God’s Bank

December 15th, 2010

On September 21st of this year, Italian financial police seized $30.18 million from a Vatican Bank account at a Rome branch for possible ties to money laundering.  About $26 million of these funds were headed to JP Morgan in Frankfurt and the remainder was going to Banca del Fucino. Later that day investigators announced that the Vatican Bank’s chairman and director general are under investigation for failure to meet Italy’s anti-money laundering laws.  On that day in September, I wrote a blog post about the Institute for Works of Religion, known commonly as Vatican Bank, and its already dirty list of scandals.  This includes the infamous death a man named Roberto Calvi, nicknamed “God’s Banker,” and his connection to the Bank.

One month after the seizure, Holocaust survivors from the former Yugoslavia requested that the European Commission investigate the Vatican Bank for potentially aiding Nazis launder their stolen valuables.  The request follows from a decade-old lawsuit in the U.S., which alleges that—according to a U.S. State Department report—the Vatican Bank “laundered assets stolen from thousands of Jews, gypsies and Serbs killed or captured by the Ustasha, the Nazi-backed regime of wartime Croatia.”  But in December of 2009 a U.S. appeals court in San Francisco dismissed the case because the Vatican Bank has immunity under the 1976 Foreign Service Immunities Act.

The corruption probe has given new hope to these survivors and their case.  The Vatican has called the probe a “misunderstanding.”

Evidence revealed by the prosecution indicates otherwise.  In fact, prosecutors say the Vatican Bank “deliberately flouted anti-laundering laws with the aim of hiding the ownership, destination and origin of the capital.” Their documents also show that some members of the clergy may have acted as fronts for corrupt businessmen and Mafia.  These documents highlight two unreported transactions: one in 2009 that used a false name, and another in 2010 in which the Vatican Bank withdrew $860 million from an Italian bank account, but refused to disclose where the money was destined.

In a separate and also recent case, financial police in Sicily revealed a case in which a Roman Catholic priest living in Rome, whose uncle was convicted of Mafia association, used a Vatican Bank account for money laundering.  According to investigators, the Priest’s father illegally obtained $350,000 dollars from the regional government of Sicily for a non-existent fish breeding company and then transmitted the funds to his son as a “charitable donation.”  The priest then remitted the funds back to his father in Sicily from a Vatican Bank account using techniques making the money difficult to trace.

The Vatican has a special status as an independent state within Italy. In this current case Italian investigators could move against the Vatican Bank because the transaction occurred in Rome and is therefore classified as a foreign financial institution operating in Italy.  In other cases, like with the case in the U.S. brought by Holocaust survivors, the Vatican Bank has retained its immunity.

These forms of banking secrecy, even when they are actions conducted by a bank controlled by holy men, are dangerous for reasons we all well know.  But it is heartening to see strong and well-founded actions brought against the secretive institution.  Let’s hope these investigations will result in bringing a small glimmer of transparency to the Vatican Bank.

Written by Ann Hollingshead

Follow @FinTrCo