Wed, Dec 11, 2013

http://www.ft.com/cms/s/0/0636ebd4-60ef-11e3-b7f1-00144feabdc0.html#axzz2nA5s3DAk

Efforts by the Vatican to comply with international standards on financial transparency have received a positive assessment from experts at Europe’s anti-money laundering agency, according to a papal state official.

Moneyval, the Council of Europe’s anti-money laundering agency, which is meeting in Strasbourg this week, said it had on Monday approved a first progress report issued by the Vatican, as well as the experts’ accompanying assessment of the Holy See’s compliance to date. The text of the combined report is to be made public later this week.

The report marks an important step for the Vatican in coming into full compliance with global norms following Moneyval’s first rating, issued in July 2012, which said the Holy See had “come a long way in a very short period of time”, while giving it seven negative grades out of 16 key recommendations.

The Vatican had no immediate comment but a source involved in the process who saw Moneyval’s appraisal described it as “very good”.

He said the report noted the law enforcement capability of the Financial Information Authority (AIF), a watchdog set up under Pope Benedict XVI and given enhanced powers by his successor Francis.

The report was also said to have approved oversight processes undertaken by the Vatican bank and the Vatican’s separate treasury, known as the Administration of the Patrimony of the Apostolic See (Apsa), which was hit in June by the arrest on corruption charges of Monsignor Nunzio Scarano, the former senior cleric in charge of its accounting department. Since then, Apsa had closed and banned “retail accounts” held there.

The arrest was followed by the resignations of the director of the Vatican bank and his deputy, who were named in Italian court documents disclosing that the cleric had been in regular contact with them to get approval for movement of funds in and out of his two accounts at the bank.

At the same time, Pope Francis, who has questioned the need for a Vatican bank, set up a special commission to chart its future strategy. Religious observers say the new pontiff has demonstrated his intent to come to grips with powerful figures in the Curia, the Holy See’s bureaucracy, whose obstruction of Pope Benedict’s efforts to clean up the bank was seen as one of the reasons for his historic decision to abdicate last February.

The Vatican official said the report adopted on Monday notes a “dramatic”increase in the number of suspicious transactions signalled to the AIF by the Vatican bank, formally known as the Institute for the Works of Religion (IOR). He did not divulge numbers.

The Vatican bank, which has contracted the US Promontory Financial Group to help whip it into regulatory shape, is vetting all its nearly 20,000 account holders and has been reported to have closed up to 1,300.

The Vatican, which acknowledges past scandals involving its financial operations, hopes that Moneyval’s latest evaluation of an anti-money laundering process that began in 2010 will help counter what it sees as an overly hostile attitude by the Italian authorities, particularly the Bank of Italy and the customs agency.

The Vatican’s significant use of cash, totalling several hundred million euros a year through incoming donations and outgoing funding of Church activities in far flung places, has long attracted the attention of Italian authorities. A senior Italian finance ministry official told parliament last week that the customs agency was seeking information on what it called several thousand unregistered movements of money into and out of Italy.

Last week the AIF signed a memorandum of understanding with Germany’s financial intelligence unit. “This memorandum is strengthening AIF’s international reach and further integrates the Holy See and the Vatican City State with a co-ordinated global effort to fight money laundering and the financing of terrorism,” René Bruelhart, AIF director, said.

This follows similar agreements reached with the US and Italy, among others.