Vatican urged to strengthen bank controls

An independent financial watchdog called on the Vatican to strengthen measures aimed at preventing money-laundering and terrorist financing, warning that Holy See regulators lacked the power to oversee the flow of money through the world’s smallest state.

The appeal came in a241-pagereport on the Vatican by Moneyval, a committee of financial experts backed by the 47-nation Council of Europe. The Vatican is undergoing evaluation by Moneyval in a bid to persuade foreign lenders and their regulators that the Vatican bank and other Holy See financial institutions are transparent and adequately regulated.

“The report released today is not the end but is rather an important passage of our continuing efforts to marry moral commitments to technical excellence,” said Msgr. Ettore Balestrero, the Vatican’s chief legate to Moneyval.

Restoring public trust in the way the Vatican handles its finances has become a top priority of Holy See officials in the wake of an investigation by Italian prosecutors into whether the Vatican bank violated Italy’s money-laundering laws—an allegation the Vatican denies. The probe has raised red flags at the Bank of Italy and prompted banks that traditionally handled the Holy See’s financial transactions to sever ties.

Moneyval gave the Vatican a mixed report card. The Vatican received grades of “compliant” or “largely compliant” on 22 out of 45 guidelines used by the Financial Action Task Force to determine whether countries are at risk of becoming havens for money laundering and terrorist financing. The report doesn’t reflect a definitive judgment by Moneyval, which will continue to evaluate the Vatican’s finances and the raft of rules the Holy See has adopted in recent years to clean up its financial operations.

“The Holy See has come a long way in a very short period of time,” Moneyval said. “But further important issues still need addressing in order to demonstrate that a fully effective regime has been instituted in practice.”

Of the 30 countries that have undergone similar Moneyval evaluations, 12 have scored higher than the Vatican. John Ringguth, executive secretary of Moneyval, said the Holy See needs to vest its fledgling financial regulator with oversight powers independent of the Vatican bank and other Holy See offices. He noted that only two-thirds of the 30,000 accounts at the Vatican bank were assigned to actual account holders. Vatican officials say the additional accounts belong to religious orders and people who have multiple “sub accounts” assigned to them.

“It’s important that [regulators] have proper power to do full inspections and that they have power to do proper sanctions,” Mr. Ringguth said. [More]

SOURCE

The Wall Street Journal