Vatican Bank (Institute for Religious Works)
The “murky” IOR has secret accounts, no audits and records destroyed after ten years. Since 1998 the Vatican Bank has ben promising three international monetary watchdogs to provide more financial transparency. To keep using the euro, it agreed in 2009 to submit to the anti-money-laundering laws of the European Union, but has only done the minimum demanded of it. However, according to a Mexican bishop, money laundering by the Church is theologically impossible, anyway....
“The Holy See’s financial statement values St Peter’s Basilica at one euro.
The Vatican Bank...is ‘off the books’, i.e. not listed on the financial statement.” 
Theoretically account holders are limited priests, religious, Catholic institutions, employees of Vatican City State and diplomats accredited to the Holy See. However, the Vatican refuses to reveal its account holders to outside authorities — and especially to subject itself to scrutiny of past transactions — so no one can test this assertion. “Rumours have long swirled about whether accounts were used as fronts for other interests, including organized crime and Italian politicians”. 
Fuel was added to these suspicions in 2013 when a senior accountant in the Vatican financial administration, Monsignor Nunzio Scarano, was arrested and sent to Rome's Queen of Heaven jail. He is known as “Monsignor 500” for his habit of carrying 500 euros' worth of cash in his pocket ($650 US). The Monsignor is accused of trying to help friends bring 20 millions euros into Italy from Switzerland using a government plane to escape detection  and even burning their mobile phones to hide their plot. He is also under investigation for allegedly trying to launder money from his secret Vatican Bank account by paying cash to friends who were then to pay this into his account at an Italian bank. Only after the Italian authorities stepped in did the Vatican Bank, for the first time in its history, freeze an account — that of Monsignor 500.  The Italian judge wrote that the Monsignor saw the Vatican Bank as “the only safe and rapid instrument for financial and banking operations that could evade - if not outright violate - laws against money laundering and tax evasion”. 
As the bank of an independent state, the Vatican Bank escapes scrutiny from Italy. The Bank of Italy suspects that Italians are hiding taxable income in the bank and the Vatican Bank has even admitted that its insistence on special bilateral financial agreements (memoranda of understanding) with specific countries is to shield itself from the Italian financial authorities.  And, as if the nine-metre thick walls of its tower in the Vatican did not offer enough privacy, “God’s bank” appears to have quietly established itself in the offshore financial centre of the Cayman Islands. 
The Vatican Bank also has an impenetrable organisation, with three separate boards of directors. And it boasts another curious feature: it is said to be “never audited”, hence funds deposited there may simply vanish without a trace.  This bank even maintains that it adopts the remarkable practice of destroying all of its records every ten years. 
Increased international oversight
The Vatican Bank is now coming under pressure from three organisations to conform more closely to international banking rules designed to prevent fraud.
♦ In 2009, to be able to continue using the euro, the Vatican Bank agreed to submit to the anti-money-laundering laws of the European Union thus putting itself under the jurisdiction of the European Court of Justice. It updated its agreement with Italy and the European Commission to come closer to conforming to European Union monetary regulations against financial fraud (Article 8) and brought in a Vatican law “approximating” the EU rules at the end of 2010, in order for it to better monitor itself....  (A spokesman has claimed that it is “not a bank in the normal definition of the term” and therefore expects special treatment.) 
♦ The Vatican Bank has been in talks with the Organisation for Economic Co-operation and Development which sets transparency standards. However, more than a decade after the OECD began its investigation of tax havens in 1998, the Vatican is still not on its “white list” of countries with good records on transparency. 
♦ The Vatican Bank is also negotiating with the Council of Europe’s Financial Action Task Force (FATF), which imposes measures against money laundering and terrorist financing and is also known as Moneyval. The Vatican promised to adopt the anti-money laundering standards set by the FATF, which obliged it to pass anti-money laundering legislation and set up the equivalent of the Bank of Italy’s Financial Intelligence Unit to monitor the IOR’s activities. 
Tax haven investigation by OECD
The Vatican Bank is effectively “off-shore” from Italy.
IOR does not publish its accounts but is reported to hold €5bn in assets. It provides banking operations for Vatican staff, charitable operations and missions worldwide. It also serves an unknown number of private Italian account holders who use the Vatican as a tax haven. 
