News / Economy

Vatican Bank Likely to Close Foreign Embassy Accounts

FILE - Italian financial police officers talk to each other in front of St. Peter's Square at the Vatican, Sept. 2010.FILE - Italian financial police officers talk to each other in front of St. Peter's Square at the Vatican, Sept. 2010.
x
FILE - Italian financial police officers talk to each other in front of St. Peter's Square at the Vatican, Sept. 2010.
FILE - Italian financial police officers talk to each other in front of St. Peter's Square at the Vatican, Sept. 2010.
Reuters
The Vatican bank is likely to close all accounts held by foreign embassies, following concerns about large cash deposits and withdrawals by the missions of Iran, Iraq and Indonesia, according to people with knowledge of the situation.

The Vatican's financial watchdog, which examined the transactions in 2011, believed the embassies' justifications for the transactions were too vague or disproportionate to the amounts - up to 500,000 euros at a time - these people said. In one case, a large cash withdrawal was said to be for “refurbishment.”

Now the bank and the watchdog want to reduce the possibility that the Institute for Religious Works [IOR], as the bank is called, could be an unwitting vehicle for money laundering and other illicit finances.

Four people with knowledge of the matter said the closure of the accounts was likely to be a key recommendation of a broad review that Pope Francis has ordered of the bank, whose scandal-tainted history has long been an embarrassment for the Holy See.

The review is set to be completed by the end of the year.

It is the thorniest part of nascent efforts by the world's smallest state to open itself up to more outside scrutiny. The process ostensibly began under the former Pope Benedict, but was thwarted by conflicts among Vatican officials and an Italian money-laundering investigation.

The IOR is a private bank - currently with about 7.1 billion euros in assets under management - whose stated goal is to hold and manage funds for religious orders of priests and nuns, Catholic charities, Vatican employees, and other Catholic institutions. The number of account holders has swelled to 19,000 over the years, though, and it has diversified beyond the original categories with the right to hold accounts.

Fewer than two dozen of the 180 countries accredited to the Vatican have accounts at the IOR; many Western states such as the United States and Britain do not.

Reuters has learned that the Financial Information Authority [AIF], the Holy See's financial watchdog, wrote to the IOR in the second half of 2011 expressing its concern over several cash withdrawals and deposits by the embassies of Iran, Iraq and Indonesia, according to the people with knowledge of the situation.

The transactions - which were registered at the Vatican border in line with Vatican and European Union requirements that amounts of more than 10,000 euros in cash or equivalent be declared at customs - caught the eye of the AIF because of their origin, frequency and amounts. Iran, Iraq and Indonesia are classified by international institutions and governance bodies as countries at high risk of financial crimes. The Holy See's regulators also thought the justifications for the withdrawals, including one that simply said “personnel,” were vague, these people said. It was not clear where the money for the cash deposits came from.

The Iranian and Iraqi embassies to the Vatican said they had no comment on the cash movements or the concerns raised by regulators.

The Indonesian ambassador to the Vatican, Bahar Budiarman, said that his embassy takes out up to 10,000 euros at a time from its IOR account and that the money is destined for personal use and petty cash. For bigger amounts, wire transfers are used, said Budiarman, who has been ambassador since early 2012.

An IOR spokesman stated in emails that the bank does not comment on matters concerning the AIF and that the IOR had no comment on the possible closure of embassy accounts.

The AIF said that “it does not give details about cases it investigates and does not comment on the... review of the bank.”

The review of the IOR has gained momentum under Pope Francis, who became pontiff in March this year. In June, he created a special commission to advise him on how to reform the bank, and has not ruled out closing it altogether.

“If [Pope Francis] pulls off a restructuring of the IOR and gives it real oversight and transparency, it would go a long way towards convincing people that he's serious about reform,” said John Thavis, longtime Vatican analyst and author of The Vatican Diaries.

Improving standards

The Vatican moved to improve its financial transparency in 2010. That effort immediately hit a stumbling block when Rome magistrates investigating possible money laundering froze 23 million euros held by the IOR in two Italian banks. The IOR said it had been transferring its own funds between accounts in other countries. IOR officials told Italian magistrates at the time the money would be used to buy German securities, back then a safer bet than Italian securities, according to prosecutor's documents seen by Reuters. The magistrates later unfroze the funds, though the investigation continues.

