Oct. 1 (Bloomberg) -- The Vatican bank disclosed its annual report for the first time in the institute’s history as it seeks to improve financial transparency after several corruption scandals.
The bank, formally called the Institute for Works of Religion, or IOR, expects 2013 to be marked by extraordinary expenses “for the ongoing reform and remediation process”and the effects of rising interest rates, according to a statement. The bank earlier this year reported that 2012 profit more than quadrupled to 86.6 million euros ($117 million).
A review of all customer relationships and procedures to prevent money-laundering is under way, the bank said in the statement posted on its website. IOR will shut down about 900 accounts, including all of those held by foreign embassies, Corriere della Sera reported today without saying how it got the information. The decision was taken after viewing large cash transactions by diplomatic missions of Iran, Iraq and Indonesia, according to the newspaper.
“The remediation efforts and the introduction of appropriate regulation in the institute apply independently of the nature of the clients,” Max Hohenberg, a spokesman for the IOR, said by phone. “It doesn’t matter whether they are employees, cardinals or ambassadors.”
Today’s annual report publication is part of Vatican bank President Ernst von Freyberg’s effort to help transform a 71-year-old institution rocked by scandal into a transparent financial firm. In June, Pope Francis named a special commission to help oversee the operations of the bank after Moneyval, the Council of Europe’s monitoring body for money laundering and terrorism financing, called for independent supervision of the bank.
Von Freyberg assumed responsibility for 18,900 clients when he accepted the appointment from Francis’s predecessor, Pope Benedict XVI, in February. His team is reviewing the source of all deposits, from the savings of individual nuns and priests to the operating resources of Catholic congregations with worldwide reach.
The bank oversees about 7.1 billion euros in assets, largely in bonds and cash. IOR clients with outposts from Chile to Tanzania manage income, transfers and expenditures out of the bank located in the world’s smallest state, situated in the heart of Rome. The bank doesn’t use deposits for lending and had less than 1 billion euros in equities at the end of last year.
The bank’s profit is at the disposal of the Holy See. Last year it gave the Pope a contribution of 50 million euros. The IOR had 114 employees at the end of 2012 and is housed in a building adjacent to the papal offices just off St. Peter’s Square.
The Vatican is trying to overcome three decades of scandals ranging from the Banco Ambrosiano failure in the 1980s to the freezing of 23 million euros by Italian prosecutors in 2010 in a money-laundering probe.
While admitting no wrongdoing, the Vatican paid $240 million to Banco Ambrosiano account holders in 1984 after the IOR was implicated in the lender’s fraudulent bankruptcy. Ambrosiano’s former chairman Roberto Calvi, dubbed “God’s banker,” was found hanged under London’s Blackfriars Bridge in June of 1982 amid the scandal.
The Vatican signed an agreement with Italian authorities July 26 to exchange information about the bank in order to prevent money laundering and terrorism financing. Similar accords have also been signed with other countries, including the U.S.