Vatican financial watchdog hails ‘rising trend’ in reports to Promoter of Justice

Vatican City, Jul 3, 2020 / 03:30 am

The Vatican's financial watchdog authority reported Friday that it received 64 suspicious activity reports in 2019, 15 of which it forwarded to the Promoter of Justice for possible prosecution. 

In its annual report, released July 3, the Financial Intelligence Authority (Autorità di Informazione Finanziaria, or AIF) hailed "the rising trend in the ratio between reports to the Promoter of Justice" and cases of suspicious financial activity.

The report comes ahead of a scheduled inspection by Moneyval, the Council of Europe's anti-money laundering watchdog, which has put pressure on the Vatican to prosecute breaches of financial regulations. 

Unlike in previous years, the report was not presented at a Vatican press conference.

The AIF was established by Benedict XVI in 2010 to oversee Vatican financial transactions. It is charged with ensuring that internal banking policies comply with international financial standards.

The number of suspicious activity reports (SARs) is seen as an important indicator of the AIF's performance. In 2017, there were 150, while in 2018 there were 56. 

The AIF forwarded 11 reports to the Promoter of Justice in 2018, four fewer than in 2019. 

In the introduction to the new report, AIF director Giuseppe Schlitzer wrote: "Overall, the tendency towards higher quality SARs is strengthening, thanks to the guidelines on more specific anomaly indicators which was provided and a more conscious implementation of a risk-based approach."

In the introduction Schlitzer said that in 2019 the AIF had "intensified its action in every branch of activity, while consolidating forms of collaboration with other states and jurisdictions." 

"At the system-wide level, also thanks to the Vatican authorities' strong commitment to fighting money laundering and the financing of terrorism, there was further progress towards a better functioning and international recognition of the jurisdiction," he wrote.

He noted that the AIF had carried out two onsite inspections at the Institute for the Works of Religion (IOR), commonly known as "the Vatican Bank." 

The first, in June, "aimed at assessing the technical compliance with the legal and regulatory framework for payment services." The second, in August, "consisted in a general compliance assessment in the fields of money laundering and the financing of terrorism." 

The annual report said that the AIF exchanged 66 requests for information with foreign financial intelligence units concerning 373 subjects. 

It also said: "Domestic cooperation with the competent authorities of the Holy See and the Vatican City State is intense and led to 24 requests for information and concerned 423 subjects."

"A marked increase in exchanges with the authorities of the Holy See and Vatican City State was observed as compared with the previous year, which confirms the trend of greater domestic cooperation and exchange of information, as well as greater involvement of Holy See and Vatican City State authorities in countering money-laundering and the financing of terrorism."

Moneyval was due to carry out a scheduled inspection of the Vatican in spring 2020. But the inspection was delayed due to the coronavirus outbreak.

In a July 3 statement on the AIF's annual report, the watchdog's president Carmelo Barbagallo said that the Moneyval evaluation team would begin its inspection of the Holy See and Vatican City State Sept. 29.

"The inspection, which will last about two weeks, was actually scheduled to begin in April but was postponed because of the pandemic. AIF has been tasked with heading the Vatican's delegation," he said.

He continued: "Several years have gone by since Moneyval's first inspection of the Holy See and Vatican City State, which took place in 2012. During this time span, Moneyval has remotely monitored the many advances made by the jurisdiction in the fight to prevent money laundering and the financing of terrorism. As such, the upcoming inspection is especially important. Its outcome may determine how the jurisdiction is perceived by the financial community."

"The Moneyval inspection will be broad-based. It will cover both the legislative framework and its effective implementation. It is crucial to arrive well prepared, to highlight the progress achieved in recent years in the system of controls, and to underscore what has been done in recent months to assure further progress."

Last year was a turbulent period for the financial watchdog. 

On Oct. 1, Vatican gendarmes raided the AIF's offices in connection with a controversial London property deal. This led to the suspension of five employees and officials, including Tommaso Di Ruzza, the AIF's director. They were also blocked from entering the Vatican.

The Egmont Group, through which 164 financial intelligence authorities share information and coordinate their work, suspended the AIF Nov. 13.

René Brüelhart, a Swiss lawyer who had served as president of the AIF since 2012, resigned Nov. 18.

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Marc Odendall, a Swiss-German banker and member of the AIF board, resigned the same day, citing the Egmont Group's decision and Brüelhart's departure.

"We cannot access information and we cannot share information. There is no point in staying on the board of an empty shell," he told the Associated Press.

During an in-flight press conference Nov. 26, Pope Francis confirmed that Di Ruzza remained suspended because of suspected "bad administration."

"It was AIF that did not control, it seems, the crimes of others. And therefore [it failed] in its duty of controls. I hope that they prove it is not so. Because there is, still, the presumption of innocence," Pope Francis said.

Barbagallo, an auditor and Italian banking consultant, was named Brüelhart's successor Nov. 27.

Barbagallo announced in January that the Egmont Group had lifted its suspension of the AIF.

Addressing the incident in his statement on the AIF's annual report, Barbagallo said: "The suspension was lifted after only two months, once adequate reassurance was provided to Egmont. Crucial to this aim was the Memorandum of Understanding (MoU) signed by AIF and the Promoter of Justice."

"With this memorandum, we were able to assure our foreign counterparts that, should the need arise to seize confidential documents and information, the seizure would be carried out in accordance with the confidentiality standards established by the Egmont Group concerning financial intelligence."

The Vatican announced the appointment of Schlitzer as director of the AIF April 15. He succeeded Di Ruzza, who completed his five-year term of office January 20, according to the Vatican.

In his July 3 statement Barbagallo said that the AIF hoped to issue "a new statute and the first internal regulation."

"First and foremost, pursuant to the new statute, the name of the Authority would change to the Supervisory and Financial Information Authority (SFIA), a name that highlights the Authority's dual nature as intelligence unit and supervisory (and regulatory) authority," he wrote.