Frozen bank accounts are freezing the Church in Nicaragua. Here's why

The persecution of the Church is getting a boost from alleged money laundering charges and frozen bank accounts. Where will stop?

A seminary in the Nicaraguan city of Bluefields announced this week it would cease operations, after the government froze its bank accounts last month — along with the accounts of hundreds of other Nicaraguan Catholic institutions, which the government says are complicit in an international money-laundering scheme. 

But Church leaders say the alleged money-laundering is actually a charitable microloan program, and that the allegations of financial corruption are a pretext for the country’s government to seize Catholic properties and silence the Church. 

Saint John Paul II Propedeutic Seminary. Courtesy photo.

The facts

On May 23, Fathers Eugenio Rodríguez and Leonardo Guevara of the diocese of Estelí — of which the imprisoned Bishop Rolando Álvarez is apostolic administrator — were taken from their parishes and detained in a Managua seminary, according to police reports, while an investigation began against them.

While police were initially circumspect about the investigation, they said in a May 27 statement that they had been investigating the prospect of money laundering, and “illegal activity in the management of funds and resources in bank accounts that had belonged to people convicted of treason against the country.” 

The Diocese of Estelí confirmed that the investigation aimed to probe the finances of Estelí’s diocesan Catholic Charities, which was dissolved “voluntarily” in March of this year — after government pressure to close.

The May 27 police statement said that investigators from several national agencies had discovered hundreds of thousands in cash hidden in buildings owned by both the Diocese of Estelí and other unspecified dioceses.

That discovery, police said, led prosecutors to suspect a “money laundering network” among Catholic institutions, and to request that bank accounts belonging to scores of Catholic institutions be frozen.

The day before that statement was published, several parishes, schools and dioceses in the country announced they had lost access to their bank accounts, in what appeared to be a massive freeze on the bank accounts of Catholic institutions in Nicaragua.

But local media confirmed in Nicaragua that the transactions which police called money laundering are actually part of a micro-financing and micro-loan program administered by  Cáritas Diocesana de Estelí, which in 2012 received a $500,000 USD grant from Catholic Relief Services.

A relationship between CRS and Cáritas Estelí dates back to 1990, when the U.S.-based relief agency began donating funds for microfinance projects. 

In 2012, CRS donated more than $500,000 to Cáritas Estelí for "poor micro-businesses," according to documentation of the donation, which was obtained by Confidencial, a Nicaraguan news outlet. 

The documents explain that in the event of the dissolution of Cáritas Estelí — which occurred in March of this year — money should be diverted to another Catholic entity which “serves the poor.”

But when the Diocese of Estelí made attempts to withdraw part of the funds, the national bank account blockades began, and the charges of money laundering were leveled.

In addition to the two priests, several lay leaders have also been detained.

For their part, human rights activists have said the investigation is “illegal and illogical” — and seemingly part of ongoing government persecution of the Church in Nicaragua.

Yader Morazán, a Nicaraguan lawyer specializing in human rights — who is now exiled in the United States — told The Pillar: “It is difficult to carry out legal analysis on facts that are unknown, where there is no access to information on the alleged defendants. The only things known are from police press releases and a few media leaks.”

But Morazán told The Pillar that detention of the priests and lay leaders in Estelí does not seem to comply with the country’s criminal law. 

If prosecutors believe the priests and lay officials are involved in crimes, they are required to charge them and conduct initial court hearings within days, he explained — but no charges have yet been filed.

While police are permitted to petition Nicaraguan courts for a preventative 90-day detention on money-laundering suspects, they are not permitted to impose a house arrest without a court order, as they seem to have done in this case.

“This is a great violation of procedural rights because they have people detained without filing charges and without crimes being investigated and prosecuted,” Morazán added.

The lawyer said the detention of the priests, and the freezing of bank accounts, is clearly a political act.

“This could well be another lie fabricated by the regime. The first political prisoners in this country — including my father — saw police plant evidence, weapons, money, or drugs, and then take photographs, to indicate that there was evidence that a crime had been committed.”

“But recently the police have changed their approach, and they don’t even care about appearing legal in what they do,” Morazán concluded.

The consequences

Frozen bank accounts in Nicaragua have meant in recent weeks the financial asphyxiation of hundreds of Catholic institutions in the country. 

Activist and lawyer Martha Molina told The Pillar that at least four dioceses in the country  —- Matagalpa, Estelí, León and Managua —  have affirmed their bank accounts were frozen, while hundreds of parishes and other institutions report the same. Priests in several dioceses have also seen their accounts frozen, he said.

The situation in Managua might be the most severe, because all parishes in the archdiocese use a centralized bank account to receive donations and pay their bills, leaving the entire diocese and its parishes without access to money. 

According to a priest of Matagalpa, living now in exile, this measure seeks to annihilate the Church in Nicaragua.

