Wednesday, July 03, 2013

New finance scandal to test Vatican resolve

http://triskel182.files.wordpress.com/2013/06/don-500-euro.jpgA suspected plot to smuggle €20m from Switzerland and the arrest of a former Italian secret service agent; a financial middleman and a senior priest with a past as a banker who is now under suspicion of money laundering.
 
“You could not make it up,” remarked a Vatican official, who asked not to be named as news of the latest financial scandal broke over the city state on Friday. 

The same was said in 1982 when Roberto Calvi, the chairman of Banco Ambrosiano, was found hanging from London’s Blackfriars bridge, his pockets stuffed with bricks and cash, a presumed victim of mafia hitmen taking vengeance for funds lost through the collapse of the bank, in which the Vatican was a significant shareholder.

At that time, the Vatican stonewalled. Efforts by Italian investigators to question officials of the city state, including Paul Marcinkus, an American archbishop then heading the Vatican bank, were blocked for reasons of sovereign immunity. He died in 2006, always maintaining he had no involvement in the affair.

Today – with the election of a new pope promising a simpler and “poorer” Church – the Holy See is pledging a new era of co-operation with the Italian authorities. 

However, as Father Federico Lombardi, Vatican spokesman, also noted on Friday, the Holy See has not yet received any request for help from Rome. 

This reflects, Vatican officials admit, an understandable lack of trust on the part of Italian prosecutors and an absence of direct lines of communication between the two sides on a judicial or regulatory level.

The officials, who asked not to be identified, said Monsignor Nunzio Scarano, the cleric at the centre of the Italian investigations, was already the subject of internal Vatican inquiries into suspicious movements in his account held at the Institute for Religious Works (IOR), as the city state’s bank is formally known.

It was not clear however from official Vatican statements whether the Holy See had informed Italian authorities of their suspicions regarding the priest.

The scandal presents the first real test of the “zero tolerance” policy set by Ernst von Freyberg, a German lawyer and manager appointed as head of the IOR by pope Benedict XVI shortly before his abdication in February. 

With a mission to clean up the bank, Mr von Freyberg has hired Promontory Financial, a US group which specialises in whipping banks into regulatory shape. A team of financial forensic experts is said to be going through Father Scarano’s transactions.

Mr von Freyberg, who was in Frankfurt on Friday, wants to know if there was a failure in the bank’s supervisory process and whether someone in the IOR was acting to cover up the affair. The IOR has been the subject of a separate money laundering investigation since 2010 by Rome prosecutors.

The Financial Times asked Mr Freyberg last month how he dealt with the risk of priests laundering mafia money presented as “donations”. “That is the big risk. You are spot on,” he replied. 

“How do you get to grips with that? It starts with knowing your customer. Is there something odd about this priest? . . . Why does Don Giorgio come every Wednesday with €10,000 in cash? If Don Giorgio did that our system would catch that and alert us to it, and then we would inquire and inform the IAF about it,” Mr von Freyburg said.

The IAF is the Vatican’s Financial Information Authority, whose director, Rene Bruelhart, was appointed by Pope Benedict to bring the Holy See into line with international standards on financial transparency, focusing on money laundering. 

A Swiss lawyer, Mr Bruelhart had been head of Liechtenstein’s Financial Intelligence Unit with the same mission.

“Italians do their job and we do our job, in parallel. We are all moving in the same direction,” a Vatican official said. “The pope is taking this seriously.”

Vatican observers say the Argentine pontiff received a clear mandate from the conclave of cardinals who elected him following months of damaging exposures about corruption in the Curia – the Vatican bureaucracy – leaked by pope Benedict’s personal butler.

“He was chosen as a reformer, scandal-solver and director of a true globalisation of the Vatican,” wrote Massimo Franco, columnist for Corriere della Sera. “The papacy and the Italian magistrates have the common interest of opening the black box of the IOR to see what is good and what is bad,” he said on television on Friday.

Pope Francis has taken the first steps. 

In April he appointed a committee of eight cardinals to draw up reforms for the Curia. 

After being informed of Monsignor Scarano’s case, the pope also set up a special commission to advise on reforms for the Vatican bank.

Tarcisio Bertone, the powerful secretary of state, is expected to retire within the next months. 

Some commentators expect pope Francis to reduce the powers of his successor and streamline the Curia. 

Saints did not have bank accounts, the pope has remarked.

“One has to be deaf, dumb and blind to think that reforms are not on the agenda of the pope,” said Father Dodaro, president of the Augustinianum Institute.

“There is a clear direction, the pope himself has been very obvious about it as he keeps saying that he wants a poorer Church. How that is translated into detail we don’t know.”

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