Vatican bank pays hefty price for clean-up

VATICAN CITY – The Vatican bank, dogged by scandal and allegations of money laundering, has paid a colossal price for cleaning up its accounts, its 2013 financial statement showed Tuesday.

The bank said it had blocked the accounts of more than 2,000 clients and shut down hundreds of others in a vast operation that cut profit to 2.9 million euros ($3.9 million) from 86.6 million euros in 2012.

The ending of 396 “customer relationships” not eligible for accounts with the bank led to an outflow of about 44 million euros in funds by itself, it said.

Bank president Ernst von Freyberg, who took over at the helm last year, said he had established a policy of “zero tolerance for any suspicious activity”.

“This often painful but very necessary process has opened the door to a new, unburdened future of the IOR,” he added in a statement.

The Institute for Works of Religion, also known as IOR under its Italian acronym, said that while the reforms had been costly, results for the first half of 2014 showed a net profit of 57.4 million euros.

The IOR does not lend money, but handles funds for Vatican departments, Catholic charities and congregations as well as priests and nuns living and working around the world.

The bank, which has a reputation for secrecy and intrigue, also has a troubled history.

It was the main shareholder of the Banco Ambrosiano, which collapsed in 1982 amid accusations of laundering money for the Sicilian mafia.

The chairman of Banco Ambrosiano, Roberto Calvi — dubbed “God’s Banker” in the media — was found hanging from Blackfriars Bridge in London that year in a suspected murder by mobsters.

More recently the bank has been investigated for money laundering by Italian authorities, with its

Battle for assets control

Earlier this year, the Vatican launched an investigation into former Secretary of State Tarcisio Bertone — second only to the pope in the Holy See’s hierarchy — amid allegations he had embezzled 15 million euros from the bank.

The IOR’s 2013 financial statement listed an unspecified loss of 15.1 million euros, though it was not clear whether this was a reference to the Bertone affair.

Pope Francis, who has called for a “poor Church for the poor”, set up a pontifical commission in the wake of the scandal to propose ways to reform the bank and better manage its assets.

The IOR said phase two of the clean-up operation would include a “new board and executive team, operating under a new governance structure,” expected to include French businessman Jean-Baptiste de Franssu as the new president.

According to Italy’s investigative weekly L’Espresso, von Freyberg is being replaced after clashing with the pope’s personal intermediary to the bank, reportedly over access to information.

Vatican expert John Allen said von Freyberg’s departure after only a year at the helm left the Vatican “struggling to avoid impressions of a crisis.”

Allen, who writes for the Boston Globe, said officials were also “playing down accusations in the Italian press that a shadowy ‘Maltese lobby’… is attempting to take control of Vatican assets, presumably for motives of financial gain.”

The shake-up is expected to result in greater supervision by the Vatican’s Financial Information Authority (IAF) of the bank’s asset management.

A former top Vatican accountant, Monsignor Nunzio Scarano — who worked for the department in charge of real estate and sovereign bonds investments — was charged by Italian prosecutors in January with laundering fake donations from offshore accounts through the IOR.

Francis has frequently spoken out against the “idolatry of money” since his election last year and in June he denounced those getting rich through speculation on financial markets, urging them to use their investments for the good of humanity. – Rappler.com