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Vatican Bank Being Investigated for Money Laundering

Comment: For many years, we’ve looked at the Vatican Bank–the IOR (Institute for Religious Works.) Long a vehicle for the financing of fascism and criminal undertakings, the institution has FINALLY come under investigation for money laundering. (The Vatican Bank was discussed at length in AFA #18.)

“Vatican Bank ‘Investigated over Money Laundering”; BBC News; 9/21/2010.

The head of the Vatican Bank, Ettore Gotti Tedeschi, is under investigation as part of a money-laundering inquiry, police sources say.

Prosecutors also seized 23m euros ($30m; £19m) from the bank’s accounts with another smaller institution.

The inquiry was launched after two suspicious transactions were reported to tax police in Rome.

The Vatican said it was “perplexed and astonished”, and expressed full confidence in Mr Tedeschi.

The Vatican Bank, known officially as the Institute for Religious Works (IOR), was created during World War II to administer accounts held by religious orders, cardinals, bishops and priests.
Police intervention

Rome magistrates are looking into claims that Mr Gotti Tedeschi and the bank’s chief executive Paolo Cipriani violated laws that require banks to disclose information on financial operations.

The BBC’s David Willey in Rome says the Bank of Italy’s financial intelligence unit tipped off Italy’s tax police last week, after two suspicious transactions were reported between the Vatican Bank and two different Italian banks.

The tax police seized 23m euros that the Vatican Bank had tried to transfer from a small Italian bank called Credito Artigianato.

Some 20m euros was destined for JP Morgan in Frankfurt, with the remainder going to another Italian bank, Banca del Fucino.

Reports say the Vatican Bank had failed to inform the financial authorities where the money had come from.
Past scandal

In a statement, the Vatican strongly defended its record.

“The Holy See is perplexed and astonished by the initiatives of the Rome prosecutors, considering the data necessary is already available at the Bank of Italy,” the statement said.

And the Vatican also gave its backing to the two officials under investigation.

“The Holy See wants to express the maximum confidence in the president and in the chief executive of the IOR,” it said.

Mr Gotti Tedeschi, who is an expert on financial ethics, has been in charge of the bank for a year. He was formerly head of Spanish bank Santander’s Italian operations.

The Vatican Bank was last mired in scandal in 1982 when its governor Archbishop Paul Marcinkus was indicted over his involvement with the collapse of what was then Italy’s largest private bank, Banco Ambrosiano.

Although he was never arrested, the fallout from that scandal took a darker turn when two of its top executives, one of them its chairman, Roberto Calvi, were murdered.

Calvi, known as God’s Banker because of his close ties to the Vatican, was found hanged under Blackfriars Bridge in London.

Discussion

9 comments for “Vatican Bank Being Investigated for Money Laundering”

  1. “The papacy was now financially secure. It would never be poor again.”:

    How the Vatican built a secret property empire using Mussolini’s millions

    Papacy used offshore tax havens to create £500m international portfolio, featuring real estate in UK, France and Switzerland

    David Leigh, Jean François Tanda and Jessica Benhamou
    The Guardian, Monday 21 January 2013 15.23 EST

    Few passing London tourists would ever guess that the premises of Bulgari, the upmarket jewellers in New Bond Street, had anything to do with the pope. Nor indeed the nearby headquarters of the wealthy investment bank Altium Capital, on the corner of St James’s Square and Pall Mall.

    But these office blocks in one of London’s most expensive districts are part of a surprising secret commercial property empire owned by the Vatican.

    Behind a disguised offshore company structure, the church’s international portfolio has been built up over the years, using cash originally handed over by Mussolini in return for papal recognition of the Italian fascist regime in 1929.

    Since then the international value of Mussolini’s nest-egg has mounted until it now exceeds £500m. In 2006, at the height of the recent property bubble, the Vatican spent £15m of those funds to buy 30 St James’s Square. Other UK properties are at 168 New Bond Street and in the city of Coventry. It also owns blocks of flats in Paris and Switzerland.

    The surprising aspect for some will be the lengths to which the Vatican has gone to preserve secrecy about the Mussolini millions. The St James’s Square office block was bought by a company called British Grolux Investments Ltd, which also holds the other UK properties. Published registers at Companies House do not disclose the company’s true ownership, nor make any mention of the Vatican.

    British wartime records from the National Archives in Kew complete the picture. They confirm Profima SA as the Vatican’s own holding company, accused at the time of “engaging in activities contrary to Allied interests”. Files from officials at Britain’s Ministry of Economic Warfare at the end of the war criticised the pope’s financier, Bernardino Nogara, who controlled the investment of more than £50m cash from the Mussolini windfall.

    Nogara’s “shady activities” were detailed in intercepted 1945 cable traffic from the Vatican to a contact in Geneva, according to the British, who discussed whether to blacklist Profima as a result. “Nogara, a Roman lawyer, is the Vatican financial agent and Profima SA in Lausanne is the Swiss holding company for certain Vatican interests.” They believed Nogara was trying to transfer shares of two Vatican-owned French property firms to the Swiss company, to prevent the French government blacklisting them as enemy assets.