And, in addition, this “off-shore” tax haven to Italy appears to have “off-shore” tax havens of its own. Curious is the location of two of the Church’s “independent missions”. These are missions too small to be set up as apostolic prefectures, yet they are still given autonomy, and thus are not part of any diocese.  There are nine “independent missions” worldwide, most of them in remote areas with a sparse Catholic population, like Azerbaijan and Tajikistan.  However, two of them have been hived off from pre-existing dioceses. These are the Cayman Islands (left) and the Turk and Caicos Islands (right), both of them offshore financial centres.
It is difficult to use pastoral needs to explain the Vatican’s decision to excise the Cayman Islands [in 2000] from its natural Jamaican diocese of Kingston, in order to proclaim them missio sui juris [“independent missions”] under the direct control of the Holy See and entrust them to Cardinal Adam Joseph Maida, a member of the IOR board. 
For every person in the Cayman Islands, there are two companies and about five investment funds registered there.  In 1998, however, the Organisation for Economic Co-operation and Development began cracking down on tax havens. 
Q. What is a tax haven? A. Any country that offers low rates of tax to attract business is to some extent a tax haven. The real problem is that many countries refuse to release details on suspected tax dodgers to other countries. 
Even after a decade of prodding by the OECD, the Caymans and Turk and Caicos Islands have remained on the list of “promise to do better” tax havens.  Another curious fact is that in 1998, the year the OECD started to examine tax havens, the administration, (and presumably its financial records) of the “independent missions” in the Turk and Caicos Islands was moved from neighbouring Nassau away from the Caribbean to, of all places, Newark, New Jersey.  “Due to its proximity to New York, Northern New Jersey in particular has become susceptible to the money laundering industry.”  ...Guess where Newark is.
Of course, none of this has stopped the Pope from attacking tax havens for robbing the poor and laying the blame for the global financial crisis at the door of “offshore centres”. 
According to the editors of Lancet, “If international corporations did not channel more than half the world's trade through tax havens, but instead paid local taxes, then 230 deaths in children due to starvation could be prevented each day by the extra revenue.” 
Money laundering investigation
The Vatican Bank has used its “less than clear” relationship to the Vatican State to claim “sovereign immunity”.  Its connection with the Vatican State has enabled it to avoid having to answer charges in a US court that after WWII it helped hide and launder millions of dollars of concentration camp loot.  And it continues ― when convenient ― to assert its immunity from scrutiny as an organ of the Vatican State. Thus in September 2010 a Vatican spokesman claimed that “The IOR is located within the territory of Vatican City State, beyond the jurisdiction and surveillance of various national banks”. 
The Vatican's claim to be above international financial scrutiny became harder to maintain when, that same year, Italy ruled the Vatican was a “non-equivalent extracommunitarian country,” thus applying stricter anti-money laundering procedures. 
Under these the IOR was discovered to be acting as if it were an Italian bank, thus avoiding scrutiny of certain money transfers. The Italian prosecutor said that in refusing to give an Italian Bank the requested information the Vatican Bank had demonstrated “a deliberate failure to observe the anti-laundering laws with the aim of hiding the ownership, destination and origin of the capital.”  Although the Vatican insists this is a “misunderstanding” which can be easily cleared up, an Italian judge has twice upheld the seizure of €23 million ( $33 million) and denied the Vatican’s request for a return of the funds until mid 2011 . In December 2010, three months after the mysterious transaction came to light, an Italian judge criticised the Vatican bank for continuing to hide the identity of its clients. 
Additional unrelated cases came to the attention of the Italian police in 2010. In one instance the agent caught shifting mysterious funds for a rich client was a priest.  And another priest apparently used the Vatican Bank to help his father launder the €250,000 he had obtained from European Union funding for a non-existent fish farm, a grant which was then withdrawn from his account by an uncle previously convicted for being with the mafia. 
2012: The Vatican Bank tries to satisfy the Council of Europe, (FATF or Moneyval)
After the Italians, the Americans began to ask questions about "God's banker". In March 2012 the US State Department for the first time listed the Vatican as potentially vulnerable to money laundering, a notch below those states for which it has solid proof of this.  And a few days later the large American bank JP Morgan Chase announced that it was closing the Vatican Bank's account, This account, number 1365, was a “sweeping facility,” meaning that it was emptied out at the end of each day with funds transferred to another IOR account in Germany. Over a period of about 18 months some 1.5 billion euros passed through this mysterious account. 
