Friday, February 15, 2013
A dispute with the Bank of Italy over potential money laundering led the Institute for Works of Religion, commonly known as the Vatican Bank or IOR, to partner with a payment processor in Switzerland, a country not part of the 27-state European Union. The agreement arrived approximately 40 days after POS card-present transactions in Vatican City were blocked.
In a statement issued Jan. 10, 2013, the Bank of Italy said it stopped the Deutsche Bank Italia from supporting POS equipment in the Vatican City State on Jan. 1, 2013, because the Vatican Bank does not have adequate anti-money laundering (AML) controls. The EU requires non-EU countries to have equivalent AML and fraud laws to do business with EU financial institutions.
"The Vatican City does not have either a banking regulatory framework or European recognition of 'equivalence' for anti-money-laundering purposes," the Bank of Italy said in its release. "The Bank of Italy therefore had no choice but to reject the request for a 'moratorium' put forward by Deutsche Bank Italia for the POS machines it had installed in the Vatican City without the necessary authorization and which had subsequently been found during a Bank of Italy inspection."
The Vatican Bank has been under scrutiny since the 1982 $4.7 billion collapse of Banco Ambrosiano, in which the Vatican was a major shareholder. Banco Ambrosiano was between $700 million and $1.5 billion in debt at the time. Much of the missing money was allegedly siphoned off via the Vatican Bank.
The Vatican Bank agreed to pay $224 million to Banco Ambrosiano creditors for its role in the bank's collapse. In June 1982, Banco Ambrosiano Chairman Roberto Calvi was murdered in London. The banker had been convicted of illegally transferring more than $27 million out of Italy before fleeing the country.
Gotti Tedeschi, former IOR President, and another Vatican Bank executive are under investigation of suspected money laundering, Italian police said in September 2010. Tedeschi was removed as President of the Vatican Bank on May 24, 2012, but is still under investigation on suspicion he participated in money laundering while at the IOR. Pope Benedict XVI issued an Apostolic Letter in December 2010 creating the Financial Information Authority, an independent agency to oversee monetary and commercial activities of Vatican institutions, including the IOR.
The Council of Europe's Committee of experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) published an evaluation of the Vatican Bank in July 2012, stating the bank "has come a long way in a very short period of time" and many elements of the EU's AML and combating terrorism program recommendations are in place. However, Moneyval said a "lack of clarity" remained about the role, responsibility, authority, powers and independence of the FIA. It called for independent supervision of the Vatican Bank.
In its press release reporting its decision to block Vatican City transactions, the Bank of Italy mentioned Moneyval's findings and added that its action against Deutsche Bank is consistent "with the action it has been taking for some time to increase the awareness of all banks established in Italy with regard to the need to apply the current anti-money-laundering legislation in their dealings with IOR, the bank established in Vatican City."
According to Vatican City State's 2011 financial report, Vatican museum visitors spent $122 million there that year. This transaction volume virtually ensured the Vatican would not have to search long to find a card transaction processor after the Bank of Italy blocked Deutsche Bank from supporting EU transactions there.
Switzerland payment services provider Aduno Group said Feb. 12, 2013, it is now responsible for processing all electronic card transactions at the Vatican. Switzerland, like Vatican City State, is not a member of the EU and is therefore not subject to EU regulation.
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