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Vatican passes key financial transparency test, but gets poor grades for financial watchdog
The Vatican has passed a key European financial transparency test, but received poor grades for the effectiveness of its new financial watchdog agency and for the ability of its bank to track suspicious transactions.
The Council of Europe report released Wednesday marked a milestone in the Holy See’s efforts to shed its reputation as a shady tax haven long mired in secrecy and scandal.
The report showed the Vatican had received compliant or largely compliant grades on nine of the 16 “key and core” internationally recognized recommendations to fight money laundering and terrorist financing.
But seven other areas were found lacking, particularly its anti-terror finance measures and the Vatican’s financial oversight agency, created amid much fanfare in 2010 to try to respond to international demands for greater fiscal transparency.
The report found that the agency had yet to conduct any inspections, and that its role, authority and independence needed clarification. It said its ability to share financial information with other governments was hobbled by the Vatican’s insistence that it enter first into bilateral agreements.
The Holy See put the requirement in place largely because it fears Italy would make unreasonable demands for financial information from the Vatican bank, where Vatican officials, dioceses and members of religious congregations hold accounts. The Holy See wanted to make sure that if it gave such information to Italy, a reciprocity agreement would compel Italy to share similar information with the Holy See.
The so-called Moneyval committee praised the Holy See for making so much progress in a short amount of time to come into compliance with the norms, and the Vatican scored complaint or largely compliant grades overall in 49 percent of the criteria.
But the report said more work needs to be done.
“We take both the praise and criticism contained in the report with seriousness,” said Monsignor Ettore Balestrero, undersecretary of state and the head of the Vatican delegation to the Moneyval committee.
In particular, it said the Vatican bank, long the subject of rumor and scandal, should be independently supervised and should make rules about who is eligible to keep accounts there.
Currently, the bank is supervised by five cardinals, headed by the Vatican secretary of state.
It said the bank’s customer due diligence measures were lacking in some areas, particularly concerning high-risk transactions. And it found fault with the Vatican’s procedures to report suspicious financial transactions.
The Vatican submitted itself to the Moneyval evaluation process more than two years ago after it signed onto the 2009 EU Monetary Convention. Since then, it has written and rewritten a law criminalizing money laundering, created the financial watchdog agency and ratified three anti-crime U.N. treaties, among other measures.
Each of those moves is required by the Financial Action Task Force, the Paris-based policymaking body that helps countries develop anti-money laundering and anti-terror financing legislation. The Council of Europe’s Moneyval committee rated whether the Vatican was compliant, largely compliant, partially compliant or noncompliant in each of the task force’s recommendations. [More]