In May, in response to the scandal the Vatican sacked the bank’s director, Gotti Tedeschi, a member of Opus Dei who had been in charge since 2009. 
More bad news came in July when the Council of Europe reported that the Vatican Bank had still not satisfied all the requirements. It had made some progress in satisfying the transparency test of its FATF or Moneyval, but had managed to pass just over half of its obligations ― only 9 of the 16) “key and core” aspects of its financial dealings. Its promises were better than its performance:
The 241-page report found serious problems with the agency's role as a supervisor or regulator of the Vatican's finances, giving it a failing grade. It said the agency had yet to conduct any inspections, can't sanction one of the two key Vatican financial institutions and that its role, authority and independence needed clarification. [...]
The report said the agency's ability to share financial information with other governments was hobbled by the Vatican's insistence that it enter first into bilateral agreements. 
This, the Vatican admitted, was to avoid having to hand over information to the Italian authorities who were investigating it. This delaying tactic allowed the Vatican to spirit its money away. In October the Italian police reported that
“the IOR transferred its Italian accounts to the German Deutsche Bank AG,” and lamented that the transfer started when the Bank of Italy “modified the position of the Vatican institute to fulfil anti-money laundering recommendations.” 
Yes, the Vatican chose to transfer its money to the very bank that, a couple of months later, faced the first of many convictions for tax evasion and rate-fixing. 
Further questions about possible money laundering were raised in 2013 when it was revealed that the Vatican Bank permits diplomats accredited to it to have secret accounts in its bank. And not just the ambassadors, but also the missions' second and third-ranking diplomats. Some 20 of the 100 countries represented at the Holy See are reported to have taken advantage of this offer. Among these are Syria, Iran, Iraq and Indonesia, whose accounts the Vatican is said to be closing in the face of heightened scrutiny from European banking authorities. The year before information about the Syrian account was leaked from secret US Government files. These involve payments by the murderous Syrian regime of Bashar al-Assad through "God's banker" for civil and military communications systems.  The Vatican Bank refused to confirm or deny this report. 
Bishop: It’s theologically impossible for the Church to launder money
In an unguarded moment in 2005 the Bishop of Aguascalientes and former head of the Education Commission of the Mexican Bishops’ Conference (CEM) revealed how the Church can let the end justify the means. Giving money to the Church, he said, “purified” it. Monsignor Ramón Godínez Flores who had studied theology and canon law in Rome explained that “It is immaterial where the donations from drug trafficking originate and it’s not up to us to investigate the source of the money.” 
Bishop Godínez said, “Whatever donations I get, I accept with thanks.”  These have become known as “narco-alms” (narco limosnas), which have sometimes extend to the funding of whole “narco-chapels” (narco capillas). One of these even had a plaque naming as its benefactor Lazcano, the bloodthirsty leader of Los Zetas drug cartel had been connected to some 30,000 murders.  This allows the gangsters to purify their souls and avoid punishment in the Hereafter by what they call the “Boss of Bosses” (jefe de jefes).
Why does the Vatican even need a bank?
The Italian historian Giorgio Campanini said in the Catholic weekly Famiglia Cristiana that the Vatican Bank should be closed on the ground that the pontificate shouldn't have direct links to the world of finance. He argued that there are plenty of ethically minded commercial banks in Italy and elsewhere that could be trusted to manage the Holy See's assets. “Total transparency would thus be assured and the faithful, who continue to generously donate, would know that their money given to the church...is destined to the poor.” 
Rachel Donadio and Andrew Higgins, “Power Struggle on Reforming Vatican Bank”, New York Times, 9 March 2013. http://www.nytimes.com/2013/03/10/world/europe/power-struggle-on-reforming-vatican-bank.html
Curzio Maltese, “The Secrets of the Vatican Bank” (“Scandali, affari e misteri: tutti i segreti dello Ior”), La Repubblica, 26 January 2008, translated by Graham Hunter.
