Court denies Vatican bank’s efforts to reclaim millions

Vatican City, Oct 21, 2010 / 14:48 pm

An appeal from the Holy See's "bank" to recover millions of dollars frozen by Italian authorities in September has been declined. The Vatican expressed its "amazement" that the bank, known as the Institute of Religious Works, and its directors are still under investigation for allegedly not conforming to European anti-money laundering standards.

In September, authorities froze 23 million Euro (over $31 million) due to possible violations of Italian laws regarding disclosure. The original investigation concerned a pair of transactions between Vatican accounts in Italy and Germany that were blocked under suspicion of money laundering.

According to the Vatican's L'Osservatore Romano, which quickly published an article highlighting the transparency of the Vatican bank’s operations, the situation was based on a "misunderstanding."

The case continued with Vatican bank president Ettore Gotti Tedeschi and director general Paolo Cipriani being called into court for questioning. Both claimed no wrongdoing and pointed to internal transfer orders as the source of the problem.

According to Italian media reports, authorities are now investigating several large deposits and withdrawals from the bank’s Italian branches in which the sources and destinations of hundreds of thousands of dollars is not clear.

In spite of the continuing investigations, the bank made an appeal to regain control of the frozen sum. But, as Italian media reported on Oct. 20, Rome's "Re-examination Court" upheld the freeze.

Vatican spokesman Fr. Federico Lombardi expressed his "amazement" at the court’s decision. He said the Holy See believes the matter involves a conflict of interpretations.

"The directors of the IOR," he said, "are certain they will very soon be able clarify the question with the competent authorities."

The bank’s head, Gotti Tedeschi, is a respected professor of finance strategy and business ethics, and has an extensive background in public and private banking.

He was appointed by Benedict XVI a year ago and has been working to bring the Vatican's banking operations up to European regulations standards. One of his goals has been to get the Vatican bank on the "white list" for banks that comply with anti-money laundering regulations.