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Vatican Cracks Down on Financial Loopholes

Vatican spokesman Rev. Federico Lombardi speaks to the media about a decree passed by the Vatican bank to comply with international rules to fight money laundering and terrorist financing, at the Vatican press hall, Dec 30, 2010

The Pope has signed into law new rules aimed at making the financial dealings of the Vatican Bank more transparent. The move comes as the bank is being investigated over money laundering claims.

The Vatican also is setting up a financial watchdog to monitor suspicious financial transactions. Its aim is to bring more oversight to finances at the Vatican Bank, along with all other departments at the Holy See.

The Vatican has a special status as an independent state within Italy and up until now has been exempted from international banking regulations. It had until the 31st of December, however, to bring its rules in line with the rest of Europe.

Speaking Thursday, Vatican spokesperson Father Federico Lombardi said the Vatican wants to make the system transparent so that criminals can't exploit the financial sector. "These new laws have the finality to enforce the international system of controls to avoid money laundering and the financing of terrorism."

The move comes only a few months after prosecutors in Rome launched a criminal investigation into alleged money laundering by the Vatican Bank's director and his deputy. The Italian authorities seized $30 million that the Vatican had deposited at a bank in Italy without identifying who was depositing the money or who it was for. That investigation is still ongoing. Neither man has been charged and both men deny wrongdoing.

The Vatican said the new financial authority will start its operations on April 1. The chairman will be named by the Pope.