Elisabetta Povoledo, “Transfer of Vatican Official Who Exposed Corruption Hints at Power Struggle”, New York Times, 26 January 2012. http://www.nytimes.com/2012/01/27/world/europe/archbishop-viganos-transfer-hints-at-vatican-power-struggle.html
1. “Book Review: Render unto Rome: The Secret Life of Money in the Catholic Church”, National Secular Society, 17 June 2011. http://www.secularism.org.uk/book-review-render-unto-rome-the.html
2. Judgement of the Ninth U.S. Circuit Court, 12 April 2005. “Court clears way for suit against the Vatican Bank for Nazi gold”, San Jose Business Journal, 18 April 2005. http://www.bizjournals.com/sanjose/stories/2005/04/18/daily9.html
3. “Cleric and 2 Others Arrested in Vatican Bank Investigation”, New York Times, 28 June 2013. http://www.nytimes.com/2013/06/29/world/europe/cleric-and-2-others-arrested-in-vatican-bank-investigation.html
4. “Vatican Freezes Account of Monsignor 500 after Money Laundering Scandal”, International Business Times, 12 July 2013. http://www.ibtimes.co.uk/articles/489568/20130712/nunzio-scarano-vatican-freezes-account-monsignor-500.htm
5. “Vatican, US Treasury agree to share financial data”, AP, 7 May 2013.
6. “Arrested Vatican monsignor felt he could act with impunity: judge”, Reuters, 30 June 2013. http://www.reuters.com/article/2013/06/30/us-vatican-bank-idUSBRE95T08220130630
7. “The Secrets of the Vatican Bank”, translated from La Repubblica, 26 January 2008.
8. John Loftus, former US Department of Justice prosecutor with the Nazi-hunting OSI unit, quoted by Jonathan Levy, “The Vatican Bank”, ed. Russ Kick, Everything You Know Is Wrong: The Disinformation Guide to Secrets and Lies, 2002, p. 19.
9. “Declaration of Avvocato (lawyer) Franzo Grande Stevens in support of defendant IOR's (Institute for Religious Works', i.e., Vatican Bank's) motion to dismiss plaintiff's third amended complaint”, 30 October 2000, Turin, Case No. C-99-4941 MMC, United States District Court, Northern District of California, § 21, “It is the custom and practice of the IOR not to retain records after ten years”. http://www.vaticanbankclaims.com/vatpr.html
10. Monetary Agreement between the European Union and the Vatican City State, 17 December 2009, Article 8 and the Annex. http://ec.europa.eu/economy_finance/euro/world/outside_euro_area/documents/2010-01-01-vatican_monetary_agreement.pdf
11. EU Directives are not directly applicable end even EU states (which the Vatican is not) must transpose the requirements into their national legislation.
Jeffrey Donovan and Lorenzo Totaro, “Pope to Bind Vatican to Money-Laundering Law, EU Says”, Bloomberg News, 29 October 2010. http://www.bloomberg.com/news/2010-10-29/-papal-act-set-to-commit-the-vatican-to-money-laundering-laws-eu-says.html
12. “Vatican Finances Aboveboard, Affirms Aide”, Zenit, 23 September 2010. http://www.zenit.org/article-30465?l=english
13. Guy Dinmore, “The Vatican: A murky See”, Financial Times, 24 September 2010. http://www.ft.com/cms/s/0/4c7e5606-c802-11df-ae3a-00144feab49a.html#axzz150QiGLfh
14. Guy Dinmore, “Sicily probe adds to Vatican bank pressure in Rome”, Financial Times, 3 November 2010. http://www.ft.com/cms/s/0/3a207e64-e736-11df-880d-00144feab49a.html#axzz14zXPKrYj
15. Guy Dinmore, “Sicily probe adds to Vatican bank pressure in Rome”, Financial Times, 3 November 2010. http://www.ft.com/cms/s/0/3a207e64-e736-11df-880d-00144feab49a.html#axzz14zXPKrYj
16. “Sui iuris” http://www.statemaster.com/encyclopedia/Sui-iuris
17. “Hunger: enough is enough”, Lancet editorial, Volume 381, Issue 9864, Page 348, 2 February 2013,
18. Catholic Dioceses in the World by Type: Independent Missions (Missions “sui iuris”) http://www.gcatholic.com/dioceses/data/type-miss.htm
19. “The Secrets of the Vatican Bank”, translated from La Repubblica, 26 January 2008. http://www.concordatwatch.eu/showdoc.php?org_id=843&doc_id=1821
20. Iain Dey, “Last orders: Is the sun about to set on tax havens?” The Times, 8 March 2009. http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5864693.ece
21. “Harmful Tax Competition: An Emerging Global Issue” [title of OECD report, 1998], Wikipedia. http://en.wikipedia.org/wiki/Harmful_Tax_Competition:_An_Emerging_Global_Issue
22. Iain Dey, “Last orders: Is the sun about to set on tax havens?” The Times, 8 March 2009. http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5864693.ece
23. Willem Buiter, “Non-doms and tax havens: the Chancellor’s good fortune”, Financial Times, 29 February 2008. http://blogs.ft.com/maverecon/2008/02/non-doms-and-tax-havens-the-chancellors-good-fortune/ Officially it’s called “Jurisdictions Committed to Improving Transparency and Establishing Effective Exchange of Information in Tax Matters”.
