On Tuesday, the Vatican and the Bank of Italy signed a cooperation agreement that aims to put an end to years of Italian mistrust of Vatican finances. The agreement looks to enhance “the exchange of information in the field of financial supervision, on the basis of reciprocity.” In other words: The Vatican’s financial sketchiness landed it in the penalty box, but it may now be getting a chance to make nice with Italy’s financial establishment.
For years, Italian banks have expressed concern that the Institute for Works of Religion, or IOR,—the Vatican’s official bank—provides a tax haven for well-connected Italians. In 2010, Italian banks ceased dealings with the IOR after the Bank of Italy said it needed to implement strict anti–money laundering standards. Later that year, $31.15 million held by the IOR in two Italian banks was frozen amid an investigation into money laundering, though the money was later returned. The largest impact that their shaky relationship has had was in 2013, when Italy blocked the use of debit and credit cards in the Vatican due to a lack of transparency. This proved to be a major obstacle, as one of the city-state’s largest sources of income is from tourists visiting Vatican museums.
Since 2013, when Pope Francis was elected, relations between Italian and Vatican financial authorities have improved. In 2014, Pope Francis created a new department, the Secretariat for the Economy, and brought in an outsider, Australian Cardinal George Pell, to lead it. Cardinal Pell explained that “We are aiming at a substantial transparency. Our ambition is to become something of a model of financial management, rather than a cause for occasional scandal.”
In the past few years, the IOR has certainly cleaned up its act. Thousands of accounts have been closed and the Vatican created three departments to oversee, independently, Vatican administrative and financial structures—the Council for the Economy, the Secretariat for the Economy, and the Office of the Auditor General.
Even Moneyval, the European financial-crimes watchdog that has previously criticized the Vatican for insufficient supervision and monitoring as well as insufficient compliance on reporting of suspicious transactions, said in a 2015 report that the Vatican is making great strides toward improving its practices. Much of Moneyval’s praise centers around the Vatican’s creation of independent supervision structures to circumvent the kind of fraud or money laundering that might have taken place in the past. Since the creation of these new systems, Moneyval reports that 29 money-laundering investigations have started, although no prosecutions have been initiated. The report still offered suggestions for continued improvement, mainly that the Vatican’s judiciary needs to be more aggressive when dealing with those suspected of financial crimes. At the very least, the bank’s increased transparency will ensure that it has more eyes on it than the ones above.