European watchdogs are today due to present a report on the Vatican Bank which assesses whether the Pope’s troubled financial institution has cleaned up its act or is still a carriage for money laundering and other questionable transactions.
The preliminary report to the Council of Europe by money-laundering experts is reported to contain serious misgivings about whether the bank has put sufficient precautions in place to end its reputation as a channel for Mafia profits of crime, arms deals and even the financing of terrorism.
Milan (Photo credit: DavidMartynHunt)
The secretive bank, whose official name is the Institute for Works of Religion (its Italian acronym is IOR), has come under scrutiny as Pope Benedict XVI attempts to counter its awful reputation and history by opening it up – somewhat – for inspection.An impetus for the IOR to get itself on the Organization for Economic Cooperation and Development’s “white list” of banks not involved in money laundering or the financing of terrorism was the Vatican’s adoption of the euro as its currency in 2000.
But it was only three years ago that the Pope made serious moves to clean up the bank. This was after evidence emerged that the head of the IOR since 1990, Monsignor Angelo Caloia, had expanded money laundering and keeping secret accounts for favoured politicians for which the bank became notorious in the 1970s and 1980s.
But it appears that not everyone in the Vatican Curia, the Roman Catholic Church’s offices in the Italian capital which form an independent nation state, supports the Pope’s policy of transparency for the IOR.
Some of the resistance among senior Vatican officials to the Pope’s policy of bank transparency is based on defending the sovereignty of the Holy See, which is under almost constant pressure from Italian authorities.
But others appear to have less principled reasons for wanting to defend the secrecy of the IOR’s 35,000 accounts, $7.5 billion in assets and the $55 million a year the banking business produces for the church.
That is indicated by the fate of the professional banker, Ettore Gotti Tedeschi, who was brought in after Caloia’s departure.
Amid reports of disputes with the Vatican’s foreign minister, Cardinal Tarcisio Bertone, Tedeschi was fired in May by the IOR’s lay board of financiers, saying he had become an obstacle to transparency.
That does not seem to be the view of Italy’s national police, the Carabinieri, who detained Tedeschi in June as part of a corruption investigation, but who discovered when they searched the banker’s home and office a dossier comprising many files and ring binders of information about the Vatican Bank.
The trove of information gathered by Tedeschi is said to refer to anonymous numbered accounts and messages indicating how IOR officials got around European regulations aimed at combating money laundering.
The professed purpose of the IOR, which was set up in 1942, is to finance works of charity among the church’s 1.2 billion followers worldwide. But it is not a bank in the traditional sense and relies on commercial banks in Italy and in other countries to handle its transactions.
Thus in 2009 IOR set up an account with the Milan branch of the American bank JPMorgan Chase. Tens of millions of euros are reported to have flowed through the Milan account to another IOR account set up at the JPMorgan branch in Frankfurt, Germany.
When Italian investigators, working on another case, stumbled on the Milan account and started asking questions, JPMorgan, which had done business with IOR for 35 years, became nervous.
JPMorgan executives asked Vatican officials for information about where the money going through the Milan account originated. When the American bank didn’t get satisfactory answers it closed the IOR Milan account, saying anti-money laundering regulations did not permit its continued operation.
From its founding in 1942 the activities of the bank were controversial and the target of allegations of questionable movements of money and gold during and after the Second World War.
But the Vatican Bank’s culture as a criminal enterprise took off in 1969 when lawyer, banker and Mafia don Michele “The Shark” Sindona was given the job of running it by his old friend Pope Paul VI.
Sindona used the bank to launder the Gambino Mafia family’s profits from heroin trafficking. By the late 1970s Sindona and his banks were the subject of investigations by Italian judges, prosecutors and politicians, several of whom were murdered.
In 1986 Sindona, serving a 25-year sentence for murder, was poisoned in his cell by cyanide in his coffee.
The culture of illegality at the IOR was well established when Archbishop Paul Marcinkus took over its running. In 1982 he was indicted as an accessory in the $3.5-billion collapse of the IOR’s associated Banco Ambrosiano, which was used to launder Mafia drug money. Marcinkus avoided trial because of diplomatic immunity.
But the head of the Banco Ambrosiano, Roberto Calvi, was found hanged under Blackfriars Bridge in London in 1982.