Pope to issue new rules to counter financial crimes

Thursday, December 30, 2010

ROME - The Vatican plans to unveil new rules intended to counter financial crimes and make its financial activities more transparent, a media report said Thursday.

The decision has been taken following a probe by Italian prosecutors into whether officials of the Holy See’s bank broke Italy’s laws against money laundering, the Wall Street Journal reported.

In a statement, the Vatican said that it will create a financial watchdog, called the Authority of Financial Information, and set out regulations to prevent money laundering and terror financing.

“The norms that will be adopted tomorrow deal with anti-money-laundering and anti-terrorism, and these are the things for which we are being prosecuted by the Italian state,” said Vincenzo Scordamaglia, a lawyer representing the Institute of Religious Works, the Vatican’s bank, which is known by its Italian acronym IOR.

“Tomorrow’s law is proof that the Holy See has been working since 2009 towards entering the white list,” added Scordamaglia, referring to a roster of countries deemed to have transparent banking and strong anti-money-laundering rules.

According to a person familiar with the matter, the new rules will come into effect Jan 1, and will apply to Vatican City and all worldwide locations of the Holy See where financial transactions can be made.

The head of the Vatican’s new watchdog-who will be appointed by the pope-will be “a high-ranking prelate who will hire staff with the necessary know-how,” the person said, adding that the new authority would supervise the IOR and any other Vatican institution that can make financial transactions, including charities.

Vatican officials have been working for much of the year with the Bank of Italy, the Organization for Economic Cooperation and Development and other international institutions to get the Holy See to comply with international directives on anti-money-laundering and anti-terror financing legislation.

The Vatican’s efforts accelerated, according to a person familiar with the matter, after Italian prosecutors in September placed the IOR’s chairman, Ettore Gotti Tedeschi, and its director general under investigation on suspicion that they failed to comply with Italian laws against money laundering.

Neither man has been charged. Gotti Tedeschi has denied wrongdoing, and said the bank operates with “absolute transparency”. The Vatican has denied that its officials acted improperly and said the investigation is the result of a “misunderstanding” between the bank and Italian authorities.

Scordamaglia, who also represents Gotti Tedeschi, said that he had no further comment on the probe.

As part of their investigation, prosecutors are trying to determine whether IOR clients used the Vatican bank accounts as a screen to mask the transfer of funds to Italy from Vatican City, which is a sovereign state outside the jurisdiction of Italian financial regulators, according to a person close to the probe.

For years, the IOR has transferred funds to its accounts at other banks on behalf of its clients without fully disclosing those clients’ identities, the journal said.

In 2007, however, Italy introduced tougher disclosure laws, requiring banks to list the names of people who receive funds from IOR accounts and the reason for the transaction.

In October, a judge ruled that $30.34 million in Vatican funds seized as part of the probe should remain frozen, it said.

The IOR has been the financial arm of the Holy See since it was created in 1942 to manage accounts held by priests, cardinals and bishops as well as religious orders, the journal said.

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