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Vatican secrecy blamed for banking dispute

September 23, 2010

By Guy Dinmore in Rome and Rachel Sanderson in Milan, published: September 23 2010

A dispute between the Vatican and Bank of Italy, which led to an inquiry into suspected money laundering by Pope Benedict’s senior bankers, stems from a clash of cultures rather than possibly nefarious tran­s­actions, say Italian banking and government sources.

The sources, who asked not to be identified, told the Financial Times on Thursday that they tended to agree with the Vatican’s insistence that the dispute resulted from a “misunderstanding” between its bank, the Institute of Religious Works (IOR), and Credito Artigiano, an Italian lender. Rome magistrates froze €23m ($31m) on Tuesday in an account held by IOR at Credito Artigiano after the central Bank of Italy raised concerns about two attempted transfers that did not comply with anti-money laundering rules by not identifying beneficiaries or the purpose of the transfer.

Ettore Gotti Tedeschi, chair­man of IOR, and Paolo Cipriani, director-general, were formally placed under investigation for possible money-laundering, which the Vatican strongly denies. It said the money, including €20m to buy German government bonds, was being transferred to accounts it held in two banks in Frankfurt and Rome.

The Vatican appointed Mr Gotti Tedeschi , a veteran banker and lecturer in financial ethics, a year ago 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 payments to Italian government officers a decade later.

While both sides appear keen to resolve the issue, the Italian sources maintained that the Vatican had been dragging its feet in complying with anti-money laundering regulations when transferring funds through Italian banks. They attributed this to a centuries-old mindset resting on a bedrock of secrecy and monarchical autonomy.

Rome magistrates are still working on an investigation begun last year into the movement of Vatican funds through Banca di Roma.

Expressing its “perplexity and amazement” at the latest investigation, the Vatican said Mr Gotti Tedeschi had worked “with great commitment to ensure the absolute transparency of IOR’s activities” and the future inclusion of the institute in the “white list” of jurisdictions compliant with international norms. It also noted that as a sovereign state, the Vatican was “beyond the jurisdiction and surveillance of the various national banks”.

The Bank of Italy sent a circular on September 9 to remind lenders of the vigilance required for IOR transactions. It said IOR was categorised as a non-European Union bank not on the “white list” and difficulties had emerged in the application” of 2007 money laundering legislation. Banking sources said some lenders interpreted this as a warning not to do business with the Vatican bank. The Bank of Italy said that interpretation was wrong.

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