    Earlier in the war, in 1943, the British accused Nogara of similar “dirty work”, by shifting Italian bank shares into Profima’s hands in order to “whitewash” them and present the bank as being controlled by Swiss neutrals. This was described as “manipulation” of Vatican finances to serve “extraneous political ends”.

    The Mussolini money was dramatically important to the Vatican’s finances. John Pollard, a Cambridge historian, says in Money and the Rise of the Modern Papacy: “The papacy was now financially secure. It would never be poor again.”

    From the outset, Nogara was innovative in investing the cash. In 1931 records show he founded an offshore company in Luxembourg to hold the continental European property assets he was buying. It was called Groupement Financier Luxembourgeois, hence Grolux. Luxembourg was one of the first countries to set up tax-haven company structures in 1929. The UK end, called British Grolux, was incorporated the following year.

    While secrecy about the Fascist origins of the papacy’s wealth might have been understandable in wartime, what is less clear is why the Vatican subsequently continued to maintain secrecy about its holdings in Britain, even after its financial structure was reorganised in 1999.

    The Guardian asked the Vatican’s representative in London, the papal nuncio, archbishop Antonio Mennini, why the papacy continued with such secrecy over the identity of its property investments in London. We also asked what the pope spent the income on. True to its tradition of silence on the subject, the Roman Catholic church’s spokesman said that the nuncio had no comment.

    Posted by Pterrafractyl | January 28, 2013, 12:16 pm
  2. @Pterrafractyl–

    Good find! There is a good account of the genesis of the Vatican financial engine in AFA #17.

    This story, like R. Wilson’s find about the Quandt company and the Goebbels family, has profound links with the Bormann milieu.

    Best,

    Dave Emory

    Posted by Dave Emory | January 28, 2013, 9:48 pm
  3. […] Vatican Bank Being Investigated for Money Laundering […]

    Posted by Miscellaneous articles for – Articles divers pour 02-03-2013 | Lys-d'Or | February 3, 2013, 12:11 pm
  4. That’s right Monsignor, you just wanted to build a home for the terminally-ill. Yea, that’s the ticket:

    Top Vatican bank managers resign after Monsignor’s arrest

    By Philip Pullella

    VATICAN CITY | Mon Jul 1, 2013 3:27pm EDT

    (Reuters) – Two top managers of the scandal-plagued Vatican bank resigned on Monday following the arrest of a high-ranking cleric with close ties to the financial institution, in the latest of a string of embarrassments for the Holy See.

    Director Paolo Cipriani and deputy-director Massimo Tulli stepped down three days after the Vatican was rocked by the arrest of Monsignor Nunzio Scarano, who is accused of plotting with two other people to smuggle 20 million euros into Italy from Switzerland.

    Ernst von Freyberg, a German who earlier this year became president of the bank, officially known as the Institute for Works of Religion (IOR), will assume the role of bank director until a permanent replacement is appointed.

    The bank has also established a new position of chief risk officer who will be charged with improving compliance with financial regulations at a bank which has long been a byword for secrecy and lack of transparency.

    The Vatican bank, which has had more than its share of scandals in the past few decades.

    Scarano, 61, who worked as a senior accountant in the Vatican’s financial administration, was arrested along with an Italian secret service agent and a financial intermediary.

    According to transcripts from a judge’s report, Scarano, who is under two separate investigations by Italian magistrates in Rome and Milan, mentioned the director in phone conversations tapped by police investigators.

    The judge’s report, obtained by Reuters, says Scarano controlled vast amounts of money and felt he could act with impunity because of his connections to the Vatican bank.

    Only last Wednesday, two days before the arrests, Pope Francis set up a commission of inquiry into the Vatican bank, which has been hit by a number of scandals in the past decades.

    Scarano was for years a senior accountant for a Vatican department known as APSA, whose official title is the Administration of the Patrimony of the Apostolic See.

    SUSPENDED

    Magistrates have said there is no indication so far that the Vatican bank was directly involved in the attempt to bring the money into Italy, but that the investigation was continuing and more searches were under way.

    SScarano was suspended from his duties several weeks ago when he was placed under investigation by magistrates in Salerno.

    In that investigation, his lawyer Silverio Sica said wealthy friends had donated money to Scarano in order for him to build a home for the terminally ill.

    According to Sica, his client wanted to use that money to pay off his mortgage so he could sell a property in Salerno and use the proceeds to build the care home.

    Posted by Pterrafractyl | July 1, 2013, 11:55 am
  5. @Pterrafractyl–

    Before joining the church, this guy worked for Deutsche Bank.

    Recall that, in the early ’80’s, JPII called in Hermann Abs to straighten out the Vatican finances after the Calvi affair and the revelations about the P-2 Lodge.

