On Jan. 1, 2013, the Bank of Italy, the country’s central bank which also acts as its banking regulator, shut down the ATMs and all credit and debit card services operated by Deutsche Bank’s Italian unit inside the Vatican City State. Putting most tourist transactions on a cash-only basis has “cut into sales at the Vatican Museums, post office, and other shops [and] is costing the Vatican an estimated $40,000 a day.”
Per The Economist: "The reason for the central bank's tough stance is that it has to comply with the European Union’s banking and anti-money-laundering law. This law permits EU banks to operate in non-EU countries only if these have adequate regulatory frameworks and supervisory controls in place."
Vatican spokesman, Fr. Federico Lombardi, attributed the disruption to “The arrangement between several Vatican City State offices and one of the POS (point of sale) providers, whose services were employed to facilitate payments by tourists and pilgrims inside the Vatican, [which] is about to expire….He said the Vatican already was in negotiations with other providers, and the no-plastic policy was expected to short-lived.”
The policy is still in effect.
Rene Bruelhart, former head of Liechtenstein’s financial intelligence unit and working with the Vatican since December 2011 to make their regulations appear satisfactory to financial authorities, expressed his surprise over the action taken by the Bank of Italy in an interview reported on Jan. 13.
In July, the Holy See passed the third round evaluation of the Moneyval Committee of the Council of Europe with a “good” report card, passing 9 of 16 “core and key” recommendations....Moneyval affirmed that the Holy See has a system of preventing and fighting money laundering and the financing of terrorism, equivalent to and recognized at the international level.
But a Bank of Italy statement
noted “the presence of an effective anti-money-laundering regime had still not been proved.”
Continued Bruelhart: “We don’t have problems with other European countries. On the contrary, we have close collaboration. No other country in the world has adopted similar measures. I repeat, therefore, that I’m truly surprised.”
There are two background stories which explain Bruelhart’s “surprise” although they intersect. Both are causing high tensions in the Roman curia. One is the Vatican’s “close collaboration with other European countries” and not Italy; the other is the need for an international organization to “certify” the Vatican’s compliance with the EU banking and anti-money-laundering laws.
Vatican’s alliance with the EU and break with Italy
When the neoconservatives installed Karol Wojtyla as Pope John Paul II, the US was the richest country in the world. The goal was to use the Catholic hierarchy to lead the Religious Right in securing Republican victories and, like a giant vacuum cleaner, the plutocrats would suck the wealth of the US into their own pockets.
At the time, John Paul II had little interest in the EU, “disliking the free hand it seems to give member states on abortion, euthanasia or meddling with human genetics, and what he judges to be its materialist foundations.”
But now, the EU is largest economy in the world. “States hand over sovereignty to markets…the market always dominates policy…and bankers took over Europe.”
The plutocrats possibly set up the “eurocentric” Joseph Ratzinger as Wojtyla's successor to emulate their success in the US with financial hegemony in Europe. The Church could again use abortion and same-sex marriage to “sanctify” pro-business factions.
The first Head of the EU Delegation in Rome, Mr. Luis Ritto, was accredited to the Holy See on 24 June 2006, following approval by the EU Member States on 4 April 2006. The visit by President of the European Commission, José Manuel Barroso, to Pope Benedict XVI on 5 May 2006 opened the way for this accreditation, and showed the interest and commitment of the EC President to establish full diplomatic relations between the European Union and the Holy See….This growing manifestation of interest for Vatican matters is opening the way for the development of a more structured political dialogue with the Holy See. (emphasis mine)
After the European Council’s October 2011 financial crisis summit, Herman Van Rompuy, president of the European Council, presented a report to the assembly of the Commission of the Bishops’ Conferences of the European Community (COMECE) which has a permanent Secretariat in Brussels, headquarters of the EU. “The bishops’ plenary session was dedicated to discussing the financial crisis….Van Rompuy is working hand in hand with the Vatican to work through the crisis and particularly strengthen the European Union and the Roman Catholic Church
That same month, the Pontifical Council for Justice and Peace (a Vatican think tank) called for the establishment of a “central world bank” to regulate the global financial industry and the international money supply as a step toward the “global public authority” as “envisioned by Pope Benedict” in his 2009 encyclical, Caritas in Veritate.
