, which appointed Gotti Tedeschi to impose greater transparency on the IOR and ensure it complied with international anti-money laundering regulations, has insisted the affair is the result of a misunderstanding and that it was merely trying to move its own cash around.

posted on Feb, 12 2011 @ 07:14 PM

off-topic post removed to prevent thread-drift


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