A Vatican Observer Vatican finances, the latest events are not just a financial scandal

Oct 10, 2019

The Vatican Gendarmes Corps seized documents, computers, and other electronic equipment in the offices of the Vatican Secretariat of State and the Financial Intelligence Authority. 

The events led to the suspension of five Vatican officials, but above all generated a particular preoccupation among the financial intelligence units of many countries as well as in international organizations, like the Egmont Group, the Council of Europe's committee Moneyval and of the European Commission.

The Egmont Group gathers financial intelligence units from 150 States, included the Vatican financial intelligence authority. The Holy See is a member of the Council of Europe, while the European Commission feels called into question because the Holy See undertook some obligations when it signed the 2009 Monetary convention. 

The Vatican official communication departments did not officially disclose the reason for the "raids" of the Vatican police. However, it was leaked that the reason was the purchase of a real estate in London by the Vatican Secretariat of State. In the end, the Institute for Religious Works found that the deal had some shadows, and asked for clarifications. 

If this is the issue, many questions can be raised.

Was the Financial Intelligence Authority asked for collaboration? And, given that the financial intelligence activities are under the obligation of official secrecy did the investigators ascertain whether the Financial Intelligence Authority did or was doing some intelligence activity? 

If the Financial Intelligence Authority already worked on the issue, and sources say that it was, there could be devastating consequences for the credibility of the Vatican Financial system. 

There are many serious perplexities raised over the suspension of Tommaso Di Ruzza, director of the Financial Intelligence Authority. The suspension is unusual, and, according to Vatican sources, it was decreed without giving any notice to René Bruelhart, the president of the Authority. 

In the end, the scenario is not favorable to the Holy See and shows that this is not merely a financial scandal. 

The role of the Vatican Financial Intelligence Authority

The Vatican Financial Intelligence Authority (AIF) played a crucial role in building the Holy See's international credibility in countering financial crimes, especially under the direction of Di Ruzza. 

As the Holy See is a global player, the international and multilateral fields were privileged. However, AIF also strengthened some deteriorated "special" relation, like the bilateral relation with Italy. Proof of it is the memorandum of understanding the Vatican Financial Intelligence signed with the Bank of Italy. The memorandum was signed by AIF president Bruelhard and Di Ruzza and by the Bank of Italy's Governor Ignazio Visco along with the then chief of the Bank of Italy's oversight department Carmelo Barbagallo. It is not usual that the Bank of Italy's governor in person signs a memorandum. It was a sign that there was an operative and institutional arrangement for the mutual interest of both the Vatican and Italy.

The Vatican Intelligence Authority is recognized as a trusted partner both in its functions of oversight and intelligence.

According to the latest AIF annual report, the AIF signed 56 memoranda of understanding with counterparts in financial information and eight memoranda with counterparts in the oversight. Beyond the Italian Unit for Financial Information and Bank of Italy, AIF signed memoranda with the US Office of the Controller of Currency, with the German central bank and many financial intelligence units. 

The exchange of information with financial intelligence units from all over the world show that the AIF is a trusted interlocutor. The figures of the latest AIF report number 473 exchanges of information with other financial intelligence units. The AIF also forwarded 158 spontaneous communication of information to competent authorities and received 15 spontaneous communication of information. 

This work is based on relations of trust, characterized by the secrecy needed for intelligence investigation. There is also the need for a well-designed juridical system, on which the Holy See has been working over  the last several years.

Given all of these data, is it possible that the Financial Intelligence Authority underestimated a real estate investment while working on the interest of the government, that is, the Secretariat of State? The foreign counterparts and international organizations have severe doubts about that, and they are also concerned since the autonomy and independence of the Vatican financial watchdog can be at risk. 

There are also some nerves within the Financial Intelligence Authority.. The acts of seizure took place without giving any notice to the Board of Directors. Among the board members, there are people with indisputable international credit, like Juan Zarate, who served as an anti-terrorism advisor to the US president; and the Italian Maria Bianca Farina, that chairs the Italian Post Service.

In addition to that, the financial intelligence authority was surprised by the publication of the leaked note of the Vatican police, which signaled the people suspended. The release of names and pictures of the people, while an investigation is ongoing, was considered by many in the Vatican disproportioned and damage to the reputation and the dignity of the people involved. An op-ed with no byline published by Vatican News announced that there would be lawsuits for that. 

