Pope to Bind Vatican to Money-Laundering Law, EU Says

Pope Benedict XVI will bind the Vatican to implementing European Union laws against money laundering and financial fraud, the European Commission said, after the Holy See’s bank was tainted by a series of scandals.

The Vatican is “fully committed” to putting relevant EU legislation into effect by the end of 2010, as stipulated by a monetary accord the Vatican signed with the commission Dec. 17 last year, Amadeu Altafaj, spokesman for EU Monetary Affairs Commissioner Olli Rehn, said in an interview in Brussels.

A joint EU-Vatican committee, set up under the agreement, “discussed in detail” a draft Vatican law “approximating” the EU rules at an Oct. 15 meeting, Altafaj said. By an “act of the pope,” the law will become applicable to “the institutions of the Holy See, including the Institute for Religious Works,” as the Vatican Bank is called, Altafaj said Oct. 26. The information was confirmed today by a high-ranking Vatican official, who declined to be identified, citing Vatican policy.

After scandals that included IOR involvement in the fraudulent bankruptcy of Banco Ambrosiano in 1982, the Vatican is seeking to embrace financial openness after a push by the Group of 20 nations for greater transparency in the wake of the economic crisis. The Vatican’s efforts came under scrutiny last month when Italian prosecutors seized 23 million euros ($32 million) from a Rome bank account registered to the IOR and opened an investigation into the Vatican Bank and its top two executives for alleged violations of money-laundering laws.

‘Offshore Bank’

Altafaj’s comments come after Italian media, including the newspaper Libero, had said the Vatican may not respect the Dec. 31 deadline to implement the EU legislation. Not complying with the deadline could nullify the monetary accord with the commission and lead to action by the European Court of Justice. The accord also sets rules for the Vatican, which uses the European single currency, on the issuance of euro coins.

“The IOR has long acted as an offshore bank mostly for Italian businessmen and politicians close to the Roman Curia,” the Vatican’s governing body, Gianluigi Nuzzi, author of Vaticano SpA (Vatican Inc.), a book about the IOR, said by phone before Altafaj’s remarks. “Maybe that’s starting to change.”

The Vatican agreed on Oct. 15 to set up a special authority as of Jan. 1 to implement the new financial legislation “with the right to control the institutions of both the Vatican and the Holy See,” Altafaj said. The Vatican is a sovereign city- state outside EU jurisdiction, though surrounded by Italian territory. The Holy See refers to the institutions, many located within Vatican City, that manage the Roman Catholic Church’s global affairs.

‘Clear Improvement’

The new authority will be “the contact point” for the EU and international organizations “active” in combating money laundering, such as the Paris-based Financial Action Task Force. “This shows a strong level of commitment by the Vatican in implementing the legislation,” Altafaj said. “It’s a clear improvement from the current situation.”

The authority’s head is likely to be Cardinal Attilio Nicora, who will become a sort of “central banker of the Vatican,” Corriere della Sera reported on Oct. 26, citing no one. Nicora currently oversees the Administration of the Patrimony of the Holy See, which manages financial assets and real estate belonging to the Holy See. He was recently named to lead efforts to bring the Vatican in line with EU financial legislation, the Vatican’s Osservatore Romano newspaper said on Sept. 23.

‘Judas’

In May, Nicora was asked in an interview on state-run RAI3 television about cases of alleged corruption involving Italian businessmen and Catholic Church officials. “The community of the apostles also picked the wrong administrator, whose name was Judas,” he said, referring to the man whose betrayal led to Christ’s crucifixion.

Rome prosecutors last month opened a probe into whether the Vatican Bank violated money-laundering laws by omitting information in wire-transfer requests from an IOR account at Credito Artigiano SpA. The case stems from a misunderstanding with the Italian bank, the Vatican said on Sept. 21. Chairman Ettore Gotti Tedeschi, who joined the IOR last year, and Director General Paolo Cipriani are also being probed. The Vatican has said it has “full confidence” in them.

Under Gotti Tedeschi, 65, who also teaches ethics in finance at Milan’s Catholic University, the Holy See has sought to improve the IOR’s image after scandals that included the $1.3 billion collapse of partly Vatican-owned Banco Ambrosiano, once Italy’s largest private bank. Its former Chairman Roberto Calvi, dubbed “God’s banker,” was found hanged under London’s Blackfriars Bridge in June 1982.

To contact the reporters on this story: Jeffrey Donovan in Rome at jdonovan26@bloomberg.net; Lorenzo Totaro in Rome at ltotaro@bloomberg.net.

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net; James Hertling at jhertling@bloomberg.net.

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