Separately, AIF officials noticed in the summer of 2011 that large sums of money were moving several times a month in and out of the bank accounts held by the embassies of Iran, Iraq and Indonesia, according to the people with direct knowledge of the situation.

Withdrawing and depositing cash is not illegal, and embassies may legitimately transfer money in and out of the Vatican provided they offer sufficient details on the origin of the money and purpose of the transaction.

But international financial standards require banks to carry out thorough checks on the origin of large cash transfers and on the effective beneficiaries to rule out the possibility of money laundering, tax evasion and other financial crimes. Checks are heightened if the transactions involve countries, such as Iran and Iraq, considered by international regulators to be at high risk for financial crimes, and if high-level diplomats are involved.

Regulators working at the AIF at the time pressed the IOR for details about the transactions. The IOR replied, but referenced only the Iranian transfers and did not provide any further details about them, according to the people with knowledge of the situation. It did not mention the other two countries.

The AIF dropped its inquiries, according to these people. One top Vatican official briefed about the situation said the response was “silly” and that the AIF should have tried to follow up. The AIF management has since changed.

Earlier this year, Ernst Von Freyberg - a German lawyer hired in February to run the IOR - told colleagues that embassy accounts were potentially dangerous, and that he wanted to close them, according to a person with knowledge of the event. The proposal was blocked by the Vatican's powerful Secretariat of State, however, whose officials feared the move might hurt diplomatic relations, this person said.

A report by Moneyval, the Council of Europe's anti-money laundering committee, said last year that while the Holy See had taken steps to improve standards, more needed to be done. The committee, which carried out the review at the Vatican's request, is due to conduct a new assessment later this year.

The bank also is coming clean on possible illicit financial activities. The Vatican has said it detected six possible attempts to use the IOR to launder money last year, and at least seven in the first half of this year. In one case, a prelate who had close ties to the IOR was arrested in June on suspicion of plotting to smuggle 20 million euros in cash into Italy from Switzerland to give to rich friends in southern Italy. The prelate, who will be tried in December, said he was not acting for personal gain.

You May Like

Kurdish Party Pushes Political Gamble to Run in Turkey Poll

HDP announces it will run as political party instead of fielding independent candidates in June election, but faces tough 10 percent threshold More

Twitter Targets Islamic State

New research shows suspending Twitter accounts of Islamic State, its supporters has been effective; group, its backers are facing 'significant pressure,' says terrorism expert More

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

Majur Juac made the leap from being a refugee in Africa to a master chess champion in US, where he shares his expertise with students More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA Monitors Earth’s Vital Signs From Spacei
X
Rosanne Skirble
January 27, 2015 5:05 PM
The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.
Video

Video Weekly Protests in Korea Keep Japanese WWII Atrocities Alive

Every week in Seoul protesters gather in front of the Japanese Embassy to demand an apology and reparations from Tokyo for the thousands of South Korean women who were forced into prostitution during World War II. Although this year marks the 70th anniversary of the end of the war, these protestors have helped keep the issue of comfort women alive and made it difficult for Japan to move beyond its past wartime atrocities. VOA's Brian Padden reports from Seoul.
Video

Video Exercise: New Prescription for Parkinsons Disease

Exercise could be the new prescription for Parkinson's Disease, a progressive disorder of the nervous system that affects movement. More than six million people worldwide suffer from Parkinsons and they're traditionally treated with medication and surgery. Shelley Schlender has more.
Video

Video Brussels Shaken as New Greek Leader Challenges Europe’s Austerity Drive

Greece’s youngest-ever prime minister, 40-year-old Alexis Tsipras, was sworn in Monday after his victorious far-left Syriza party entered a coalition with far right rivals. Tsipras says he will restore dignity to Greece by ending spending cuts. So begins a new chapter for the country at the epicenter of Europe’s economic crisis - a change that has sent tremors across the continent, as Henry Ridgwell reports from London.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Oil Price Drop Troubles Texas Producers

As oil prices have fallen over the past several months, drilling operations have slowed in some parts of the United States - including Texas, the state that surpasses all others in energy production. The Lone Star State’s energy output has been boosted in recent years by development of resources trapped deep below ground in the Eagle Ford shale deposit, which stretches across south central Texas. As VOA’s Greg Flakus reports from Karnes City, Texas, the drop in oil prices has created concerns,
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8815
JPY
USD
117.85
GBP
USD
0.6581
CAD
USD
1.2420
INR
USD
61.404

Rates may not be current.