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Ex-Vatican bank officials allowed money laundering, say prosecutors

Prosecutors suspect two former Vatican bank executives of laundering money, based on incomplete data on bank transfers that prosecutors say violated money laundering laws.

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Among the regulations, banks are obliged to verify the identity of customers. Money transfers that originate in non-EU states that do not comply with these stringent anti-money laundering rules are subject to stricter scrutiny.

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In the documents, Italian prosecutors said former IOR Chairman Ettore Gotti Tedeschi, who attempted to improve practices at the IOR before he was fired in 2012, was no longer under investigation. His lawyer, Fulvio Palazzo, was not immediately available for comment.

In all the transactions detailed, the IOR failed to report who the money belonged to when it was transferred, which broke Italian rules aimed at preventing money laundering, the prosecutors said. Prosecutors did not allege that the sums involved were part of illicit financing or criminal activities.

In the largest transfer, prosecutors say that Cipriani and Tulli signed a fax on Sept. 6, 2010, ordering 20 million euros ($26 million at today's rate) be moved from an IOR account at Credito Artigiano, a small Italian bank owned by Credito Valtellinese, to a Frankfurt-based IOR account with JP Morgan. JP Morgan and Credito Valtellinese both declined to comment.

Another fax sent on the same day by Cipriani and Tulli told Credito Artigiano to transfer 3 million euros to an IOR account at small Roman bank Banca del Fucino, prosecutors allege in the document. That bank declined to comment.

In both cases, Cipriani and Tulli are alleged to have refused to provide details of the origin of the money to Credito Artigiano and the reason for the transfer, prompting Credito Artigiano to alert the Bank of Italy, which oversees Italy-based banks, of a failure to follow guidelines.

Credito Artigiano's report eventually led prosecutors to freeze the 23 million euros of funds, and triggered a wide-ranging probe into possible money laundering at the IOR, which declined to comment on the allegations.

"The seizure in question is just an example of a much broader reality," prosecutors said in one of the documents, in which they accuse IOR managers of "deliberately undervaluing and refusing to comply with anti-money laundering requirements".

Cipriani and Tulli resigned abruptly, without giving reasons, two weeks ago.

CONFUSION

The tiny Vatican state, which legally lies outside the European Union, does not yet fully comply with international rules to combat money laundering. It is taking steps to address this, however, including by setting up a financial supervisory authority.

In the documents seen by Reuters, prosecutors said there was "total confusion" regarding the IOR's accounts with Credito Artigiano and other Italian banks, making it impossible to identify the clients involved. The banks declined to comment. Credito Artigiano is not under investigation.

By statute, only members of religious orders, bank employees and Vatican citizens can open an account with the IOR, but prosecutors allege it was possible that lax practices within the bank meant IOR clients could allow the use of their accounts for money laundering.

In the absence of strict adherence to international standards, "the IOR could easily become a channel for the laundering of money related to crime", the prosecutors say in one of two documents they have produced.

The 23 million euros seized in 2010 by Italian prosecutors as a result of an alleged breach of the law were released a year later after the Holy See introduced a number of measures to improve supervision, including the setting up of an independent financial watchdog.

Credito Artigiano declined to say whether IOR had had access to those funds and whether it still had a client relationship with the IOR.

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