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Vatican bank goes to court over frozen funds

October 7, 2010

by Guy Dinmore in Rome, published: October 7 2010

The Vatican has taken what is believed to be the unprecedented step of resorting to an Italian court in an effort to free €23m ($32m) belonging to its bank that was frozen by the Italian authorities during an investigation into a suspected breach of anti-money laundering regulations.

Vincenzo Scordamaglia, a lawyer representing the Institute of Religious Works (IOR), as the Vatican bank is formally known, said he had filed a case with a Rome tribunal on Thursday to challenge the seizure of the bank’s funds. A first hearing is scheduled for Friday.

In the first case of its kind, the Italian judiciary last month froze €23m held by the Vatican bank in an account in Credito Artigiano, an Italian bank. The Vatican bank’s two top officials – Ettore Gotti Tedeschi and Paolo Cipriani – were placed under investigation for suspected breach of anti-money laundering norms.

Veteran Vatican observers said they could not recall a previous case of the Vatican, a sovereign state, seeking redress through the Italian judicial system. A Vatican spokesman declined to comment.

The observers said the move reflected the extreme sensitivity of the Holy See over the issue as it starts the process of seeking inclusion on lists of jurisdictions compliant with international norms on tax co-operation and money laundering administered by the Organisation for Economic Co-operation and Development, and the Financial Action Task Force.

The Vatican bank says the dispute was the result of a “misunderstanding” with Credito Artigiano when the Vatican tried to make two transfers to accounts it held at two other banks, in Germany and Italy. The Bank of Italy initially blocked the transfers because the Vatican bank had failed to identify the intended beneficiaries and the reason for the transfer as required by Italian law.

Mr Gotti Tedeschi – a veteran banker and lecturer in ethics in finance – was appointed by Pope Benedict XVI a year ago to bring more transparency to the Vatican bank following its entanglement in the fraudulent collapse of the partly Vatican-owned Banco Ambrosiano in the 1980s and the Enimont corruption trials involving Italian government officials a decade later.

Mr Scordamaglia told the Financial Times he had received the go-ahead to seek redress through Rome’s Tribunal of Freedom by Cardinal Tarcisio Bertone, the Vatican’s secretary of state, in order to “clear the bank’s name” and demonstrate the Vatican’s commitment to international regulations on combating terrorism and money-laundering.

Magistrates in Rome led by Nello Rossi questioned Mr Gotti Tedeschi and Mr Cipriani, for two hours each last week.

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