A judge ruled that €23 million ($31.8 million) in Vatican funds
should remain frozen as part of a probe by Italian prosecutors into
whether top officials of the Holy See's bank violated Italy's anti
money-laundering laws by ordering the transfer of funds to certain
Italian and German banks without disclosing the nature of the movements.
The move comes as the prosecutors are broadening their probe, looking
at the Vatican bank's transactions with other Italian financial
institutions, said people familiar with the matter.
Judge Maria Teresa Covatta's decision to keep the funds frozen is a
setback for the Vatican, which has denied that any of its officials
acted improperly and that the investigation is the result of a
"misunderstanding" between the bank and Italian authorities.
Vatican spokesman Rev. Federico Lombardi said Wednesday that the
ruling "has been met with stupor" and that "We're dealing with a problem
of interpretation."
Father
Lombardi added that "IOR managers believe they can clarify the whole
issue as soon as possible with the appropriate authorities."
Judge Covatta didn't release the text of her motivations for the ruling.
The two officials put under investigation in September are Ettore
Gotti Tedeschi, chairman of the Institute for Religious Works, or IOR,
as the Vatican bank is known, and the bank's managing director, Paolo
Cipriani.
Neither has been charged in the probe.
The Vatican has previously said the bank ordered the transfer of most
of the €23 million in funds from an IOR account at regional lender
Credito Artigiano, to a branch of J.P. Morgan in Frankfurt in order to
purchase German bonds.
Mr. Gotti Tedeschi has denied any wrongdoing, saying the bank operates with "absolute transparency."
Approached on the sidelines of a Rome conference on finance and ethics, he declined to comment.
The Vatican hasn't made Mr. Cipriani available for comment.
Credito Artigiano and J.P. Morgan have declined to comment.
As prosecutors broaden their probe, they are looking at the activity
of accounts the IOR has opened at Italian banks on behalf of Vatican
bank clients over the years, a person familiar with the matter said.
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, this person added.
Father Lombardi declined to comment on any detail of the broadened investigation.
Traditionally, the IOR's clients have been Vatican officials and
clergy, who receive salaries and other funds from the Holy See into
their IOR accounts.
For years, the IOR has transferred funds to its accounts at other
banks on behalf of its clients without fully disclosing their client's
identities.
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.
Over the past year, a number of accounts in Italian banks, registered
under the IOR, have breached those laws, said the person familiar with
the matter.
The Vatican has said its bank accounts in Italy are registered under the IOR, and not under the names of its clients.
Mr. Gotti Tedeschi and other Vatican officials have said they are
reviewing the bank's practices with the aim of bringing the IOR up to
code with the Organization for Economic Cooperation and Development's
anti money-laundering standards.
SIC: WSJ/USA