Analysis: What will the Vatican tell Moneyval?

Vatican City, Nov 26, 2019 / 04:00 am

In December, the Holy See is due to send a report to Moneyval, the Council of Europe's anti-money laundering watchdog, giving an update on its progress implementing the agency's recommendations to improve Vatican financial standards.

The report is likely to make for bleak reading in Strasbourg, but even more grim writing in the Vatican.

In 2012, the Vatican agreed to comply with a set of "recommendations" from Moneyval, incorporating them into internal policies. The two bodies have issued periodic updates on the Vatican's progress.

After recent media coverage on Vatican financial scandals, it seems clear that Moneyval will be looking this year to see whether internal policies and regulatory agreements are being treated as mere "recommendations" inside some Vatican departments.

In the last month, CNA has reported a series of allegations concerning two major Vatican investments arranged by the Secretariat of State. The first involves the Secretariat's purchase of a London property earmarked for development into luxury apartments. Senior Vatican sources say some $200 million used to finance the purchase came from money borrowed from Swiss banks, one of which - BSI - has since been closed by FINMA, the Swiss banking authority, for systematic violations of money laundering safeguards.

Of more immediate concern to Moneyval is likely to be the reported attempt by then-sostituto at the Secretariat of State, Cardinal Angelo Becciu, to disguise the loans on Vatican ledgers, despite internal regulations prohibiting the practice. Also of interest to the watchdog will likely be that no action was taken as a result; CNA has reported that the attempt to zero-out the loans against the value of the London investment was detected by then-Prefect for the Economy, Cardinal George Pell, who reported the matter to the Vatican's Council for the Economy which "noted" the incident but took no action.

Pell was also reportedly given a "reprimand" by Becciu for prying into the Secretariat's dealings with BSI, according to senior officials at the Vatican's Prefecture for the Economy.

Moneyval might also be interested to look into the management of the Secretariat's U.K. registered holding company for the property, London 60 SA Ltd. Two of the company's directors, Msgr. Mauro Carlino and Dr. Caterina Sansone, are officials at the Secretariat of State and are currently suspended, after being targeted in raids carried out at both the AIF and the Secretariat of State by the Vatican gendarmes on Oct. 1.

Another director at London 60 SA Ltd. who might attract the attention of money laundering authorities is an architect and real estate developer named Luciano Capaldo - initially registered by the Secretariat of State with civil authorities in London as a "Vatican citizen."

Through his company Imvest, which was raided by Italian financial authorities last year, Capaldo is linked to, among others, Giampiero Nattino, an Italian banker investigated by both Italian and Vatican authorities for money laundering and market manipulation through accounts at APSA, the Vatican's central reserve bank.

Moneyval will almost certainly be hoping to read a full account of a 50 million euro loan made by APSA to the Secretariat of State to partially fund their purchase of a bankrupt hospital. APSA later wrote off 30 million of that loan, and blamed the write-off for its failure to record an annual profit for the first time in its history.

Leaving aside the circumstances of the hospital itself, which reportedly involve the disappearance of shoe boxes full of cash, along with millions in bogus invoices, links to a Congolese oil company and suggestions of good, old-fashioned nepotism, the APSA loan was made - again over the objections of Cardinal Pell - against specific policies put in place at the behest of Moneyval.

Following a 2012 on-site inspection, APSA agreed to cease granting loans for commercial ventures, like the Secretariat's for-profit purchase of the hospital.

That agreement also exempted APSA from oversight by the AIF, the Vatican's internal Financial Information Authority, which ceased inspections the same year the loan was granted, in 2015. Depending on how forthright Vatican authorities are about what happened, and what remedial action they offer to take, Moneyval may be left with no option but to revisit those exemptions.

Although multiple senior sources across Vatican departments have consistently identified Becciu as the driving force behind the loan, Secretary of State Cardinal Pietro Parolin took personal responsibility for the project last week, along with an attempt to offset the loan with a grant from a U.S. foundation (obtained with the help of Theodore McCarrick).

Parolin's claim, that all this was done with "fair intentions and honest means" may well be included in next month's progress report. It is not certain whether Moneyval analysts will agree, or whether they will judge that good intentions suffice to cover policy violations.

Of course, it is not all bad news. Some progress has been made, and will no doubt be highlighted.

At the time of Moneyval's last report, in 2017, the watchdog noted the Vatican had yet to prosecute a case of money laundering in court. The "overall effectiveness of the Holy See's engagement with combating money laundering depends on the results that are achieved by the prosecution and the courts," the report concluded.

In response, the Vatican successfully prosecuted its first money laundering case last year.

In 2017, Moneyval also noted that the AIF "seemed to be working efficiently as both a financial intelligence unit and as supervisor of the one financial entity in the Holy See." If the AIF is still working efficiently in 2019, it would need to be running on auto-pilot. Indeed, perhaps the most pressing question about the December AIF report is who is left to write it.

Among those suspended following the Oct. 1 raids by Vatican gendarmes was AIF director Tommaso Di Ruzza, who was subsequently given a clean bill of health by his own agency, which expressed hope that the matter would "soon be clarified."

Just over three weeks later, AIF president René Brülhart resigned his post. On the same day, it was announced that the Egmont Group of 160 national financial watchdogs had suspended the AIF.  Marc Odendall, a member of the AIF board, quit his post, calling the agency an "empty shell" and saying further affiliation with it would be "pointless."

The chief of the Vatican gendarmes who organized the raids was also forced to step down last month.

After months of steadily building media coverage, the reaction from the Vatican has begun to shift slightly. After repeatedly being identified as the driving force behind the APSA loan to purchase the hospital, Cardinal Becciu told CNA that the matter was the "exclusive competence" of the Secretary of State, "Bertone and then Parolin."

When Parolin accepted ultimate responsibility for the APSA hospital loan last week, he told CNA he felt "compelled" to do so "in order to put an end to a controversy that takes away time and resources from our service to the Lord, to the Church and to the Pope, and disturbs the conscience of many Catholics."

That controversy has not ended, and is only likely to intensify in the coming weeks.

And although he first dismissed concerns about the London property investment, describing the Vatican's action as "accepted practice," Cardinal Becciu recently took to Twitter to denounce CNA's report of his alleged "involvement in financial impropriety 'discovered' by Card Pell" as "shamefully misleading" and "false."

The next day, a veteran Vatican journalist said Becciu's involvement in the London property deal, the hospital loan project, and his clashes with Pell were "common knowledge" among curial officials at the time, or "well known by now."

Having already described the London deal as "opaque" while promising to look into the matter further - to the objections of Becciu - Cardinal Parolin may find that, to Moneyval, the problems raised by the deal are all too clear.

Before Monyeval issues its response to the Vatican's December update, Parolin may find himself needing to offer the pope, and the faithful, substantive means of demonstrating accountability in the curia.

If the Holy See is to avoid returning to international financial "blacklists," it will need to show it means business, and not business as usual.