The memo, dated April 8, 2016, when Pell was the prefect of the Vatican’s Secretariat for the Economy, said that the cardinal had discovered a means by which APSA could alter financial records to “shield the true identity of owner/source of funds” in the SWIFT system, which records international banking transactions.
Pell asked the then-auditor general of the Vatican, Libero Milone, to undertake an immediate investigation into evidence that several transactions appeared to have been altered in this way, and to make urgent recommendations for reform to the system.
The 2016 memo emerged one day after APSA, which was subject to several waves of institutional reform during the Francis pontificate, recorded a profit of 62.2 million euros (around $73 million) in 2024, up from 49.5 million euros ($58 million) in 2023.
The allegations presented by Pell, while made nine years ago, are potentially serious for the Vatican’s international financial status, since they came weeks after APSA was exempted from international oversight.
In the April 8 letter to Milone, Cardinal Pell wrote that he had in the previous 48 hours “become aware of a possible significant risk in the processing of SWIFT transactions” — international money transfers facilitated by the global Society for Worldwide Interbank Financial Telecommunication.
“On Wednesday 6th April I was alerted to a request from APSA to amend the controls in the SWIFT system,” Pell said. “The request appears to be such that the identity of the sender of funds can be altered to shield the true identity of [the] owner / source of the funds.”
“I immediately took steps to freeze implementation of such a change,” Pell told Milone. However, he said, “on Thursday, April 7, I received further information which seems to illustrate that transactions have been processed in such a way as to shield the true identity of the sender of the funds.”
He said he was attaching SWIFT records indicating one such example, adding, “There may be others.”
Pell further informed the auditor that he had ordered an immediate external backup of the SWIFT database and told Milone that “in the light of these significant issues and the risks that transactions may have been potentially processed in [an] illegal manner, I refer this material to you and ask for an immediate and urgent investigation.”
“Obviously it would be necessary to highlight any possible irregularities to the relevant competent authority,” Pell concluded.
Several sources close to the Secretariat for the Economy and the Office of the Auditor General confirmed the authenticity of the memo and its departmental protocol number and said that Milone’s office had responded by launching an investigation of APSA’s accounts and systems.
That report was presented to the Secretariat for the Economy, led by Pell, and the Council for the Economy, the oversight body for all curial financial affairs, chaired by Cardinal Reinhard Marx of Münich, later in the year of 2016.
The Pillar has been unable to obtain a copy of that report, however multiple sources familiar with its contents said that it identified multiple transactions on behalf of private accounts held at APSA which were disguised to appear to be from Vatican sovereign accounts which, auditors concluded, could have facilitated millions of euros in tax evasion.
“The conclusions were damning,” said one official familiar with the report. “It pointed the finger at several specific instances and left little room for misinterpretation. We were looking at criminal behavior. Bank fraud, you could call it.”
Another source stressed that APSA was in the process of ongoing reform at the time of the Pell memo and Auditor General’s report and that “progress was already being made.”
“The fact that this was detected and investigated at all is, actually, proof of progress. But it can be said that the sense of urgency was not shared outside the [auditor’s office] and the Secretariat [for the Economy].”
Both sources agreed that the detection of the transactions presented a “potential dire risk” to international recognition of the Vatican as a credible financial jurisdiction.
The Pillar has previously reported that, also in 2016, confidential Vatican records show that senior members of the Council for the Economy were warned that the body, set up by Pope Francis in 2014, was in danger of becoming “useful to give the appearance of ongoing reform, but with no real substance.”
Internal Vatican documents separately obtained by The Pillar in 2022 showed that Milone’s team had also warned the Council for the Economy in 2016 that financial irregularities at APSA included “a dangerously, highly centralised investment process and opaque portfolio management operation that breed irregularities and represent significant exposure to fraud.”
In the same year, Pell’s department warned the Council for the Economy that, such was the extent of resistance from within the curia, Pope Francis’ financial reforms were “not only on the verge of becoming irrelevant but in danger of becoming a charade.”
The international “whitelist” status of the Vatican — the recognition of robust anti-money counter-terrorism financing laws and mechanisms in its jurisdiction necessary to avoid enhanced scrutiny and international sanctions — is largely predicated on a 2021 report from MONEYVAL, the European Commission’s anti-money laundering watchdog, which conducted a lengthy on-site inspection of Vatican financial institutions in 2020.
That report concluded that while improvement still needed to be made to mitigate the risk of internal corruption and to bring successful prosecutions for financial crimes, the Vatican was at “medium-low” risk of money laundering activity.
