This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Pope Taps Trusted Prelate to Oversee Vatican Bank (Update 1)

By Nicole Winfield

VATICAN CITY -- Pope Francis took a first big step in reforming the troubled Vatican bank on Saturday by tapping a trusted prelate to help oversee its management, in a sign he wants to know more about its activities.

Francis signed off on naming Monsignor Battista Ricca as interim prelate of the Institute for Religious Works.

It's a key job that has been left vacant since 2011: The prelate oversees the bank's activities, attends its board meetings and, critically, has access to all its documentation. The prelate reports to the commission of cardinals who run the bank and is currently headed by the Vatican No. 2. That gives Ricca a near-direct line to the pope, serving as a bridge between the bank's lay managers and board members and its cardinal leadership.

Ricca is currently director of the Vatican hotel, where Francis lives, and other Vatican-owned residential institutes for clergy.

Technically the appointment was made by the bank's five-member commission of cardinals, headed by Cardinal Tarcisio Bertone, Vatican secretary of state. But the Vatican statement announcing the appointment made clear Francis had approved it, an indication that it was something Francis either initiated himself or strongly supported.

The Vatican spokesman, the Rev. Federico Lombardi, said the interim nature of the appointment was a sign that Francis is still mulling how to reform the Vatican bureaucracy as a whole -- one of the major priorities set out by the cardinals who elected him pope in March.

Right before resigning, Pope Benedict XVI named German aristocrat and financier Ernst von Freyberg as president of the Vatican bank, filling a vacancy that had been left open for nine months following the ouster of Italian banker Ettore Gotti Tedeschi for alleged incompetence. Von Freyberg has said the bank's main problem is its reputation, not any operational shortcomings.

The Council of Europe's Moneyval committee, however, says otherwise. The committee, which helps member countries comply with international norms to fight money laundering and terrorist financing, gave the Vatican bank several poor or failing grades in its inaugural evaluation last year.

While praising the Vatican as a whole for making progress quickly, Moneyval said the bank's rules for customer due diligence, wire transfers and suspicious transaction reporting were insufficient. It said the bank needed an independent supervisor and must conduct a thorough risk assessment to ensure that it knew its clients and the risks it faces.

Vatican officials have recently revealed that six such transactions were flagged last year and an additional seven so far in 2013.

But the customer checks are only now getting under way, even though the Vatican pledged to Moneyval that they would be completed by December 2012. Von Freyberg has said they would be completed by the end of July.

The Vatican must submit a progress report to Moneyval in November.

The Vatican opened itself to the Moneyval evaluation process after signing a new European Union monetary agreement in 2009. Its aim is to shed the bank's image as a secretive tax haven and improve its reputation in global financial circles following a series of scandals, including a money-laundering investigation launched by Rome prosecutors in 2010.

In an interview this week, von Freyberg said his aim was to make the bank's activities more transparent, by publishing its annual report online on Oct. 1. He has hired a leading firm in the fight against money laundering, Promontory Group, to go over the bank's client base, a top-notch international law firm to review the bank's legal framework, and a fancy German public relations agency to help revamp the bank's image.

"I cannot comment on the past," von Freyberg said. "I am here now to take things in hand and we are doing this with great effort."

He said he had some of his own ideas about bank reform, but that the cardinals were the top decision-makers and that the mission of the Vatican bank remained the same.

The Vatican bank was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. Located in a tower just inside the gates of Vatican City, it also manages the pension system for the Vatican's thousands of employees.

The bank is not open to the public; its 19,000 clients include Holy See personnel, religious orders, prelates and diplomats accredited to the Holy See.

The Vatican bank's finances have long been shrouded in secrecy. In the 1980s, it was implicated in a scandal over the collapse of Italy's Banco Ambrosiano in one of Italy's largest fraud cases. Roberto Calvi, the head of Banco Ambrosiano, was found hanging from Blackfriars Bridge in London in 1982 in circumstances that remain mysterious.

Banco Ambrosiano collapsed following the disappearance of $1.3 billion in loans the bank had made to several dummy companies in Latin America. The Vatican had provided letters of credit for the loans.

While denying any wrongdoing, the Vatican bank agreed to pay $250 million to Ambrosiano's creditors.

In the 2010 money laundering case, Italian financial police seized 23 million euros and Rome prosecutors placed the Vatican bank's then-president, Gotti Tedeschi, and general director Paolo Cipriani under investigation for alleged violations of Italy's anti-money laundering norms in conducting a routine transaction from a Vatican bank account at an Italian bank. The money was eventually unfrozen. The men technically remain under investigation but nearly three years later, haven't been charged.

But that isn't the only problem facing the Vatican bank. Last year, under pressure from the Bank of Italy, JPMorgan closed its Vatican bank accounts. And in December, again under pressure from the Bank of Italy, Deutsche Bank Italia halted its 15-year term providing electronic payment services to the Vatican, leaving the tiny city state cash-only. E-commerce operations only resumed at the end of May and still aren't fully operational, even though the Vatican announced in Februrary the problem had been resolved, The Associated Press reported earlier this week.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs