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Moneyval approves Vatican's financial reforms

European watchdog praises efforts, but says more work to be done

12 December, 17:07
Moneyval approves Vatican's financial reforms (By Sandra Cordon) (ANSA) - Vatican City, December 12 - The Vatican has made significant efforts in financial reforms and moving towards compliance with international standards in transparency and fighting money laundering - but more work must still be done, a European watchdog warned in a report Thursday.

The Council of Europe's Moneyval agency, a monitoring group of financial experts, said in a report that it approved of the progress made by the Vatican to bolster financial transparency within its institutions.

"It is clear from this review that much work has been done in a short time to meet most of the Moneyval technical recommendations," said the organization which in July 2012 had been highly critical of the Vatican's financial practices.

However, it added Thursday, the new measures must still be "tested in practice".

That first Moneyval report 18 months ago found problems in seven of 16 "key areas" and made a series of recommendations to the Holy See for improving its financial legislation and practices.

This latest report by Moneyval found that as yet, no formal inspections had been made at the Vatican Bank, officially known as the Institute for Religious Works (IOR), or at the Administration of the Patrimony of the Apostolic See (APSA) to check the effectiveness of the new financial measures.

APSA is responsible for managing the Vatican's real-estate holdings and financial portfolios and earlier this year, came under intense public scrutiny when its head of analytic accounts, Msgr. Nunzio Scarano, was suspended amid allegations he conspired with a former Italian spy and a financial broker to try to secretly repatriate 20 million euros of laundered money from Switzerland to Italy.

Investigators are continuing to probe other transactions in accounts that Scarano managed.

Moneyval said that Holy See's Financial Intelligence Authority (FIA), an internal regulator, should perform inspections as soon as possible to see if any customers may be involved in money laundering.

It also suggested the FIA exercise more control over the Vatican Bank which in recent years has come under intense scrutiny in connection with allegations of suspicious activities.

Since his election to the helm of the Catholic Church in March, Pope Francis has taken significant steps to deal with the array of financial scandals surrounding Vatican bodies and the bank.

He signaled his deep interest in change by warning early on that if the bank could not adapt to greater transparency in its operations and adherence to international banking standards, it might even have to be shut down.

In August, Francis issued new regulations at the Holy See in a papal decree known as a Motu Proprio, part of the pope's drive to clean up the Holy See's reputation on financial transparency.

The Vatican followed that by signing an agreement with Italian authorities over the exchange of financial and banking information.

As well, the IOR has opened a website and begun publishing annual reports in a transparency drive.

In October, the Vatican's Pontifical Commission passed new financial laws designed to increase transparency, surveillance and improve regulations to bring them into compliance with international standards including efforts to prevent and fight money-laundering and terror financing.

The new laws will also boost the power and responsibilities of the FIA to fight financial crime as well as providing for a stronger prudential role.

Reforms have also included closing client accounts that were not considered to be consistent with the bank's religious mission, Ernst von Freyberg, president of the Vatican bank, said in a recent report.

It also gives the FIA "the function of prudential supervision over entities habitually engaged in financial activities," in response to a recommendation from Moneyval.