"It is a way of putting pressure on and stifling the mission of the Church," the priest told The Pillar anonymously, for fear of reprisals against his family, who still lives in Nicaragua. 

“They closed even priest insurance accounts, which was a fund taken mainly from Ash Wednesdays collections. Elderly and sick priests depend on those funds to live. Now we don't know how the elderly priests are going to survive, because with that insurance they received something to live with dignity,” the priest told The Pillar.

The government has also “issued a decree confiscating real estate property from those who have been exiled. I don't have anything, but I'm afraid that they will take away my family's assets as a reproach,” the priest said.

Nicaragua’s parishes are not likely to close their doors because of frozen bank accounts — but they will see their operations reduced.

“They are going to try to continue paying the people who serve in the parishes with what is collected in the Masses and pay for electricity, water and maintenance, because it is the only way of circulating money that they have now,” the priest explained.

In Nicaraguan parishes, there are normally 2 or 3 permanent employees: the sacristan, the secretary and sometimes a domestic helper. Some parishes also employ a business manager, a gardener, or a custodian, priests told The Pillar.

Those priests said that if parishes rely on weekly collections, without access to bank accounts, they will have to cut staff to keep the lights on. An average parish pays between 20,000 and 25,000 córdobas ($550-$630 USD) in electricity each month —  an economic blow that many rural parishes will not be able to bear.

But parishes will not be the only institutions to suffer. Catholic hospitals, schools, and pharmacies in the country often have hundreds of employees, and complex financial structures. 

Among those institutions is the St. John Paul II National Propaedeutic Seminary, in the Diocese of Bluefields, which announced June 19 that it would close its doors because of its frozen bank accounts. The seminary was a house of initial formation for seminarians from seven of the nine dioceses in the country.

It is not clear what institution will close next, priests said.

“They closed priestly insurance accounts, they closed accounts of bookstores, pharmacies, nursing homes, clinics, schools, cathedrals, parishes. We don't know what will happen now. We know that bank employees have told the directors of the institutions that they would have to liquidate the staff little by little because there is no other way to survive,” a priest told The Pillar.

Among the financial restrictions, the country’s government has made a move that some see as a hostile takeover of Catholic schools — and a step toward their secularization.

The Ministry of Education announced this month that it would pay part of the salaries of teachers in Catholic schools, both those that are completely private, and those that are subsidized—that is, schools which are run by Catholic institutions, but receive state funds. The government will not pay the salaries of religion teachers, however. 

The average monthly salary of a teacher in Nicaragua is around $250 USD, while the country’s “basic basket”  — an official calculation of basic products needed for a family — exceeds $500 monthly. 

“They make this payment to keep the teachers happy and because they are afraid that the parish schools will close — because there is no budget or technical capacity for the state to respond to the educational demand,” Molina told The Pillar.

“The schools will soon enter into crisis due to the blocking of bank accounts and the constant harassment of the dictatorship. There is no money to pay other expenses or salary supplements,” the lawyer added. “They are not going to return the accounts. They will have to close,” he added.

Some fear that the freezing of accounts is only the first step in confiscating schools and other Catholic institutions. 

In fact, the Nicaraguan regime already seized two Catholic schools at the end of May and beginning of June: the Santa Luisa de Marillac Technical Institute in Jinotega and the Susana López Carazo school of the Dominican Sisters of the Annunciation.

Sources at one of the country’s main seminaries, with more than 100 seminarians, also affirmed that doors could soon close without access to bank accounts.

That’s why activists say that the Ortega administration could be preparing a massive confiscation of Church property across the country.

The meaning

When 222 Nicaraguans were exiled to the United States this February, including 7 people associated with the Catholic Church, global analysts saw a dire future for the Church in the country.

But within Nicaragua, some analysts had a different view — they saw the move as a sign that things might get better for the Church in Nicaragua, which in 2022 saw a bishop and 6 other priests arrested, Catholic radio stations closed and two religious communities expelled from the country.

The thinking in some Nicaraguan circles was that President Daniel Ortega had buckled under international pressure and sanctions, and was releasing a swath of political prisoners from the country — which might lead the crackdown on the Church in the country to abate, at least in part. 

But the last five months have shown that analysts who expected a crackdown against the Church to decrease in Nicaragua were wrong.

During Lent and Holy Week this year, the Nicaraguan government banned thousands of processions across the country. The government sentenced Bishop Rolando Álvarez of Matagalpa to 26 years in prison, and in recent months has closed three Catholic universities.

The financial crackdown that began last month has some activists saying that the Ortega regime has crossed a new line— that exiling a few dozen priests was not going to stop the Church from operating in Nicaragua, but the seizure of its assets will force the Church underground. 

Not being able to silence critical voices or end the legitimacy and popularity enjoyed by the Catholic Church in Nicaragua, Daniel Ortega may now intend to take the Church to the catacombs.