In 1984, Pope John Paul II told journalists that he wanted the Vatican to be “a house of glass where all can see what is happening and how it carries out its mission in faithfulness to Christ and the evangelical message.”
He never quite reached that goal, and certainly not when it came to money matters and financial dealings in the Vatican. His successor, Pope Benedict XVI, spurred on by recent investigations, moved a step closer to the goal of financial transparency Dec. 30 by instituting the Vatican’s Financial Information Authority to oversee the monetary and commercial activities of Vatican institutions, including the Institute for the Works of Religion (IOR), better known as the Vatican bank.
The bank’s troubles date back to the collapse of the Banco Ambrosiano in 1982, and the suspected murder of Italian banker Roberto Calvi, found hanging under Blackfriars Bridge in London.
That scandal did enormous damage to the Vatican’s image because the Vatican bank, then headed by the American Archbishop Paul Marcinkus, was a main shareholder of Banco Ambrosiano. The bank, without accepting blame, paid out $244 million to close the affair.
In 1993, the bank was again entangled in a scandal, this time linked to Enimont, an Italian company, and a corruption trial involving illicit payments to Italian government officials.
All this, and much else, indicated all was not well at the Vatican from ethical and legal perspectives. Clerics were involved, too, in a bank parallel structure that facilitated illegal transactions, as Italian journalist Gianluigi Nuzzi documented in his 2009 book, “Vaticano S.p.A” (“Vatican Inc.”).
Then-Cardinal Joseph Ratzinger observed what was happening, but did not comment. Soon after his election as pope, however, he moved with determination to reach the goal that had evaded Pope John Paul in relation to the Vatican’s financial and monetary activities.
In February 2006, he called in two highly esteemed financial experts to advise the Vatican on these matters: Peter Sutherland, former Irish attorney general and European Union commissioner and director general of the General Agreement on Tariffs and Trade (now the World Trade Organization), and Lord Camoys, a veteran U.K. banker.
In September 2009, the pope tapped the Milanese banker Ettore Gotti Tedeschi, former head of operations of Santander Bank in Italy and professor of ethical finance at the Catholic University of the Sacred Heart in Milan, to be president of the Vatican bank, which is estimated to have $5 billion in assets.
Gotti Tedeschi’s mandate was crystal clear: to ensure the bank operated according to the highest ethical principles, and could not be used for illicit purposes, including money laundering.
Pope Benedict had another incentive when it came to bringing transparency to the Vatican’s finances: He was spurred on by the increasingly rigorous financial regulations of the European Union and other international bodies.
A further urgency was added to his determination by Italian magistrates in 2009 and 2010. While investigating illicit financial transactions linked to the Mafia in Sicily, they discovered that a priest with a Vatican bank account had engaged in dubious financial transactions. This led to queries regarding the identity of all account holders. Gotti Tedeschi had verified every account by Dec. 31, 2010, and closed some.
Other Italian prosecutors investigating corruption involving politicians and businessmen with Vatican ties queried the propriety of some financial transactions involving real estate of the Congregation for the Evangelization of Peoples, and put its former prefect, Cardinal Crescenzio Sepe, under investigation. He denied wrongdoing, but the case is still open.
On Sept. 21, Rome prosecutors accused the Vatican Bank’s Gotti Tedeschi and its director, Paolo Cipriani, of violating norms against money laundering by seeking to transfer more than $30 million from a Rome bank to other destinations without disclosing the money’s origins or its beneficiaries. The money had been frozen by the magistrates in April 2010.
Gotti Tedeschi — backed by senior Vatican officials — claimed there was a misunderstanding, waived his immunity as a Vatican employee and presented himself before the magistrates.
His deposition did not entirely convince, however, as became clear Dec. 20 when the magistrates refused a request to release the confiscated money. They charged that relations between Italy’s financial institutions and the bank regarding money laundering were still not at the required level, and claimed the bank “can easily become a channel for the development of illicit operations for the laundering of sums of money from the proceeds of crime.” The money is still frozen.
These cases gave added impetus to Pope Benedict XVI’s effort to ensure “transparency, honesty and responsibility” in all that concerns money and finance in the Vatican City State and the institutions linked to the Holy See.
Pope Benedict is determined to get the Vatican City State recognized internationally as an honest, credible institution in the financial world. With this in mind, at the end of last year he moved decisively to position it to join the “white list” of states that are committed to preventing and combating illegal activities in the financial and monetary sectors.
On Dec. 30, he issued an apostolic letter and promulgated new legislation to ensure that the Vatican City State, as well as every institution of the Holy See, will henceforth abide by the highest international legal standards whenever they engage in financial operations.
The new legislation, articulated in four laws, implements the Monetary Convention signed between the Vatican City State and the European Union on Dec. 17, 2009. Its purpose is to prevent and counter “the laundering of proceeds from criminal activities” and “the financing of terrorism.” It comes into force April 1.
At the same time, he created the Financial Information Authority to ensure full implementation of this legislation and the entry of Vatican City State into the “white list.” He appointed Italian Cardinal Attilio Nicora as president of this authority.
Vatican spokesman Father Federico Lombardi said the legislation responds to the need to maintain “the effectiveness of the organizations that work in the economic and financial sector at the service of the Catholic Church in the world” and, “more importantly,” to “the moral requirement of ‘transparency, honesty and responsibility’” that must always be observed in the social and economic field (see Caritas in Veritate, No. 36).
“In the final analysis, the Church will be more ‘credible’ before the members of the international community, and this is of vital importance for her evangelical mission.”
Gerard O’Connell writes from Rome.
Global Threats (sidebar)
“Unfortunately in our time, in an ever more globalized society, peace is threatened by various causes, including the improper use of the market and of the economy, and the dreadful and destructive violence that terrorism perpetrates, causing death, suffering, hatred and social instability.
“Most appropriately the international community is increasingly equipping itself with the juridical principles and instruments that enable it to prevent and to counter the phenomena of laundering of money and the financing of terrorism.
“The Holy See approves this commitment and intends to adopt these laws as its own in the utilization of the material resources that serve to carry out the mission and duties of Vatican City State.”
— Pope Benedict XVI