Vatican crackdown on tax cheats flagged in oversight report

AP News
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Posted: Apr 28, 2016 2:38 PM
Vatican crackdown on tax cheats flagged in oversight report

VATICAN CITY (AP) — The Vatican's financial watchdog said Thursday it received 544 reports of suspicious financial transactions last year, a three-fold increase over 2014, thanks in part to beefed-up efforts to flag potential tax cheats who are using the Vatican bank to hide money.

In its annual report, the Financial Information Authority said it passed 17 cases on to Vatican prosecutors for follow-up investigation, up from seven a year earlier. In December, European evaluators urged prosecutors to actually bring charges in some of those cases since no indictments have been handed down.

Since 2011, 34 out of 900 suspect transactions have been forwarded to prosecutors for possible follow-up.

The Vatican in 2010 created the financial watchdog to comply with international anti-money-laundering norms and in a bid to shed its image as a financially shady tax haven whose bank has been embroiled in scandal.

In its report, the agency stressed that the spike in suspicious transactions wasn't the result of increased money-laundering activity, but rather the natural result of the closure of bank accounts at the Vatican bank and new efforts to comply with tax reporting obligations in Italy and the U.S.

The effort at greater financial transparency has extended beyond the initial scope of compliance with anti-money laundering norms to implementing internationally accepted accounting standards across the Holy See's fragmented departments - part of Pope Francis' effort to reform the Vatican bureaucracy.

The tortured process has been on sharp display in recent weeks after the Vatican signed, and then suspended, an auditing contract with PricewaterhouseCoopers. The Vatican said the suspension wasn't due to any reluctance to submit to "adequate" auditing measures, but rather because of issues about the "meaning and scope" of the PwC contract and how it would be implemented.

The suspension, though, laid bare an increasingly public battle between the two centers of power in the Vatican: the secretariat of state and the new secretariat for the economy, headed by Australian Cardinal George Pell.

Pell had enlisted PwC to do the audit, and co-signed the contract, even though the Vatican has its own auditor general. His office issued a statement saying he was "a bit surprised" that the secretariat of state suspended the contract but was confident the PwC work would soon resume.

It was the latest of several Pell initiatives to try to assert control over the Vatican's finances that have been quashed by the secretariat of state or the pope himself.

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This story has been corrected to show that there were 34 cases flagged to Vatican prosecutors for possible follow-up, not 36.