The Vatican has yet to formally commit to financial transparency, the Organization for Economic Cooperation and Development said one week after Italian magistrates opened a probe into its bank for alleged violations of money-laundering laws.
While the Holy See said last week that it’s in talks with the OECD about getting on the Paris-based group’s so-called White List of nations that comply with global norms, it has not taken the first step toward transparency, said Jeffrey Owens, head of the OECD’s Center for Tax Policy and Administration.
“The speed of the negotiations depends very much on them,” Owens said by phone from Singapore. “The first thing is for them to make a formal commitment to the standards of transparency and exchange of information for tax purposes.”
The Holy See said on Sept. 21 that the Vatican Bank, or the Institute for Religious Works, and its two top executives had been placed under investigation by Rome prosecutors for allegedly omitting data in wire transfers from an Italian account. Prosecutors froze 23 million euros ($31 million) in an IOR account at a Rome branch of Credito Artigiano SpA, newspapers including Il Sole 24 Ore said that day.
The IOR’s statutes call for it to collect and manage cash, assets and properties earmarked for religious purposes. The Vatican has denied wrongdoing in the probe, saying it stems from a “misunderstanding” between the IOR and Credito Artigiano.
Vatican Bank Chairman Ettore Gotti Tedeschi, who is also under investigation, said the Holy See set up a panel earlier this year to implement financial-transparency and anti-money-laundering rules. He declined to comment on the probe.
“We’ve done more than accept the norms,” he said in an interview on Sept. 27, declining to say when the Vatican would make a formal commitment to the OECD. Owens said the Holy See faces a “difficult process.”
Under Gotti Tedeschi, a professor of financial ethics at Milan’s Catholic University who joined the IOR last year, the Holy See has sought to improve the bank’s image after a series of scandals, including the $1.3 billion collapse of the partly Vatican-owned Banco Ambrosiano, Italy’s largest private bank at the time, in 1982. Ambrosiano’s former Chairman Roberto Calvi, dubbed “God’s banker,” was found hanged under London’s Blackfriars Bridge in June of that year.
In response to the money-laundering investigation, the IOR wants to close 13 numbered accounts registered to non-clerics, a plan opposed by some Vatican officials, Corriere della Sera reported Sept. 27, citing unidentified sources.
“Gotti Tedeschi was brought in to clean house,” Gianluigi Nuzzi, author of Vaticano SpA (Vatican Inc.), a 2009 book about the IOR, said in an interview. “Not everyone wants him to succeed.” Nuzzi estimates the bank’s holdings at about 5 billion euros.
“As we see in these days, one’s image is a precious good that must be continuously protected and safeguarded,” said Gotti Tedeschi, 65, who also serves as non-executive chairman of an Italian unit of Spain’s Banco Santander SA.
The Vatican approached the OECD in the spring and officials from the two sides met twice over the summer to discuss how the city state could be included on the White List, Owens said.
Holy See authorities also met once with officials of the Financial Action Task Force, a separate body within the OECD that sets anti-money-laundering rules, and “indicated that they intend to implement the FATF standards,” said Alexandra Wijmenga-Daniel of the task force’s Secretariat.
Global efforts to crack down on banking secrecy took on greater urgency after the financial crisis broke out in 2008, with the Group of 20 nations calling for a fresh drive against tax evasion. While dozens of tax havens such as Andorra and San Marino were listed on the OECD’s website as not having implemented its standards in April 2009, only 12 jurisdictions are currently on the list.
A formal pledge to implement global tax standards would allow the Vatican to be put on the so-called Gray List, which currently includes countries such as Liberia and Panama, according to the OECD website. To take the next step onto the White List, the Vatican would need to enact at least 12 bilateral accords on sharing information for tax purposes.
Critics such as Britain’s Tax Justice Network have said that for such bilateral accords to be meaningful, they must involve key partners. Asked if the Vatican would be required to reach an information-sharing deal with Italy, the nation with which it has the closest ties, Owens said the OECD seeks to ensure that jurisdictions make agreements with their main trading allies.
“We have a set of procedures, we have a set of standards, we have review mechanisms in place,” Owens said. “All this would be applied to the Vatican just like any other state.”