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Vatican says probe due to ‘misunderstanding’

September 22, 2010

By Guy Dinmore in Rome and Rachel Sanderson in Milan, published: September 22 2010

Stung by allegations of suspected money laundering levelled by Rome magistrates against the Vatican’s top bankers, the Holy See has insisted there had been a “misunderstanding” over two disputed money transfers and it had been co-operating fully with Italian and international authorities.

Italy’s finance police said on Tuesday it had frozen €23m ($31m) held by the Vatican’s bank, the Institute of Religious Works (IOR), in the Rome branch of Credito Artigiano, an Italian bank. Magistrates have opened a formal money laundering investigation involving Ettore Gotti Tedeschi, chairman of IOR, and Paolo Cipriani, director-general.

“The current problem was caused by a misunderstanding (now being examined) between the IOR and the bank which received the transfer order,” Father Federico Lombardi, Vatican representative, wrote in a letter to the Financial Times.

Father Lombardi said that since his appointment a year ago, Mr Gotti Tedeschi had been working “with great commitment to ensure the transparency of the IOR’s activities” and the inclusion of the Vatican as a sovereign state in the “white list” of states deemed to be in compliance with international norms on money laundering.

The issue is of particular sensitivity to the Vatican, which appointed Mr Gotti Tedeschi – a veteran banker and lecturer in ethics – to continue putting IOR in order after its entanglement in the fraudulent collapse of Banco Ambrosiano in the 1980s and the Enimont corruption trials involving government officials a decade later.

The latest investigation, which was prompted by a tightening of controls by the Bank of Italy, risks straining relations between the Vatican and Italian authorities, particularly over the issue of sovereignty and jurisdiction.

Mr Gotti Tedeschi was quoted by Il Sole 24 Ore, Italy’s main business daily, as suggesting that “a procedural error was being used as a pretext to attack the Institute, its president, and more broadly the Vatican”. He did not elaborate and declined to comment further on Wednesday.

Avvenire, newspaper of the Italian bishops conference, called the investigation “offensive and inexplicable”.

IOR says the two requested transfers totalling €23m were from an IOR account held at Credito Artigiano to IOR accounts at two other banks. The Bank of Italy asked Credito Artigiano on September 15 not to execute the transfer because the beneficiaries were not identified in accordance with Italian and European Union money laundering regulations.

Italy’s central bank separately confirmed it had sent a circular to Italian banks on September 9 to remind them of the vigilance they were required to exercise in handling IOR transactions.

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