Van Rompuy met in private with Pope Benedict in November 2011. When he went on to Florence “two large banners were unfurled with two simple demands: ‘End Austerity’ and ‘Real Democracy Now!’” A group of 50 doctorate-level researchers from the European University Institute “then nailed their Ninety-Five Theses on the Ills of Europe to the door of the Catholic church where Van Rompuy had delivered a sermon.”
European bishops’ conferences continue to support the EU. In January 2012, COMECE published a commentary that the best response to the economic and financial crisis affecting Europe is that the EU become “a viable Community of Solidarity and Responsibility.” In March, they elected Cardinal Reinhard Marx as their new president who concluded his press conference by stating, “It's our firm intention to nourish that unitary dimension of Europe…” The French and German bishops' conferences published a joint declaration on Jan. 18, 2013: “We can…draw inspiration from the past in order to help the European Union establish long-term, solid political structures and an authentic social market economy.”
“The Church’s international politics will be less passive and more interventionist…along the great ideological battle lines that influence laws, customs, and coexistence among peoples,” predicted Vatican expert, Andrea Gagliarducci, in June 2012.
The Pope met “a small group of EU prime ministers and presidents” in September 2012 at his summer palace. On December 6, Benedict met with German president, Joachim Gauck, who said they discussed “the importance of the idea of Europe”, with both of them agreeing that it “must not be abandoned.”
Cardinal of Vienna, Christoph Schoenborn, gave a speech on Nov. 6, 2012, at the COMECE headquarters in Brussels “giving EU representatives ‘a realistic outline of the situation,’ because ‘the social situation in Europe and developments in the bioethical field [stem cell research] are hugely important for the Church….Christians want to have their say and bishops represent their opinions.’” (emphasis mine)
Tonio Borg, a Maltese Catholic, was elected by the European parliament on Nov. 23, 2012, as the EU’s new health commissioner despite “contempt for homosexuals and opposition to abortion.” “Some MEPs questioned Borg's stance on abortion, recalling how he tried to incorporate the ban on abortion, even if the mother's life is at risk, into Malta's constitution.” His election “casts doubt on selection procedures at the EU executive which places officials in unelected posts that shape regulation across Europe at a time when many Europeans question the Commission's democratic legitimacy."
Meanwhile, the Vatican’s problems with the Italian banking community became evident in September 2010. The Bank of Italy’s Financial Intelligence Unit informed the Vatican Bank (also known as the IOR, the Institute for Works of Religion) that €23 million (about $31 million) in transactions were seized from its accounts in two Roman banks. Prosecutors stated the IOR deliberately flouted anti-money-laundering laws “with the aim of hiding the ownership, destination and origin of the capital.” Court documents also revealed suspicions that transactions totaling €900,000 involved clergy acting as fronts for corrupt businessmen and the Mafia.
The money was being transferred to a Vatican account with JP Morgan Chase in Frankfurt. The Hessian Attorney General District Court rejected the request of a Roman prosecutor to seize the IOR's Frankfurt account and help in the money-laundering investigation.
In February 2012, La Repubblica reported that the IOR had “abandoned Italian banks” and has “transferred much of its financial assets to Germany.” In May, La Stampa stated the IOR “now works almost exclusively with Deutsche Bank” implying that German authorities would be more willing to protect the Vatican’s interests than the Italians.
When COMECE held a joint meeting with members of the press to discuss “communications regarding financial issues” in June 2012, they chose the city of Cologne.
The Moneyval Report
The Vatican Bank is not a “true” bank. There are no check books. It doesn’t make loans. “It is more a fund deposit and transfer institution than a bank,” said Carlo Marroni, a Vatican expert with Il Sole 24 Ore, Italy's financial daily. The IOR doesn't invest in the stock market, he thinks, “though they operate on the currency or bond market, or buy gold.” It also generates income by placing deposits in short-term government securities and in interest-bearing accounts at other banks.
As of November 2011, according to the Moneyval inspectors, the IOR had €6.3 billion ($8.3 billion) in assets, 33,400 accounts and 13 ATMs for use by its own clients (not tourists). Sandro Magister, the Vatican correspondent for L’Espresso, reported that IOR profits amount to €70 to 80 million annually ($103.8 – $118.6 million) and are given to the pope to do with whatever he wants.
Outside of the Vatican City State, the IOR can operate only through foreign banks and has more than 40 “correspondent” banks in Europe, the United States, Australia, and Japan.
