Vatican passes key financial transparency test
VATICAN CITY (AP) — The Vatican has passed a key European financial transparency test, but received poor grades for the effectiveness of its new financial watchdog agency and 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 and move onto the so-called “white list” of countries that share financial information.
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 concerning 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 for 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 compliant or largely compliant grades overall in 49 percent of the criteria.
Moneyval’s executive secretary, John Ringguth, said the uniqueness of the Holy See as a state stood out to evaluators. It is the seat of the Roman Catholic Church and a state with financial institutions but without a private sector.
“One of the first things that we had to get our head around was the law of 1929, which basically creates a public monopoly system in the Vatican City State and Holy See,” he said in a phone interview.
Overall he said the Vatican fared well in its first round evaluation, noting that it comes out “somewhere in the middle” of Moneyval member states in terms of rankings; some of those states, however, have had years to come into compliance whereas the Vatican only began the evaluation process last year.
Monsignor Ettore Balestrero, the Vatican undersecretary of state, said the Vatican welcomed the findings and recommendations.
“We take both the praise and criticism contained in the report with seriousness,” he told reporters.
The report said more work needs to be done. 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 actually 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.
Sixteen of the original 49 recommendations are considered “key and core,” with a score of eight or more passing grades sparing the Vatican from a more intensive review and evaluation process in the future.
By scraping by with a 9-7 report card, the Vatican is solidly in the company of other countries that have been working for years, and gone through numerous rounds of Moneyval evaluations, to come into compliance with the FATF norms.
One area singled out for improvement was in putting into operation U.N. anti-terrorism conventions, which require the Vatican keep a list of terror suspects and show how it can freeze and confiscate terrorist assets. The Vatican scored partially compliant and noncompliant, respectively.
Balestrero noted that after the reporting deadline passed, the Vatican established the terror list.
Pope Benedict XVI himself has said he wanted the Vatican’s finances to follow international principles, saying peace in the world today is threatened by terrorism and an improper use of the global financial system.
The Vatican’s Moneyval evaluation process has been the source of enormous attention and speculation in Italy, given that it corresponded with the eruption of the scandal over leaked Vatican documentation that alleged corruption in the Holy See’s finances as well as infighting over whether the Vatican’s efforts to comply with the anti-money laundering norms were on the right track.
As the process neared its end, the Vatican bank — known as the Institute for Religious Works — threw another wrench into the mix by firing its president who had been brought in by the pope’s No. 2 specifically to usher in a new era of financial transparency at the Holy See. The bank’s board accused him of actually being an obstacle to transparency and of failing to do his job.