24. “Roman Catholic Mission Sui Iuris Of Turks And Caicos” http://www.servinghistory.com/topics/Roman_Catholic_Mission_Sui_Iuris_of_Turks_and_Caicos
25. James B. Johnston, “An Examination of New Jersey’s Money Laundering Statutes”, Seton Hall Legislative Journal, Vol. 30.1, 2005, p. 2. http://works.bepress.com/cgi/viewcontent.cgi?article=1004&context=james_johnston
26. “Pope attacks tax havens for robbing poor”, Guardian, 7 December 2008. http://www.guardian.co.uk/world/2008/dec/07/pope-benedict-vatican-tax-havens-credit-crunch
27. Judgement of the Ninth U.S. Circuit Court, 12 April 2005. “Court clears way for suit against the Vatican Bank for Nazi gold”, San Jose Business Journal, 18 April 2005. http://www.bizjournals.com/sanjose/stories/2005/04/18/daily9.html
28. “Lawsuit charges that Nazi gold funded Vatican ratlines”, Concordat Watch. http://www.concordatwatch.eu/showtopic.php?org_id=890&kb_header_id=6151
29. “Vatican Finances Aboveboard, Affirms Aide”, Zenit, 23 September 2010. http://www.zenit.org/article-30465?l=english
30. "Vatican finance group signs agreement with German counterpart", Catholic News Agency, 2013-12-04
31. “Prosecutors: Vatican Bank Defying Laundering Laws”, The Associated Press, 22 October 2010. http://abcnews.go.com/Business/wirestory?id=11947823
32. “Vatican's Move to Financial Transparency Rewarded”, Zenit, 2 June 2011. http://www.zenit.org/e-32737
33. “Italian judge upholds seizure of Vatican assets”, The Associated Press, 20 December 2010. http://www.msnbc.msn.com/id/40754048/ns/world_news-europe/
“Vatican bank sets up money-laundering unit hoping to escape scandal”, Guardian, 29 December 2010. http://www.guardian.co.uk/world/2010/dec/29/vatican-bank-money-laundering-authority
“Vatican Creates Financial Watchdog”, The Associated Press, 30 December 2010. http://www.nytimes.com/aponline/2010/12/30/world/europe/AP-EU-Vatican-Bank.html
“Pope acts to tackle money-laundering in Vatican”, Agence France Press, 31 December 2010. http://uk.news.yahoo.com/18/20101230/tbs-pope-acts-to-tackle-money-laundering-5268574.html
34. Lorenzo Totaro, “Vatican Bank Probe Extended to Suspect Clergymen Accounts, Corriere Says”, Bloomberg News, 21 October 2010. http://www.bloomberg.com/news/2010-10-21/vatican-bank-probe-extended-to-suspect-clergymen-accounts-corriere-says.html
35. Guy Dinmore, “Sicily probe adds to Vatican bank pressure in Rome”, Financial Times, 3 November 2010. http://www.ft.com/cms/s/0/3a207e64-e736-11df-880d-00144feab49a.html#axzz14zXPKrYj
38. “US sees Vatican as potential money laundering hub”, AFP, 7 March 2012. http://news.yahoo.com/us-sees-vatican-potential-money-laundering-hub-235850767.html
The 2012 International Narcotics Control Strategy Report (volume 2) has three categories for the list of 190 countries vulnerable to money-laundering activities: of primary concern, of concern and monitored. The Vatican has been placed in the second category, "of concern". (pp. 31, 33) https://www.hsdl.org/?view&did=702517
39. “Vatican bank image hurt as JP Morgan closes account”, Reuters, 19 March 2012. http://uk.reuters.com/article/2012/03/19/uk-vatican-bank-idUKBRE82I0P820120319