After 9/11, regulations for financial transfers tightened to make it more difficult for terrorist funding and money laundering. Its banking partners wanted the IOR to conform to these international standards. “If a state is perceived to be at risk for money laundering, its financial institutions - in this case, the Vatican Bank in particular - usually pay a price. Depositors may take their business elsewhere, worried about possible seizures of assets, while banks in other countries may impose higher transaction costs to cover more aggressive ‘due diligence’ measures. In general, a state's ability to play the global financial game is impeded,” explained John L. Allen Jr., Vatican expert for the National Catholic Reporter. “The IOR absolutely needs that inclusion [in international standards for transparency] to conduct its financial transactions,” according to Andrea Tornielli, writing for La Stampa.
Pope Benedict announced in January 2011 that he was establishing a Financial Information Authority (AIF) which would supervise not only the IOR but all of the Vatican’s finances and there would be rules regarding financial transparency. “In fact, the anti-money laundering law of Vatican City State was written in a hurry, under the pressure from the Italian authorities’ impounding of €23 million transferred by the IOR,” reported Gagliarducci.
The AIF would be an “independent” watchdog guarding against corruption according to the Vatican and the pro-Catholic press, although its president, director and four board members - like every Vatican official - are appointed by the Pope or by someone appointed by the Pope.
“All members of the Authority are, in fact, ‘internal'", Gagliarducci noted. “Holy See borders are not anymore with Italy, but with the whole Europe." Yet, "the members of the Authority for Financial Information are all Italian, coming from the Bank of Italy milieau – even if the Bank of Italy proved a certain hostility toward the Holy See.”
After promulgation of the new law, Italian magistrates restored the €23 million to the IOR accounts in June 2011. But release of the money “is still pending.” Judge Maria Teresa Covatta was quoted as saying the intended beneficiaries of the transactions were still unclear.
In mid-October 2012 “the Italian judiciary, which is looking into suspect money flows noticed in the Vatican Bank’s accounts, sent some rogatory letters to the Holy See. Despite the introduction of anti-money-laundering laws and the assurance given by Vatican Bank heads that it no longer holds any anonymous accounts, investigators found that dirty money can also pass through non anonymous accounts belonging to priests or clerics,” wrote Tornielli.
The Vatican curia has always been an essentially Italian organization in language, culture, laws, politics and commerce. In severing the Vatican’s millennial ties to Italy, not all its members are rowing the Barque of St. Peter in unison towards the north.
Most lay board members of the IOR have also had ties to the Bank of Italy and/or the Italian financial community. For example, Ettore Gotti Tedeschi, former president of the IOR, is an Italian economist and banker.
Gotti Tedeschi was fired on May 24, 2012, via a blistering statement to the press written by IOR board member Carl Anderson, Grand Knight of the Knights of Columbus, a former member of the Reagan administration who represents the American plutocracy at the bank. Per multiple reports, Gotti Tedeschi was trying to promote greater financial transparency and adherence to international regulations but was opposed by the powerful Cardinal Tarcisio Bertone, Vatican secretary of state.
Bertone is Italian but his prior career was not in the Secretariat of State but in Congregation of the Doctrine of Faith where he was second-in-command under Joseph Ratzinger. The Secretariat of State was previously run by the “old guard” Italian members of the curia. There are rumors that this group still meets once a month in the office of Cardinal Angelo Sodano, previous secretary of state and currently dean of the College of Cardinals.
The pope recently appointed German Bishop Gerhard Ludwig Müller as head of the Congregation for the Doctrine of the Faith. Müller was also “surreptitiously added” to the Congregation for Catholic Education and the Pontifical Council for Promoting Christian Unity, “and that has caused some speculation that the pope is looking for a stronger national ally in a top position, possibly to bolster support against the Italian contingent in the Roman Curia.”
German Ronaldo Hermann Schmitz, formerly No. 2 at the Deutsche Bank, is interim president of the IOR. Pope Benedict’s personal choice to succeed Gotti Tedeschi is Hans Tietmeyer, former head of Germany’s central bank, “now that Berlin rules Europe’s finances,” although at 81-years-old, it is unlikely Tietmeyer will accept.
In order to satisfy both its banking partners and critics, the Vatican invited the Council of Europe’s Moneyval to do an evaluation of its new regulations. “Moneyval” is short for the Committee of Experts on the Evaluation of Anti-Money-Laundering Measures and the Financing of Terrorism and according to its website “15 years fighting money laundering in Europe.”
Their report which recognized and applauded the Vatican’s commitment to transparency was approved at a July 4, 2012, Moneyval plenary assembly.