    Best,

    Dave

    Posted by Dave Emory | July 1, 2013, 3:49 pm
  6. @Dave: It looks like virtually all of the reports on on Monsignor Scarano’s employment past were in error. Scarano work at “Banca d’America e d’Italia” before it was purchased by Deutsche Bank at the end of 1986. The New York Times has a correction on that. They don’t list the bank in the correction but it was “Banca d’America e d’Italia”, Bank of America’s Italian subsidiary. Considering Bank of America’s deep ties to BCCI even after it sold its shares in the late 70’s as well as the key role BofA played in transferring money between BCCI and BNL – Italy’s largest bank at the time – you have to wonder what, if any, special role the Italian branch of BofA could have been playing throughout the early 80’s.

    Posted by Pterrafractyl | July 1, 2013, 7:28 pm
  7. Pope Francis fires all but one cardinals who run Vatican bank

    just 11 months into their five-year termThe cardinals were appointed by Benedict XVI shortly before he resigned

    The Vatican bank was caught in a money-laundering row in 2010

    By Ted Thornhill
    PUBLISHED: 05:05 EST, 16 January 2014

    All but one of a five-member panel that oversees the controversial Vatican bank has been fired by Pope Francis.

    Four cardinals were given their marching orders by Francis on Wednesday.

    Those sacked were former Secretary of State, Cardinal Tarcisio Bertone SDB, Cardinals Odilo Scherer from Brazil, Telesphore Toppo from India and Domenico Calcagno, from within the Vatican.

    More at link:
    http://www.dailymail.co.uk/news/article-2540454/Pope-Francis-fires-one-cardinals-run-Vatican-bank-just-11-months-five-year-term.html

    Posted by Swamp | January 17, 2014, 9:34 am
  8. @SWAMP–

    the background of Cardinal Odilo Sherer of Brazil is interesting:

    http://en.wikipedia.org/wiki/Odilo_Scherer

    “Scherer is German Brazilian and was born in Cerro Largo, Rio Grande do Sul to Edwino and Francisca (née Steffens) Scherer. He is a nephew of the late Cardinal Archbishop of Porto Alegre Alfredo Scherer. The family of his father originated from the town of Tholey in the Saarland in Germany.[2] His mother also descended from immigrants from Saarland.

    …From 1994 to 2001, he was an official of the Congregation for Bishops in the Roman Curia, while serving as a Roman pastor and chaplain during his spare time.[3]

    During those years in Europe Scherer also on various occasions studied the German language at the Goethe-Institut in Staufen im Breisgau.”

    Brazil is a hotbed of Bormann capital network/Underground Reich activity and is home to Citizen Greenwald.

    Goethe Institute is a commonly-used front for the BND (German intelligence).

    One wonders . . . .

    Best,

    Dave

    Posted by Dave Emory | January 18, 2014, 7:46 pm
  9. Here we go again:

    CNN
    Vatican turns to Wall Street to fix bank
    By Mark Thompson @MarkThompsonCNN July 9, 2014: 11:50 AM ET

    LONDON (CNNMoney)
    The Vatican is turning to big-hitting Wall Street players for help as it tries to leave its scandal-tainted banking past behind.

    Pope Francis — a staunch critic of rampant capitalismhas hired veterans of Invesco, Goldman Sachs (GS) and Deutsche Bank (DB) to complete an overhaul of the Vatican bank.

    The bank — whose functions include providing financial advice and services to the Catholic Church — has been hit by a criminal investigation, high-level resignations and international accusations that it wasn’t doing enough to prevent money laundering.

    A report in 2012 by European experts found that the threat of financial crime at the Vatican was low. But the bank’s global reach, high volume of cash transactions and a lack of information about some non-profit organizations could make it a target for money launderers.

    Under new management, the Institute for the Works of Religion — as the bank is formally known — spent the last year shedding hundreds of customers, dealing with investment losses from the past and improving transparency.

    “Our ambition is to become something of a model for financial management rather than a cause for occasional scandal,” Vatican economics chief Cardinal George Pell told reporters.

    Taking charge at the bank is Jean-Baptiste de Franssu, a former CEO of Invesco’s European business and founder of an M&A advisory firm. His predecessor, German lawyer Ernst von Freyberg, was unable to commit full time to the role, the Vatican said.

    De Franssu will be joined on the board by Michael Hintze, who began his career at Salomon Brothers in 1982. Hintze was head of U.K. trading at Goldman, ran convertible bonds in Europe for Credit Suisse (CS), and went on to found hedge fund CQS.

    Former Deutsche Bank chairman Clemens Boersig has also been appointed to the board, alongside Mary Ann Glendon, Harvard law professor and former U.S. ambassador to the Holy See.

    Their task will be to introduce a new business model that will see the bank focus on its work for the Church, its clergy, congregations and Vatican employees. Its asset management function will be transferred to a new Vatican body.

    Posted by Pterrafractyl | July 9, 2014, 9:32 am

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