Vatican officials: Swiss bank suspected of money laundering led to Pell conflict

Vatican City, Nov 21, 2019 / 12:00 pm

The Holy See's relationship with a disreputable Swiss bank triggered an internal dispute between the Secretariat of State and Vatican financial authorities. At the center of the conflict was a multimillion-dollar line of credit used to fund a controversial investment in London property speculation.

Sources inside the Vatican's Prefecture for the Economy confirmed to CNA that a substantial part of the $200 million used to finance the Secretariat of State's purchase of a luxury development at 60 Sloane Avenue came through credit extended by BSI, a Swiss bank with a long track record of violating money-laundering and fraud safeguards in its dealings with sovereign wealth funds. 

In 2016, BSI was the subject of a damning report by FINMA, the Swiss financial regulator, which concluded that the bank was in "serious breaches of the statutory due diligence requirements in relation to money laundering and serious violations of the principles of adequate risk management and appropriate organization."

The bank was absorbed by the EFG Group in 2017. The merger was approved by FINMA on the condition that it was "fully integrated and dissolved" within a year and that no BSI employee be given a senior management role in EFG. Had the merger not been approved by FINMA, BSI would have had its banking license revoked and the business shuttered.

On Nov. 4, CNA reported that in 2015 Cardinal Angelo Becciu attempted to disguise $200 million loans on Vatican balance sheets by cancelling them out against the value of the property purchased in the London neighborhood of Chelsea, an accounting maneuver prohibited by financial policies approved by Pope Francis in 2014.

The attempt to hide the loans off-books was detected by the Prefecture for the Economy, then led by Cardinal George Pell. Senior officials at the Prefecture for the Economy told CNA that when Pell began to demand details of the loans, especially those involving BSI, then-Archbishop Becciu called the cardinal in to the Secretariat of State for a "reprimand."

"Becciu summoned the cardinal - summoned him," one senior official told CNA. "Pell was supposed to be the ultimate authority in monitoring and authorizing all Vatican financial business, answerable only to Pope Francis, but Becciu shouted at him like he was an inferior."

Becciu reportedly told Pell the cardinal was "interfering in sovereign business" by looking into the Secretariat's dealings with BSI. 

"Cardinal Pell was given to understand that as far as [Becciu] was concerned, the prefect was basically an administrative clerk and a rubber stamp, no more."

Cardinal Becciu declined to answer questions from CNA on the topic, and Pell is incarcerated and unavailable for questions.

Pell raised the attempt to disguise the loans at the Council for the Economy, an agency led by Cardinal Reinhard Marx of Münich and charged with final oversight of Vatican financial transactions. 

One senior curial source told CNA that the issue was "noted, but no action was taken" by the council, despite the highly irregular nature or the arrangement.

One senior official at APSA, which acts as the Holy See's reserve bank and manages the Vatican's sovereign asset portfolio, defended the Vatican's relationship to BSI and similar financial institutions.

"You have to understand, a lot of good can be done in those grey areas," he told CNA. "Not everything the Church does or supports can be printed in a financial statement like a normal company. Sometimes the Church must be able to help without being seen to be helping."

Among other charges, BSI was found guilty of allowing sovereign wealth funds to use the bank for "pass through transactions," in which funds are transferred into a bank and passed through multiple accounts in a single day before being transferred back out again. Such activity is considered by regulators to be a clear warning sign of money-laundering. BSI was found to have systematically failed to document or investigate such transactions.

The FINMA report also highlighted instances in which BSI employees complained about the lack of transparency in handling transactions by sovereign wealth fund clients. Forbes magazine quoted one employee's internal complaint, saying "My team is implementing these transactions without really knowing what we are doing and why and I am uncomfortable with this. […] there should be a stronger governance process around all this." No action was taken in response to this and similar complaints.

The connection to BSI comes to light as the Vatican's own financial watchdog is struggling to assert its credibility. On Nov. 18, the president of the Financial Information Authority (AIF), René Brüelhart, resigned his post.

Although the Vatican press office characterized the departure as the end of "a five year term," Brüelhart had not appointed for a fixed period, and he made it clear he had resigned.  

Shortly thereafter, Marc Odendall, a member of the AIF board, resigned as well, saying that the Egmont Group, through which 164 financial intelligence authorities share information and coordinate their work, had suspended the AIF.

Odendall told the Associated Press that the AIF had been effectively rendered "an empty shell" and that there was "no point" in remaining involved in its work.

The agency's director, Tommaso Di Ruzza, was recently given a clean bill of health after a suspension which followed a raid on his office by Vatican gendarmes. That raid also targeted offices at the Secretariat of State and is believed to be part of an internal investigation into the London property deal funded by the BSI loans.

In addition to Di Ruzza, several officials at the Secretariat of State were also suspended and barred from entering the Vatican following the raids. Among them were Msgr. Mauro Carlino and Dr. Caterina Sansone, both of who have served as directors of a London holding company used by the Secretariat of State to control the London property.