“ 'Cliente a rischio'. JPMorgan chiude il conto dello Ior”, Il sole 24 ore, 18 March 2012. http://www.ilsole24ore.com/art/finanza-e-mercati/2012-03-18/morgan-chiude-conto-143759.shtml
40. “God’s bankers:A beleaguered papacy is embroiled in intrigue. Some scent a succession struggle”, Economist, 7 July 2012. http://www.economist.com/node/21558249
Sandro Magister, “The Hunt for Thieves in the Vatican”, Chiesa, 31 May 2012. http://chiesa.espresso.repubblica.it/articolo/1350256?eng=y
“Cardinals split on whether to sack head of Vatican Bank”, AFP, 2 June 2012. http:/www.thejournal.ie/cardinals-split-on-whether-to-sack-head-of-vatican-bank-472636-Jun2012/
41. “Vatican Passes Key Financial Transparency Test”, Associated Press, 18 July 2012. http://abcnews.go.com/International/wireStory/report-card-vatican-transparency-released-16799879
The press release fo the COE itself carries a less sanguine title:
“Council of Europe report calls on the Holy See to strengthen supervisory regime”, Council of Europe, 18 July 2012. https://wcd.coe.int/ViewDoc.jsp?Ref=DC-PR079(2012)&Language=lanEnglish&Ver=original&Site=DC&BackColorInternet=F5CA75&BackColorIntranet=F5CA75&BackColorLogged=A9BACE
Mutual Evaluation Report – Executive Summary
Anti-Money Laundering and Combating the Financing of Terrrorism
The Holy See (including Vatican City State) 4 July 2012
Mutual Evaluation Report – Annexes
Anti-Money Laundering and Combating the Financing of Terrrorism
The Holy See (including Vatican City State) 4 July 2012
42. "Vatican finance group signs agreement with German counterpart", Catholic News Agency, 2013-12-04
43. "Deutsche Bank convicted in Italy in widening scandal", EU Observer, 2012-12-12
"Deutsche Bank CO2 Trade Partner Convictions Upheld by Top Court", Bloomberg, 2013-01-14
"Barclays and Deutsche Bank lose Libor appeal", Reuters, 2013-11-09
23. “Riciclaggio, la banca del Vaticano chiude i conti di 4 ambasciate”, Corriere della sera, 1 October 2013. http://roma.corriere.it/roma/notizie/cronaca/13_ottobre_1/riciclaggio-Ior-chiude-conti-ambasciate-2223389963163.shtml
24. “Seeking transparency, Vatican Bank issues first annual report”, Catholic News Agency, 4 October 2013. http://www.catholicnewsagency.com/news/seeking-transparency-vatican-bank-issues-first-annual-report/
44. “México: Obispo acepta que Iglesia reciba narcolimosnas”, Reuters, 21 September 2005. http://archivo.abc.com.py/2005-09-21/articulos/205752/mexico-obispo-acepta-que-iglesia-reciba-narcolimosnas
45. “La Iglesia católica dice purificar las limosnas del narcotráfico en México”, AFP, 20 September 2005. http://www.absurddiari.com/s/llegir.php?llegir=llegir&ref=7837
46. “Narcolimosnas – alms from drug cartels infect the Mexican Catholic church”, Borderzine, 27 December 2012. http://borderzine.com/2012/12/narcolimosnas-%E2%80%93-alms-from-drug-cartels-infect-the-mexican-catholic-church/
“Iglesia y narco en México: entre la amenaza y la complicidad”, BBC, 22 March 2012. http://www.bbc.co.uk/mundo/noticias/2012/03/120322_mexico_iglesia_narco_visita_papa_aw.shtml
47. “Giorgio Campanini: basta con lo Ior, sì alle banche etiche”, La Stampa, 6 March 2013.
Last update 06 December 2013