On the eve of the upcoming Moneyval report on the Holy See, which is to be out in spring 2020, it is normal that international observers are surprised that the Financial Intelligence Authority became a target. 

How the crisis broke

The so-called financial scandal thus turned into an institutional crisis within the Vatican, which also touches the secretariat of State.

The Promotor of Justice that is the Vatican prosecutor had received two lawsuits, one initiated by the IOR and one for the Vatican General Auditor office. 

(Column continues below)

Once he got the green light, the prosecutor, with the collaboration of the Vatican Gendarmes corps, launched the raids in the Secretariat of State and Financial Intelligence Authority and to the suspension of a top-ranking official, a chief of office and three Holy See's employees. 

Among these, it is noteworthy the presence of Monsignor Mauro Carlino, former particular secretary to the Cardinal Angelo Becciu ( who served as Vatican Secretariat of State's 'sostituto' from 2011 to 2018). 

Since Septemeber 2019, Monsignor Carlino has been the chief fo the Office for Information and Documentation of the Secretariat of State. 

Even in this case, questions are more than the answers. On which charges these five people have been suspended? How prudent was to initiate an investigation on a likely old modus operandi, also involving the Financial Intelligence Authority? The Financial Intelligence Authority worked to overcome the old modus operandi. So, was the investigation a fruit of revenge or crossfires among other entities? 

The institutional crisis and the issues at stake

The questions lead to the understanding that there is a particularly grave institutional crisis. There is an attack on the institution from within the institution. 

On the one hand, there is the Secretariat of State, under attack for unclarified reasons. The new deputy, Archbishop Edgar Pena Parra, a decision-maker, began a process of reshuffle and internationalization of the administrative office. 

The new deputy started the new phase, as is showed by the appointment of monsignor Alberto Perlasca as deputy promotor of justice at the Supreme Tribunal of the Apostolic Signatura. 

Monsignor Perlasca served from 2009 to 2019 as head of the administrative office of the secretariat of State. The new head of the Secretariat of State's administrative office is monsignor Rolandas Makirckas, a Lithuanian who recently got to the Secretariat of State after serving to the nunciature in Washington: he is the first non-Italian to lead the office.

On the other hand, there is the IOR. The Institute for Religious Works would have refused to the Secretariat of State the financial support requested to carry out the London real estate purchase.

Another factor in play is the Vatican promotor of justice, the public prosecutor in charge of the investigation. The latest Council of Europe's Moneyval committee highlighted modest outcomes in the judiciary activities in the 2017 progress report of the Holy See. 

Vatican magistrates always rejected the allegation of poor operativity. However, numbers are numbers: since the Vatican anti-money laundering system was into effect, the tribunal just issued two first grade guilty verdicts. One against Giuseppe Profiti for abuse of functions in the Pediatric Hospital Bambino Gesù; the other one against Stefano Proietti for self money laundering linked to some procurements in the Vatican. The Financial Intelligence Authority reported on the cases. In addition to that, Proietti's guilty verdict came in 2018, two years after he plead bargain at the trial in Italy. 

The Financial Intelligence Authority reported about other cases that led to an investigation in other States than the Vatican. Some examples are the investigation of Rome's public prosecutor against the banker Pietro Nattino; the investigation that led to the arrest of monsignor Patrizio Benvenuti in Bolzano, Northern Italy; the arrest of the former member of the Brazilian Federal Court of Audit Josè Gomes Graciosa. 

Which scenarios in the offing?

The scenario is yet to be assessed. The day after the news of the raids, Giuseppe Pignatone was appointed the president of the Vatican tribunal. 

Pignatone is a retired Italian public prosecutor, well known for his anti-Mafia investigation. Is his appointment a coincidence or a new phase for the Vatican tribunal? Only time will tell.

The Holy See has worked to gain robust accreditation in the international field. This accreditation seems now at stake after the Financial Intelligence Authority became a target. Is the Holy See willing to carry on the path for international credibility, or is it ready to return under the Italian influence? And what is the price to pay for the sovereignty, the autonomy and the independence of the Holy See? These questions remain without an answer, for now. The events were shocking, though.