Right after the Holy See’s official press release, rumors spread that the Italian delegation to the plenary had been gagged and prevented – by the Italian government itself – from complaining about some (presumed) outstanding international requests and about some operations by the IOR. The Italian Minister of Economy did not deny it, and offered further information about the Italian intervention at the Moneyval plenary assembly.
(In this case, "Italian government" refers to the Vatican's warm relations with the technocrat and unelected prime minister, Mario Monti.)
Moneyval released their report on the Holy See/Vatican City State on July 18, 2012. The Committee gave the “HS/VCS” a passing grade even though nothing had actually been done to uncover or stop money laundering, the real identity of IOR account holders had yet to be discovered, and there was “a lack of clarity about the role, responsibility, authority, powers and independence of the Financial Intelligence Authority (AIF).”
To address the criticisms in the report, the Swiss Bruelhart was appointed by Pope Benedict as head of the AIF, “a sign of the Vatican’s internationalization, in an attempt to separate the management of its finances from Italian affairs.”
Bruelhart’s Vatican appointment “is indicative of an operational reshuffle of Bank of Italy employees, whose influence, propitiated by Ettore Gotti Tedeschi, had been considered excessive,” stated Jeffrey Lena, the American attorney who has successfully defended the pope and the Holy See against all US lawsuits - three sex abuse, one RICO involving money laundering and one demand for assets stolen from victims of the Croatian Ustasha holocaust – by asserting the pope’s sovereign immunity. Lena has been hired to work in the Vatican full time. In the Aug. 4, 2012, interview, he also said: “The IOR has financial relations with more than a hundred countries; it has banking ties with forty of these and has links with financial entities across the European Union. But as far as I can see it, only one of these countries treats the Vatican as unequal in terms of anti-money-laundering. And that country is Italy.”
Gagliarducci agreed that the Vatican has better relations with Europe than with Italy. "Europe praises the Holy See’s commitment to transparency and for having achieved overall compliance in a very short time….”
The Vatican’s problems in the future, however, may not be only with Italy.
Under pressure from the U.S. Treasury Department, JP Morgan Chase closed an IOR account in its Milan branch in March 2012. JP Morgan reported that the €1.8 billion which had been deposited in the last 18 months in the account had been “swept” on a daily basis into a German bank. The IOR, however, had been “unable to respond” when questioned about the source of the money.
Christine Lagarde, managing director of the International Monetary Fund, recently “delivered a strong call for firmer financial regulation around the world” including “regulation of so-called shadow banking, the vast world of financial transactions that are done outside open exchanges, hidden from public balance sheets or conducted by nonbank financial institutions. ‘Shadow banking is clearly developing at a steady pace,’ Ms. Lagarde warned in our interview, and ‘currently escapes a degree of regulation and supervision.’”
Even more turmoil as “Vatileaks inquiry remains open”
As Vatican tensions were upped another few notches over the recent action by the Bank of Italy and the loss of income, concern over perception of their finances in the international court of opinion and animosity between Italian and non-Italian factions, a continuing "Vatileaks inquiry" may be the last straw (we can only hope).
The Vatican has close to 80 departments (dicasteries, congregations, tribunals, councils, "offices," and foundations). The head of each previously had financial autonomy and the idea of an AIF official or anyone else looking over his shoulder created a firestorm of bickering, back biting and mostly fear. “And so began the ‘Vatileaks’ scandal [in January 2012] as Italian newspapers published leaked internal letters showing conflicts among top Vatican officials over who had authority over whom and how transparent should the IOR and other Vatican financial agencies become.”
“Those in the know believe that the real core of the [Vatileaks] scandal is a power struggle over control of the Vatican's finances,” agreed Spiegel Online, and those finances are substantial.
Each of the dozens of departments has its own monies separate from the IOR, which some Vatileaks documents showed is still “a rogue ‘offshore bank,’ with purportedly ‘encrypted’ and ‘secret’ accounts” and which “raised questions about the Vatican's willingness to cooperate with international regulators trying to track suspect transactions.”
Amministrazione del Patrimonio della Sede Apostolica or APSA handles the Vatican’s property and investment portfolios. According to the Moneyval report, APSA’s assets exceed €680 million. In the 2004/5 fiscal year, APSA “made a profit of £33 million from the sale of various buildings.”
The congregation Propaganda Fide controls its own “mini-financial empire.” In 2010, the Vatican admitted “possible errors” in managing properties owned by Propaganda Fide, reported to have assets worth €9 billion.