However, that inspection and report did not examine APSA, only the Institute for Works of Religion (IOR), often called the Vatican bank, and ASIF, the Holy See’s internal financial watchdog.
The previous MONEYVAL inspection of the Vatican came in 2012, after which APSA undertook several reforms, including an agreement to stop performing certain commercial activities to exempt itself from international oversight.
While APSA’s primary function is to manage the Holy See’s real estate portfolio and other assets and investments - including cash and stocks - generating a return to help fund the operations of the Roman curia, in the past it also operated as a kind of exclusive private bank, offering accounts, including anonymous numbered accounts, to individuals and non-Vatican institutions.
The use of those accounts was linked to allegations of money laundering and other financial crimes for years, and ending APSA individual accounts and commercial services was a key priority of financial reforms under Cardinal George Pell, who was appointed by Pope Francis as the first prefect of the Secretariat for the Economy in 2014, and Libero Milone, who was named the first auditor general of the Vatican in the same year.
However, while the vast majority of those accounts were closed as part of the reform process, sources close to Pell’s former office told The Pillar that “it is impossible to verify that all of the accounts were closed.”
As a result of the closure of personal accounts and an undertaking by APSA not to act in commercial transactions for private clients, in 2015 APSA was exempted from the oversight of both Moneyval and the ASIF, the Vatican’s own financial watchdog.
The ASIF’s 2015 annual report concluded that since APSA is no longer an “entity that carries out financial activities on a professional basis,” it “stopped being a part of [ASIF’s] jurisdiction at the end of 2015.”
Pell’s letter outlining evidence that APSA had a system to conduct financial transactions “in such a way as to shield the true identity of the sender of the funds” came three months and one week after APSA ceased to be under external institutional financial oversight.
Evidence that APSA continued to conduct commercial transactions on behalf of private clients after its undertaking to MONEYVAL not to do so, and appearing to have done so by illegal means, could trigger a review by the international watchdog of all curial financial institutions.
The potential consequences of alleged falsification of SWIFT records could see the Vatican returned to an international “black list” of jurisdictions, severely curtailing its ability to interact with the global financial system and markets and making it subject to international sanctions and enhanced monitoring.
While Milone’s department produced a report later in 2016 which looked into the transactions highlighted by Pell and several other instances, both men left their posts in the Vatican within a year.
In June of 2017, Pell took an extended leave of absence to return to Australia to contest accusations of sexual abuse, of which he was eventually exonerated by the country’s supreme court.
That same month, Milone was forced from office by the then-sostituto of the Secretariat of State, Cardinal Angelo Becciu, who, together with the then-head of the Vatican City’s corps of gendarmes, held and interrogated the auditor and his chief deputy for several hours before forcing them to resign under threat of criminal prosecution for “spying” on the financial affairs of curial officials.
Cardinal Pell died in January of 2023.
Milone is currently seeking leave to appeal from the Vatican City’s Court of Cassation, after his lawsuit for wrongful dismissal was rejected by the city state’s Court of Appeal earlier this month.
At the time of Pell’s letter, APSA was led by Cardinal Domenico Calcagno, who served as its president from 2011 until 2018, at which time Pope Francis accepted his resignation after he turned 75 years of age.
In 2019, Calcagno’s successor at APSA, Bishop Nunzio Gallatino, acknowledged that APSA had provided a 50 million euro commercial loan to the Secretariat of State in 2014, a violation of its undertakings to ASIF and Moneyval which led to the 2015 exemption.
The money went to fund a for-profit enterprise to acquire a Catholic hospital, which had collapsed under 800 million euros of debt related to money laundering, embezzlement, and fraud charges.
Vatican Secretary of State Cardinal Parolin later acknowledged that he had acted to secure the loan from APSA, despite the 2012 prohibition on such loans, and when the loan was not repaid, APSA had to write off 30 million euros in bad debt, wiping out its profits for 2018.
In 2022, APSA was found to have partially financed a 100 million euro deal to rescue another scandal hit Catholic hospital in Rome, this time linked to businessman Gianluigi Torzi, convicted in Vatican court for his role in the London property affair, who committed a multi-million euro fraud against the hospital.
That same year, Pope Francis issued a new constitution for the Roman curia, Predicate Evangelium, in which he designated APSA to assume control of all asset management — real estate, cash, and other investments — for all Holy See institutions, and directed that APSA manage all of these funds and holdings using the IOR to execute its financial transactions.
However, just weeks later, Francis reversed this decision with a rescript, effectively stripping APSA of nearly all of its asset and account management functions.
Since 2023, APSA has been led by Archbishop Giordano Piccinotti S.D.B.