The Vatican has set up a new financial authority to fight money laundering and make its financial operations more transparent.
The Pope has signed into law new rules to bring the Vatican's
banking regulations in line with international efforts to combat money
laundering and the financing of terrorism.
The move comes ahead of an EU deadline.
It follows accusations the Vatican had been contravening international rules on money laundering.
In September, Rome prosecutors formally put the director of
the Vatican Bank, Ettore Gotti Tedeschi, and his deputy under criminal
investigation after receiving a tip-off from the Bank of Italy about
possible money laundering.
The Italian justice authorities seized 23m euros ($30m; £19m)
which the Vatican had deposited at a branch of an Italian commercial
bank near Saint Peter's Square, allegedly without properly identifying
either the depositor or the recipient.
The Vatican said there had been a misunderstanding and there had been no wrongdoing by their bank or its employees.
On Thursday, Pope Benedict XVI
signed the documents, saying the Vatican wanted to join other countries
in cracking down on legal loopholes that have allowed criminals to
exploit the financial sector.
The Vatican is acting ahead of a 31 December deadline to
create a compliance authority to oversee all its financial operations,
which is required by the EU and other international organisations.
The Vatican's centuries-old secrecy over the way it handles
its money will no longer be an excuse to avoid its obligations under
international and Italian criminal law to combat money-laundering
operations by third parties, says the BBC's David Willey in Rome.
Exempt
The Vatican Bank - known officially as the Institute for Works
of Religion - has hitherto exempted itself from international banking
regulations on the grounds that it is not a real bank in the normal
sense of the word, our correspondent says.
It handles accounts for the Pope, his cardinals and religious
orders, and has only one branch inside the apostolic palace in Rome.
The new laws are due to come into effect by 1 April, after the new authority is set up and its members chosen, the Vatican said.
It will take some time, however, for the Vatican to be put on
the so-called "white list" of the Organisation for Economic
Co-operation and Development, our correspondent adds.
The list
identifies countries that have agreed to share tax information and crack
down on tax havens.
SIC: BBC/UK