The Council of Europe’s anti-money laundering inspectorate has ended more than a decade of special measures and inspections over Vatican institutions, upgrading the Holy See to the watchdog’s ordinary process of assessments and evaluation. The move comes after Moneyval offered a broadly positive assessment of financial security progress made at the Vatican over the last 12 years.
But the Moneyval annual report also flagged concerns about staffing and funding for financial security operations, which it said delays Vatican money laundering investigations.
“With regard to preventative measures, MONEYVAL underlines that the sole authorised institution [the IOR] has a sound understanding of its money laundering and financing of terrorism risks,” the watchdog said. “In general, customer due diligence (CDD) and record-keeping obligations have been applied diligently and there is a rigorous risk-based transaction monitoring programme that requires the collection of information and documentation as necessary throughout the course of a business relationship.”
The Holy See in 2009 signed up to the European Monetary Convention, aiming to bring its financial institutions in line with international standards after years of financial scandals. As a result, the Vatican agreed to work with Moneyval through a decade-long program of on-site inspections and assessments as it moved towards financial reform, beginning in 2011.
The last of those scheduled on site inspections came in October 2020, leading to a report from Moneyval on the health of Vatican financial institutions and policies, published in June last year.
The newest report, released this month, emphasized, “the Holy See (including the Vatican City State) will be subject to MONEYVAL’s regular follow-up reporting process as a result of the positive report.”
Still, Moneyval noted that money laundering investigations in the Vatican have been “protracted,” and subject to delays and difficulties, “partly because of under-resourcing on both prosecutorial and law enforcement sides, where there has been insufficient specialisation of financial investigators.”
Prosecutors in the current Vatican trial have come under sustained criticism over their handling of the investigations which led to the indictment of 10 individuals in July last year, agreeing during the pre-trial phase to reopen their investigation into several of the charges they brought, before refiling all but one of them in January.
Another key criticism made by Moneyval last year was the lack of awareness paid by Vatican officials to the potential risks posed by internal corruption by Vatican officials themselves.
While the European watchdog praised Vatican efforts to eliminate potential money laundering through its financial institutions by international actors, it noted the risk of internal corruption — and adequate appreciation of the risk — in both its report last year and in its assessment last week.
“Domestic cases which have raised a red flag for potential abuse of the internal system by mid-level and senior figures (insiders) for personal or other benefits have not been addressed within the [Vatican’s] national risk assessment,” Moneyval noted May 4.
Five of the defendants in the current Vatican trial are former curial officials, either laymen or clerics, including Cardinal Angelo Becciu, the former sostituto at the Secretariat of State, and the former president and director of the Financial Supervisory and Information Authority (ASIF), the Vatican’s internal financial watchdog — all of whom have given evidence in court in recent weeks.
However, Moneyval’s conclusions last week also indicated that the current Vatican trial, and the investigation which brought it about, have impressed the watchdog.
Writing with regard to the IOR, the only Vatican financial institution under Moneyval’s purview, and the ASIF’s vigilance function over it, the annual report said that “coverage and quality [of the institution’s current risk assessment] look to be very good, including consideration of risks presented by insiders.” Such a positive assessment, alongside its standing criticism on the same subject at the “national level” in the Vatican, is likely an acknowledgement of the IOR’s internal reforming work.
Di Ruzza, and the ASIF’s former president both left their roles following a series of raids on the ASIF’s offices and those of the Secretariat of State in early October 2019. The raids were conducted by Vatican authorities as part of an investigation triggered by senior leaders at the IOR, who flagged a loan application from the Secretariat of State as suspicious.
That application, for 150 million euros, was intended to refinance the mortgage on a London property acquired by the Secretariat of State for a total cost of 350 million euros as part of its separation from its investment manager Raffaele Mincione in 2018. The conclusion of that deal led to allegations of criminal activity against Mincione, as well as Gianluigi Torzi, the businessman appointed by the secretariat to act as its broker in the London property deal.
Prior to the Vatican signing up to the European Monetary Convention in 2009 and in the years following, the IOR, fully titled the Istituto per le Opere di Religione (in English, The Institute for Works of Religion), was at the center of several notable financial scandals. Dealing with ongoing corruption in the bank was a leading concern of Vatican financial reform.
Because the IOR is in Vatican City, its accounts are not subject to taxation and other regulations imposed by other countries, making it a target for abuse by money launderers. Since 2014, under a new president, Jean-Baptiste de Franssu, it was the subject of several financial reforming efforts, which saw hundreds of accounts closed and charges filed against former officials at the bank.
