Prosecutors doubt Vatican money-laundering pledges

AP News
Posted: Oct 30, 2010 7:21 AM
Prosecutors doubt Vatican money-laundering pledges

The Vatican bank has taken steps to satisfy tough EU and international norms on money laundering and terror financing after being confronted with an unprecedented crackdown by Italian prosecutors, The Associated Press has learned.

In recent weeks the bank has made written and in-person pledges to pass anti-money laundering legislation, report and investigate suspicious transactions, identify customers to law enforcement and create a special compliance authority.

Prosecutors, though, aren't buying any of it. They claim that even as the bank was making such overtures, it broke the law by trying to transfer money without identifying the sender or recipient, or what the money was being used for.

Italian prosecutors have placed bank chairman Ettore Gotti Tedeschi and his deputy Paolo Cipriani under investigation and financial police seized euro23 million (US$30 million) from a Vatican bank account on Sept. 21.

The Vatican has reacted furiously, insisting that the omission of data was just a "misunderstanding" that could be easily clarified. It tried to get the seizure lifted, but the court refused.

Now the Vatican has finally given its commitments to some of the key institutions involved in the fight against money laundering, officials at the institutions told the AP.

Vatican bank officials in recent weeks made a written commitment to the Financial Action Task Force _ the Paris-based policymaking body that develops anti-money laundering and anti-terror financing legislation _ to do whatever is necessary to come into compliance with its norms, a senior FATF official familiar with the negotiations told The Associated Press on Friday.

The FATF requires the Vatican to pass legislation making money-laundering a crime; to establish an entity to report suspicious transactions and then investigate them; and to pass legislation requiring that the bank identify its customers properly and make that information available to law enforcement agencies, the official said.

Separately, on Oct. 15, Vatican bank officials met with European Commission officials and agreed that Pope Benedict XVI would act to bring into Vatican law EU directives on money laundering that are required of euro-zone countries, said Amadeu Altafaj i Tardio, spokesman for European Commissioner for Economic and Monetary Affairs Olli Rehn.

The bank, formally known as the Institute for Religious Works, also pledged to establish a compliance "authority" headed by a senior Vatican cardinal on Jan. 1 to implement the anti-money laundering legislation, he said. The authority will be the contact for all EU and international agencies working to fight money-laundering.

Vatican bank officials also had two meetings starting in the spring of this year with officials from the Organization for Economic Cooperation and Development to learn how to get on the "white list," of countries that share tax information to crack down on tax havens, said Jeffrey Owens, head of tax issues at the OECD.

To join the OECD's club, the Vatican must first make a formal commitment to transparency and exchange of financial information and then take part in peer review sessions. To get on the "white list" the Vatican must enter into tax information sharing agreements with at least 12 other countries _ a process that can often take years.

"The next stage is: They know what the standards are. Do they want to advance the dialogue with the aim of committing to the standards?" Owens said.

Despite such efforts _ which predate the seizure of the Vatican account _ prosecutors have said the Vatican has done nothing concrete to comply with Italian law, to which it is subject, much less international norms to fight money laundering. In an October court document, prosecutors said such compliance "doesn't even seem possible" given the lack of internal norms at the Vatican.

Citing an Oct. 6, 2010, Bank of Italy memorandum, prosecutors said the Vatican bank's consultations had been "completely fruitless," according to Corriere della Sera.

Gotti Tedeschi has insisted his efforts are sincere and has said he is mortified by the scandal. He has continued speaking publicly about the need for ethics in finance and has continued his promotion of the pope's encyclical on the global financial crisis.

At the same time, the bank is gearing up for another possible assault by Holocaust survivors who claim that Nazi loot was stored at the Vatican. A U.S. federal appeals court threw their case out in March after determining the Vatican bank enjoyed immunity since the Holy See is a foreign sovereign.

Attorney Jonathan Levy has since taken his case to the European Commission, asking for an investigation into whether looted Nazi gold had been used in Vatican euros and commemorative coins.

"The issue here is that it's the EU's problem because they entered into an agreement with the Vatican to mint euros," Levy said. "From our point of view, it's the EU's responsibility to hold the Vatican responsible to meet money laundering standards."