This is no ordinary bank: The ATMs are in Latin.
Priests use a
private entrance.
A life-size portrait of Pope Benedict XVI hangs on the
wall.
Nevertheless, the Institute for Religious Works is a
bank, and it's under harsh new scrutiny in a case involving
money-laundering allegations that led police to seize euro23 million
($30 million) in Vatican assets in September. Critics say the case shows
that the "Vatican Bank" has never shed its penchant for secrecy and
scandal.
The Vatican calls the seizure of assets a
"misunderstanding" and expresses optimism it will be quickly cleared up.
But court documents show that prosecutors say the Vatican Bank
deliberately flouted anti-laundering laws "with the aim of hiding the
ownership, destination and origin of the capital."
The documents also
reveal investigators' suspicions that clergy may have acted as fronts
for corrupt businessmen and Mafia.
The documents pinpoint two transactions that have not
been reported: one in 2009 involving the use of a false name, and
another in 2010 in which the Vatican Bank withdrew euro650,000 ($860
million) from an Italian bank account but ignored bank requests to
disclose where the money was headed.
The new allegations of financial impropriety could not
come at a worse time for the Vatican, already hit by revelations that it
sheltered pedophile priests.
The corruption probe has given new hope to
Holocaust survivors who tried unsuccessfully to sue in the United
States, alleging that Nazi loot was stored in the Vatican Bank.
Yet the scandal is hardly the first for the
centuries-old bank.
In 1986, a Vatican financial adviser died after
drinking cyanide-laced coffee in prison.
Another was found dangling from
a rope under London's Blackfriars Bridge in 1982, his pockets stuffed
with money and stones.
The incidents blackened the bank's reputation,
raised suspicions of ties with the Mafia, and cost the Vatican hundreds
of millions of dollars in legal clashes with Italian authorities.
On Sept. 21, financial police seized assets from a
Vatican Bank account at the Rome branch of Credito Artigiano SpA.
Investigators said the Vatican had failed to furnish information on the
origin or destination of the funds as required by Italian law.
The bulk of the money, euro20 million ($26 million),
was destined for JP Morgan in Frankfurt, with the remainder going to
Banca del Fucino.
Prosecutors alleged the Vatican ignored regulations
that foreign banks must communicate to Italian financial authorities
where their money has come from. All banks have declined to comment.
In another case, financial police in Sicily said in
late October that they uncovered money laundering involving the use of a
Vatican Bank account by a priest in Rome whose uncle was convicted of
Mafia association.
Authorities say some euro250,000 euros, illegally
obtained from the regional government of Sicily for a fish breeding
company, was sent to the priest by his father as a "charitable
donation," then sent back to Sicily from a Vatican Bank account using a
series of home banking operations to make it difficult to trace.
The prosecutors' office stated in court papers last
month that while the bank has expressed a "generic and stated will" to
conform to international standards, "there is no sign that the
institutions of the Catholic church are moving in that direction." It
said its investigation had found "exactly the opposite."
Legal waters are murky because of the Vatican's special
status as an independent state within Italy.
This time, Italian
investigators were able to move against the Vatican Bank because the
Bank of Italy classifies it as a foreign financial institution operating
in Italy.
However, in one of the 1980s scandals, prosecutors could not
arrest then-bank head Paul Marcinkus, an American archbishop, because
Italy's highest court ruled he had immunity.
Marcinkus, who died in 2006 and always proclaimed his
innocence, was the inspiration for Francis Ford Coppola's character
Archbishop Gilday in "Godfather III."
The Vatican has pledged to comply with EU financial
standards and create a watchdog authority.
Gianluigi Nuzzi, author of
"Vatican SpA," a 2009 book outlining the bank's shady dealings, said
it's possible the Vatican is serious about coming clean, but he isn't
optimistic.
"I don't trust them," he said. "After the previous big
scandals, they said 'we'll change' and they didn't. It's happened too
many times."
He said the structure and culture of the institution is
such that powerful account-holders can exert pressure on management,
and some managers are simply resistant to change.
The list of account-holders is secret, though bank
officials say there are some 40,000-45,000 among religious
congregations, clergy, Vatican officials and lay people with Vatican
connections.
The bank chairman is Ettore Gotti Tedeschi, also
chairman of Banco Santander's Italian operations, who was brought in
last year to bring the Vatican Bank in line with Italian and
international regulations.
Gotti Tedeschi has been on a very public
speaking tour extolling the benefits of a
morality-based financial
system.
"He went to sell the new image ... not knowing that
inside, the same things were still happening," Nuzzi said. "They
continued to do these transfers without the names, not necessarily in
bad faith, but out of habit."
It doesn't help that Gotti Tedeschi himself and the
bank's No. 2 official, Paolo Cipriani, are under investigation for
alleged violations of money-laundering laws.
They were both questioned
by Rome prosecutors on Sept. 30, although no charges have been filed.
In his testimony, Gotti Tedeschi said he knew next to
nothing about the bank's day-to-day operations, noting that he had been
on the job less than a year and only works at the bank two full days a
week.
According to the prosecutors' interrogation transcripts
obtained by AP, Gotti Tedeschi deflected most questions about the
suspect transactions to Cipriani.
Cipriani in turn said that when the
Holy See transferred money without identifying the sender, it was the
Vatican's own money, not a client's.
Gotti Tedeschi declined a request for an interview but
said by e-mail that he questioned the motivations of prosecutors.
In a
speech in October, he described a wider plot against the church,
decrying "personal attacks on the pope, the facts linked to pedophilia
(that) still continue now with the issues that have seen myself
involved."
As the Vatican proclaims its innocence, the courts are
holding firm. An Italian court has rejected a Vatican appeal to lift the
order to seize assets.
The Vatican Bank was founded in 1942 by Pope Pius XII
to manage assets destined for religious or charitable works.
The bank,
located in the tower of Niccolo V, is not open to the public, but people
who use it described the layout to the AP.
Top prelates have a special entrance manned by security
guards.
There are about 100 staffers, 10 bank windows, a basement vault
for safe deposit boxes, and ATMs that open in Latin but can be accessed
in modern languages.
In another concession to modern times, the bank
recently began issuing credit cards.
In the scandals two decades ago, Sicilian financier
Michele Sindona was appointed by the pope to manage the Vatican's
foreign investments.
He also brought in Roberto Calvi, a Catholic banker
in northern Italy.
Sindona's banking empire collapsed in the mid-1970s and
his links to the mob were exposed, sending him to prison and his
eventual death from poisoned coffee.
Calvi then inherited his role.
Calvi headed the Banco Ambrosiano, which collapsed in
1982 after the disappearance of $1.3 billion in loans made to dummy
companies in Latin America.
The Vatican had provided letters of credit
for the loans.
Calvi was found a short time later hanging from
scaffolding on Blackfriars Bridge, his pockets loaded with 11 pounds of
bricks and $11,700 in various currencies.
After an initial ruling of
suicide, murder charges were filed against five people, including a
major Mafia figure, but all were acquitted after trial.
While denying wrongdoing, the Vatican Bank paid $250 million to Ambrosiano's creditors.
Both the Calvi and Sindona cases remain unsolved.
SIC: Bloomberg/INT'L