When Pope Benedict XVI makes lofty statements about the role ethics plays in the economy, he speaks from experience.
Within the Vatican is the only branch of the Istituto per le Opere di
Religione (IOR), otherwise known as the Vatican bank. Its ATM uses
Latin.
Only Vatican employees and religious institutions are allowed to open
accounts in the bank — which you’d think would make it the most moral
bank in the world.
So why is its chief, economist Ettore Gotti Tedeschi, under investigation for money laundering?
Italy's Central Bank flagged a 23 million euro transfer from an IOR
account in an Italian bank, the Credito Artigiano, to two other accounts
as lacking some information now compulsory under EU-mandated anti-money
laundering laws.
So prosecutors seized the money, froze the IOR
account, and opened an investigation.
This embarrassing “misunderstanding” — as the Vatican called it in a note
published in its newspaper, l'Osservatore Romano — managed to turn the
spotlight again on an institution that has been involved in many murky
affairs.
“The IOR is not a bank in the normal definition of the term,” wrote Vatican spokesman Federico Lombardi in a recent letter to the Financial Times. In fact, it doesn't lend money or act as a consultant to businesses.
“It is more a fund deposit and transfer institution than a bank,” said
Carlo Marroni, a Vatican expert with Il Sole 24 Ore, Italy's financial
daily. IOR doesn't invest in the stock market, he thinks, “though they
operate on the currency or bond market, or buy gold.” To trade in world
markets it must go through other banks, such as the Credito Artigiano.
It is hard to pin down the value of IOR’s holdings.
“It doesn't publish
a budget or an annual report,” Marroni said. “It is usually held that
it has 5 billion euros in deposits, but I don't know how exact this
figure is.”
Another often reported figure is that accounts turn a 13 percent yearly interest — tax-free, like the Vatican itself.
But, “I think it's much less than that,” said Marroni. A leaked
document from 1987 published in a recent book that made headlines here,
“Vaticano Spa” — Spa being the acronym for publicly traded companies in
Italian — showed that an IOR account yielded a 9 percent net interest.
IOR's biggest asset, anyway, is its secrecy — all its accounts are
identified only by number.
This secrecy has been used for unholy goals.
Some of them have been documented in full.
The author of “Vaticano
Spa,” Gianluigi Nuzzi, gained access to the archive left by the late
Monsignor Renato Dardozzi, a key player at IOR from 1974 to the late
1990s.
He used it to investigate the bank's involvement in
money-laundering for Italian politicians and even mafia bosses.
In a
letter published by Nuzzi, the previous president of the Vatican Bank,
Angelo Caloia, confessed worriedly to cardinal Angelo Sodano, John Paul
II's “prime minister,” that IOR had served to “clean” bribes and that it
held ciphered accounts for Catholic politicians, such as seven-time
prime minister Giulio Andreotti.
When Banco Ambrosiano head Roberto Calvi, know as “God's Banker,” died
under Blackfriars Bridge in London in 1982, the Vatican Bank was then
the main shareholder of the Banco.
The American head of IOR at the time, Illinois-born cardinal Paul
Casimir Marcinkus, a former body guard to Pope Paul VI, resorted to
Vatican immunity to avoid prosecution by Italian judges. He died in 2006
and has often been blamed for the scandals that plagued the bank in the
1980s.
“After that, things started to change, starting under Caloia
(Marcinkus' successor from 1990)," said Giancarlo Galli, a journalist
who wrote a key book on Catholic finance.
“Slowly, later than elsewhere,
but people in the Vatican began to understand that 'opacity' is no
longer a value in the financial world, replaced by 'transparency.'”
Such efforts redoubled with the arrival last year as president of Gotti
Tedeschi, an outspoken economist who had worked as Italian
representative from Spain's Banco Santander.
After news of the
money-laudering investigation came out last fall, Tedeschi voluntarily
spoke with prosecutors.
Italy's Corriere della Sera also reported that
13 IOR accounts not belonging to Vatican employees had been closed.
Until now, IOR's secrecy has been assured by the loyalty and frugality
of its employees, mostly priests, and by the fact that the Vatican, a
sovereign State, operates as a financial black hole, exempt from all
international disclosure and transparency obligations.
This is going to change: The Vatican is working with the Organization
for Economic Cooperation and Development to be accepted on a 'white list' of financially accountable countries.
“This could take quite a long time, though,” Marroni said.
A papal decree
published on Dec. 30 gave the Vatican for the first time its own
money-laundering law.
It also created a financial oversight authority
with broad powers to investigate any suspicious money transfer.
Also last year, for the first time, the Vatican attached an official
figure to IOR, saying in the yearly statement on the Holy See's budget
that the bank had donated 50 million euros “for the religious activities
of the Holy Father.”
“This is welcome,” Marroni said, “though this shows that IOR turns a
profit. And one cannot help but wonder where it comes from.”
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