By Victor Simpson and Nicole Winfield
Investigators are closing in on the Pope's bank, dissatisfied by claims that it will change its ways
This is no ordinary bank. The ATMs are in Latin, priests use a private entrance, and a life-sized portrait of Pope Benedict XVI hangs on the wall. Nevertheless, l'Istituto per le Opere di Religione (the Institute for Religious Works) is a bank, and it is under harsh new scrutiny, including money-laundering allegations that led police to seize €23m (£19.5m) in Vatican assets in September. Critics say the case shows that the "Vatican Bank" has never shed its penchant for secrecy and scandal.
The Vatican calls the seizure of assets a "misunderstanding" and expresses optimism that it will be cleared up quickly. But court documents show that prosecutors say the Vatican Bank deliberately flouted anti-laundering laws "with the aim of hiding the ownership, destination and origin of the capital". The documents also reveal investigators' suspicions that clergy may have acted as fronts for corrupt businessmen and the Mafia. The documents pinpoint two transactions that have not been reported: one in 2009 involving the use of a false name, and another in 2010 in which the Vatican Bank withdrew €650,000 from an Italian bank account but ignored bank requests to disclose where the money was headed.
The new allegations of financial impropriety could not have come at a worse time for the Vatican, already hit by revelations that it sheltered paedophile priests. The corruption probe has also given new hope to Holocaust survivors who tried unsuccessfully to sue the Vatican in the US, alleging that Nazi loot was stored in the bank.
Yet the scandal is hardly the first for the centuries-old bank. In 1986, a Vatican financial adviser died after drinking cyanide-laced coffee in prison. Another was found dangling from a rope under London's Blackfriars Bridge in 1982, his pockets stuffed with money and stones. The incidents blackened the bank's reputation, raised suspicions of ties with the Mafia, and cost the Vatican hundreds of millions of dollars in legal clashes with Italian authorities.
On 21 September, financial police seized assets from a Vatican Bank account at the Rome branch of Credito Artigiano. Investigators said the Vatican had failed to furnish information on the origin or destination of the funds, as required by Italian law. The bulk of the money, €20m, was destined for the American JP Morgan's Frankfurt branch in Germany, with the remainder going to Banca del Fucino, an Italian bank. Prosecutors alleged the Vatican ignored regulations that foreign banks must communicate to Italian financial authorities where their money has come from. All banks have declined to comment.
In another case, financial police in Sicily said in late October that they had uncovered money laundering in- volving the use of a Vatican Bank account by a priest in Rome whose uncle was convicted of association with the Mafia. Authorities say some €250,000, illegally obtained from the regional government of Sicily for a fish-breeding company, was sent to the priest by his father as a "charitable donation", then sent back to Sicily from a Vatican Bank account using a series of home-banking operations to make it difficult to trace.