Vatican bank readies court action over funds

A dispute between the Vatican bank and the Italian judiciary over a suspected breach of anti-money laundering regulations is set to intensify.

Rome magistrates are investigating the Pope’s two most senior bankers while funds belonging to the Holy See remain frozen by court order.

Vincenzo Scordamaglia, a lawyer representing the Institute of Religious Works, as the Vatican bank is formally known, said the bank would challenge the seizure of its funds if the funds were not released.

Papal observers said they could not recall a case of the Vatican, a sovereign state, seeking redress through the Italian judicial system and that the move reflected its sensitivity over the issue.

Showing the bank’s transparency is important for the Vatican as it starts procedures to be included on lists of jurisdictions compliant with norms on tax co-operation and money laundering administered by the Organisation for Economic Co-operation and Development, and the Financial Action Task Force.

Ettore Gotti Tedeschi, a veteran banker and lecturer in ethics in finance, was appointed by Pope Benedict a year ago to bring transparency to the bank.

Mr Scordamaglia told the Financial Times he had received the go-ahead to seek redress through Rome’s Tribunal of Freedom to “clear the bank’s name” and show the Vatican’s commitment to regulations on combating terrorism and money laundering.

Mr Gotti Tedeschi and the Vatican bank’s director-general, Paolo Cipriani, were questioned for two hours each on Thursday, having been notified last week that they were under investigation and that €23m ($32m) held by the Vatican bank in an account in Credito Artigiano, an Italian bank, had been seized.

Mr Gotti Tedeschi reiterated that the alleged breach of Italian anti-money laundering norms resulted from a “misunderstanding”.

The Vatican says two attempted transfers of funds it held in Credito Artigiano were meant for accounts held by the Vatican bank in two other banks. 

The Bank of Italy initially blocked the transfers because the Vatican bank did not identify the intended beneficiaries and the reason for the transfer, as required by Italian law.

But an Italian official who asked not to be identified said the Vatican bank continued to “make mistakes” on anti-money laundering regulations and that “further action” could be taken until it came into compliance. 

Mr Gotti Tedeschi and Mario Draghi, governor of the Bank of Italy, have met to discuss the issue. 

Italy’s central bank declined to comment on their talks.

SIC: FT/INT'L