February 15, 2013
Stefani Pitrelli in Rome and Eliza
Mackintosh in London contributed to this report
A nun walks under the
Bernini colonnade in St. Peter's Square at the Vatican, Friday, Feb.
Pope Benedict XVI
signed off on one of the last major appointments of his papacy
approving a German
lawyer and financier to head the Vatican's embattled bank.
The day after Benedict’s triumphant return from a historic visit to
Britain in September 2010, he was greeted with unwelcome news at the
Italian authorities had seized nearly
$30 million worth of Vatican Bank funds that the Holy See was
seeking to transfer out of Italy’s Credito Artigiano bank.
With $8.3 billion in assets, 33,000 accounts and a distribution
network in more than 100 countries, the Vatican Bank often moved
funds from one destination to another. Yet officials familiar with
the case said they were struck by the size of the transaction and
demanded to know where the money had come from.
But the Vatican wasn’t telling.
Financial scandal at the Vatican was nothing new. In the 1980s,
Banco Ambrosiano, a financial institution largely owned by the
Vatican Bank, became embroiled in a money-laundering scandal related
to the Sicilian mafia.
In June 1982, Ambrosiano’s former
chairman, Roberto Calvi - dubbed “God’s
banker” by the Italian media - was found hanging from
London’s Blackfriars Bridge in a death that was ruled a homicide and
has yet to be solved.
There have been more recent cases of alleged criminality related to
the Vatican Bank, including that of Palumbo, who is awaiting trial
and has denied charges of using the institution’s secrecy to veil a
money-laundering ring. But more frequent have been what Italian
prosecutors describe as a haughty resistance to European Union laws
forcing banks to prove the legitimacy of funds.
Letters of inquiry, prosecutors said, have often been sent to the
sovereign city-state only to go unanswered or be tersely rejected.
In the case of the $30 million, for
example, Italian government officials say they have spent almost
three years seeking evidence that the funds are legal.
“It's a matter of fact that the
collaboration between the anti-money-laundering authorities of
Italy and Vatican City have been interrupted, and requests for
information have not received useful answers,” Rome Deputy
Prosecutor Nello Rossi said.
In December 2010, however, Benedict took
a landmark step toward transparency, issuing a motu proprio,
or papal letter, forbidding money laundering and the financing of
More importantly, for the first time, he
established an independent Vatican watchdog, the Financial
Yet subsequent events seemed to undermine his mission. Tedeschi,
the Italian economist appointed president of the Vatican Bank in
2009 and who claimed to be an anti-corruption crusader, was fired in
May by the bank’s board because of negligence. The banker also
became the target of Naples prosecutors investigating money
laundering, allegations Tedeschi has denied.
Last June, an explosive dossier from his time at the bank was seized
by Italian authorities and leaked to the news media.
In it, according to Corriere della Sera,
Tedeschi wrote of a power struggle inside the bank over reform,
citing deep resistance,
“when I asked for information about
bank accounts that did not belong to priests.”
Referring to the 2010 seizure of the $30
million, he wrote that he had been in favor of releasing data to
Italian authorities but had been blocked by powerful forces within
Last year, in a cache of documents leaked by the pope’s butler,
fresh details emerged of the broader quest to clean up
administrative corruption within the Vatican.
The incident showed how difficult it has
been for the Holy See to maintain its traditional airtight secrecy
in an age of voracious media, digital or otherwise.
Yet even as scandal swirled, the Vatican has also appeared to take
genuine strides toward transparency.
In September, it hired Rene Brulhart
- a wunderkind Swiss lawyer who helped clean up the dodgy reputation
of Liechtenstein’s banking system - as a special adviser, quickly
promoting him to the head of the Financial Information Authority.
Under his direction, the agency is thought to be formulating a
series of major directives aimed at pushing the city-state toward a
deeper embrace of international banking norms, with announcements
expected in the coming weeks.
In a report by an E.U. commission last year, the Vatican Bank was
also found to be mostly compliant with anti-money-laundering
standards and was praised for coming “a long way in a very short
period of time.”
However, the committee said, the bank
lags in monitoring suspicious activities and carrying out sufficient
“We have informed everybody very
well of the path that we are following to be a part of the
international system of controls on money laundering, and we
have been doing so for two full years,” said the Rev. Federico
Lombardi, the Vatican’s spokesman.
He called the E.U. commission report
“encouraging,” adding that,
“they’ve also signaled the points we
need to improve, and we’re working on that.”