It was widely reported that many of the Vatileak documents were handed over to the press to show Bertone’s ineptness. “Vatileaks gave rise to a climate of suspicion that is seemingly favoring the return of the Vatican Old Guard. This is another Vatileaks result, that no one is suspicion free....So, the breach was pinpointed, and maybe underrated. But closing the gap is perhaps making even more confusion.”
Bertone’s power was recently reduced. “On Dec. 14, the Vatican approved the latest tweak to its financial regulations, giving Bruelhart's agency greater independence from the Vatican's secretariat of state to enter into financial sharing agreements with other countries.” This, no doubt, raised the hackles of the "Bertone faction."
On Jan. 11, 2013, Pope Benedict XVI held a private audience with the Vatican gendarmerie and their commander, Domenico Giani. The 50-yr-old Giani, a former Italian secret services agent, is credited with “militarizing” the Vatican police with “the most cutting edge equipment” for their “surveillance and security work.” “Even Swiss Guard officers quail before his advance” wrote one of Giani’s fans.
An accompanying statement issued by the Holy See said the pope “had wanted to hold this audience in order to show encouragement to the police force and his gratefulness after a period of particularly tough challenges….The reference to the Vatileaks scandal was implicit.” So the presumption can be made that “the most cutting edge equipment, surveillance and security work” is being used by the 130-man police force on those working inside the Vatican.
Vatican clergy and employees have been issued an identity card complete with a microchip-tracking device in sweeping new security measures designed to prevent a repeat of the Vatileaks scandal. Much tighter controls have already been introduced for anyone seeking access or photocopies of the Holy See's archives, dossiers and documents.
At the Vatican trial of Claudio Sciarpelletti, arrested and convicted of aiding and abetting the pope’s butler, Paolo Gabriele, in stealing documents, the court rejected Sciarpelletti’s attorney’s request for “the evidence relative to telephone traffic and electronic mail communications
” between Sciarpelletti and Gabriele. The court said only that “it would be difficult to ascertain precisely the men's relationship from phone records and emails” but did not deny that the Vatican police had obtained this evidence.
According to Speigel Online:
Fear is running rampant in the Curia where the mood has rarely been this miserable. It's as if someone had poked a stick into a beehive. Men wearing purple robes are rushing around, hectically monitoring correspondence. No one trusts anyone anymore, and some even hesitate to communicate by phone.
“The sensitive documents paint a startling picture of the Vatican in disarray, with the 85-year-old Pope apparently too wrapped up in his theological musings to prevent toxic feuds and vendettas between rival factions in the curia
The day after the audience with the gendarmerie, the opening ceremony for the Vatican judicial year was celebrated. “The adjunct promoter of justice, the lawyer Pierfrancesco Grossi, cited Vatileaks only implicitly in his presentation.”
The Vatican and pro-Catholic press assured us that Gabriele acted alone in obtaining documents and Gabriele confessed that this was so at his trial. Grossi, however, “called for the introduction of ‘specialization courses’ and ‘refresher courses’ ‘as a condition for appearing in the list of accredited lawyers who have authorization to practice in our tribunal,’” a signal that Grossi is expecting more trials. In fact, “At the end of the opening ceremony, the Holy See Press Office stressed that the ‘Vatileaks inquiry remains open’” and that "further investigations” would be conducted.
In an environment where even honest mistakes are punished - Cardinal James Michael Harvey, Prefect of the Pontifical Household, was reassigned to St. Paul’s (appropriately) Outside-the-Walls because he hired Gabriele - the tension must be almost unbearable for those not protected by someone close to the pope.
"The only important thing is proximity to the monarch,” says a member of a cardinal's staff. Rome works like an absolutist court, one in which decisions are made by people whispering things into the others' ears rather than by committees. “There are many vain people here, people in sharp competition with one another,” the staff member adds.
Who spoke with whom, and for how long? What did they talk about? Who attends early Mass with whom, and who invites whom to dinner? Who's in and who's out? Who belongs and who doesn't, and who's coming into favor and who's falling out of it? “This mood fosters feelings of exclusion, discrimination, envy, revenge and resentment,” the monsignor says.
As a result of this chaos and mayhem, perhaps the 99% of the world will finally get some relief - not that the plutocracy will ever give up but perhaps they will be less successful if our economic enslavement isn't carried out in the name of God.
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