Ex-Vatican bank officials allowed money laundering, say prosecutors

Prosecutors allege two former top executives at the Vatican bank repeatedly broke Italian laws on money laundering by failing to give sufficient information when ordering multi-million-euro bank transfers, according to judicial documents seen by Reuters.

While the prosecutors stopped short of accusing two men who were until recently the top officials at the Vatican bank of money laundering, they said confusion over the handling of IOR accounts had created the conditions where it could take place.

Key details missing on requested transfers included the identity of the owners of the funds and the reason for transfer.

The Institute for Works of Religion (IOR), as the Vatican bank is formally known, has long been in the spotlight for failing to meet international standards intended to combat tax evasion and the disguising of illegal sources of income.

A report by European watchdog Moneyval last year said the Vatican state, despite some progress, failed to meet some critical financial transparency standards.

The allegations by prosecutors in Rome investigating possible breaches of the rules, which have not yet been made public, are the latest blow to the Vatican bank, which has been under pressure since Italy's central bank ordered Italian banks to enforce strict transparency criteria when dealing with it.

Italy, along with other EU nations, adopted a 2005 European Union directive on fighting money laundering in 2007. The law introduced a number of measures intended to increase financial transparency and block or uncover illicit money flows.

The two men, former IOR director general Paolo Cipriani and former deputy director general Massimo Tulli have not been charged with any crime. Based on the results of the probe, a judge will determine if there is sufficient evidence to charge them. Cipriani's lawyer Vincenzo Scordamaglia said the events at the centre of the investigation took place several years ago and declined to comment when Reuters contacted him by telephone.

Elisa Scaroina, listed in the prosecutors' document as a lawyer for Tulli, said she no longer represented him. It was not possible to reach Tulli.

The future of the bank is in doubt after Pope Francis last month set up a special commission to reform it. Vatican sources said in April the pope, who has said he wants the Church to be a model of austerity and honesty, could decide to radically restructure the bank or even close it.

The allegations were contained in two documents filed by prosecutors with a Rome court detailing a long-running investigation into alleged breaches of anti-money laundering laws that ended two weeks ago. The prosecutors focused on 15 irregular bank transfers ordered by Cipriani and Tulli to bank accounts in Italy and Germany. The transactions were deemed irregular as they did not provide details on the origin of the money and on the reason for the bank transfers.

The prosecutors do not at any stage in the documents suggest that the transfers were related to the illicit funding of criminal activities.

Authorities around the world have stepped up pressure over the last decade on illicit financing of criminal activities and money laundering by introducing strict rules which require the origin of financial flows to be detailed.

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