Vatican Bank mired in laundering scandal
By Nicole Winfield, Victor L. Simpson
Posted December 8, 2010 at 12:01 p.m.
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
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
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
Marcinkus, who died in 2006 and always proclaimed his innocence, was the inspiration for Francis Ford Coppola's character Archbishop Gilday in
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
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
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
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
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.
Read more: www.vcstar.com...
edit on 9-1-2011 by orangeman dave because: (no reason given)