IRS recognizes Vatican’s steps to prevent fraud

Vatican City, Jun 3, 2021 / 06:00 am

The U.S. Internal Revenue Service has listed Vatican City State among the countries that meet its international standards for customer due diligence.

With the IRS approval of the Holy See and Vatican City State’s “know-your-customer rules,” the tax body recognizes the steps put in place by the Vatican to verify customers’ identities and risk profiles.

These procedures are a critical part of enforcing anti-money laundering rules and preventing fraud.

Vatican News highlighted the addition of the Holy See to the IRS’ list on June 2 as the Vatican awaits the publication of the Moneyval report on its financial transparency and the effectiveness of the Vatican judicial system.

The IRS cites recent changes in the Vatican’s criminal code, such as its money-laundering regulations passed after Vatican police searched the offices of the Vatican financial authority and Secretariat of State’s office on Oct. 1, 2019, in connection with the Secretariat’s investment in a luxury property in London.

It also referred to changes to a Vatican law on transparency, supervision, and financial intelligence made on Oct. 10, 2020. A 15-page decree altered Law XVIII from 2013, which set out provisions to combat money laundering and the financing of terrorism.

Carmelo Barbagallo, president of the Vatican’s Supervisory and Financial Information Authority (ASIF), said that the changes sought to tighten regulation of financial flows within the Vatican in an effort to meet international standards.

“The latest amendments to Law XVIII are part of an overall strategy aimed at making the management of Vatican finances ever more transparent, within a framework of intensive and coordinated controls,” Barbagallo said.

Moneyval, the Council of Europe’s anti-money laundering watchdog, conducted a two-week on-site inspection of the Holy See and Vatican City last fall to judge the effectiveness of the Vatican and Holy See’s legislation and procedures for combating money laundering, particularly how successful the Vatican has been at prosecuting these crimes in court.

Ruth Kelly, a member of the Vatican Council for the Economy, told EWTN News last month that the council still faces a “huge task” in its efforts to quickly bring up the Holy See’s accounting and financial transparency to international standards.

The Council for the Economy, tasked with setting the budget for the Holy See’s entities and raising the level of financial transparency, is also implementing an investment policy for the Vatican and “a huge training program” in financial standards for those who work in its departments and dicasteries.

“I’m actually very encouraged by the steps that I’ve seen, even though there’s so much to do and so far to go,” she said.