Moneyval also requests Vatican bank inspection

European experts on preventing financial crimes praised a series of new Vatican laws and procedures but urged the Vatican to move immediately to conduct onsite inspections of the Vatican bank and the Administration of the Patrimony of the Holy See.

Moneyval – the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism – said, “wide-ranging legislative and institutional measures were instituted to rectify deficiencies” in Vatican law and structures and showed “significant efforts” to implement recommendations Moneyval made in July 2012.

The committee said it was encouraged that the Institute for the Works of Religion, commonly known as the Vatican bank, had completed a preliminary survey of its account holders, was in the midst of a more thorough review of them, had redefined the categories of customers eligible to hold an account at the Vatican, and had closed some accounts.

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However, Moneyval also recommended the Vatican oversight agency, known as the Financial Intelligence Authority, conduct “a full inspection of the IOR (the Italian acronym for the Vatican bank) without any further delay.”

Moneyval approved the Holy See-Vatican progress report at a meeting earlier this week in Strasbourg, France, and published the full report on its website earlier today.

In its report, the Vatican said that at the end of November, the Financial Intelligence Authority was at an advanced stage in planning its onsite inspection of the bank and expected to begin in January 2014 at the latest.

Moneyval also encouraged an inspection of the Administration of the Patrimony of the Holy See, commonly referred by its Italian acronym APSA, but the Vatican said the inspection would take place “at a later stage.”

APSA handles the Vatican’s investment portfolio and its real estate holdings, and also serves as the Vatican employment office and procurement agency. The office originally was set up to manage the assets received as a settlement from the Italian government in 1929 with the signing of the Lateran Pacts.

In its 2012 report to Moneyval, the Vatican estimated APSA’s assets to be worth about 680 million euros. The assets included the accounts of 23 individuals – cardinals and bishops who deposited charitable contributions made in their name to the Vatican or their home dioceses and a handful of laypeople who made large donations to the Vatican and were receiving annuities. The Vatican stopped accepting such arrangements in 2001 and has since been taking steps to close the existing accounts.

Moneyval praised changes in Vatican laws dealing with finance, financial crimes, money laundering and terrorism financing and changes to the role, authority and responsibilities of the Vatican’s Financial Intelligence Authority. But is also noted that the Vatican said major changes to the Vatican bank and APSA would have to await the conclusion of work by commissions appointed by Pope Francis to study the two entities.

A key focus of Moneyval has been encouraging the Vatican to strengthen the ability of its Financial Intelligence Authority to set policy to prevent financial crimes, to freeze assets when suspicious activities occur and to audit financial transactions throughout Vatican City.

The Vatican report indicated that Vatican employees have begun to use the new procedures initiated by the authority and to report potentially problematic transactions. In 2012 the authority said it received six “suspicious transaction reports,” while in the first 10 months of 2013, it had received 105 reports. The Vatican attributed the huge jump to a combination of the initial review of all Vatican bank accounts and “increased transaction monitoring.”

Moneyval had urged the Vatican to implement procedures for seizing or freezing assets when alarms are raised by suspicious transactions. In 2013, the report said, the Vatican seized 1.98 million euro “in a money laundering investigation” involving Msgr Nunzio Scarano, an accountant at APSA arrested by Italian authorities on charges of fraud, corruption and slander. He also is under investigation in an Italian money laundering case.

Moneyval’s approval of the Vatican progress report “confirms the significant efforts undertaken by the Holy See and Vatican City State to strengthen its legal and institutional framework,” said Msgr. Antoine Camilleri, undersecretary for relations with states and head of the Vatican’s delegation to Moneyval.

“The Holy See is fully committed to continuing to improve further the effective implementation of all necessary measures to build a well-functioning and sustainable system aimed at preventing and fighting financial crimes,” Msgr Camilleri said in a statement released by the Vatican press office.

Rene Brulhart, director of the Financial Intelligence Authority, told Vatican Radio that the changes enacted at the Vatican and the verification by Moneyval demonstrate the church’s commitment to “applying the measures necessary to present ourselves as a credible partner” in the global fight against financial crime, particularly “the struggle against laundering dirty money and financing terrorism.”

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