Heads Roll at Vatican Bank

On Monday, the Vatican Bank’s director and vice director resigned under pressure amid allegations that they are at the heart of the financial institution’s growing troubles. The high-level resignations of the two officials, Paolo Cipriani and Massimo Tulli, come just days after Vatican accountant Monsignor Nunzio Scarano, known as “Monsignor 500” for his habit of carrying cash under his cassock, was arrested for allegedly plotting to smuggle some $26 million from Switzerland into an unknown bank account in Italy with the help of a financial adviser and former spy. The resignations also follow Pope Francis’s appointment last week of a five-person cleanup crew tasked with reforming the bank, which no doubt put pressure on its administrators to shape up. The Vatican issued a terse statement saying that the resignations of Cipriani and Tulli were “in the best interest of the institute and the Holy See."

The Vatican Bank has long been suspected as a den of financial improprieties, with allegations from as far away as the European Union that the Institute for Religious Works, as the bank is officially known, is a front for some seriously unholy business. Last year the Vatican was stripped of its credit-card-issuing abilities when the bank proved slow to comply with international money-laundering standards set forth by the European Council’s Moneyval financial-transparency department. Those rights were later reinstated, to the delight of millions of tourists, but the Holy See’s financial arm suffered further scandal when now retired Pope Benedict XVI’s butler leaked a string of documents alleging widespread financial indiscretion, including the illicit use of funds from donations.

Last year Vatican Bank president Ettore Gotti Tedeschi claimed that he feared for his life when he was ousted by the bank’s board for alleged improprieties. At the time, he and Cipriani were placed under criminal investigation by authorities in Rome on suspicion of alleged money laundering for shady transactions between the Vatican’s bank accounts. Dozens of documents were taken from Gotti Tedeschi’s home as part of the investigation, and more than $33 million of the bank’s assets were frozen and later released as part of the inquiry.

Gotti Tedeschi’s dossier reportedly included a list of enemies who might want to harm him, including Cipriani, who is still under criminal investigation in the Italian judicial system from the 2010 affair. Cipriani has not been arrested by Italian authorities, but his resignation has sent tremors through the Vatican financial establishment that the worst is yet to come.

The bank’s current president, German magnate Ernst von Freyberg, who was appointed by Pope Benedict before his resignation, is now acting as president, director, and vice director while the bank’s board tries to reorganize itself. The pope’s reform team will likely have many suggestions on how to do that, and rumors abound that the pope isn’t sure that there is a need for a Vatican bank at all. The institution, which acts like a bank and has more than 19,000 account holders who can transfer funds to accounts around the world, insists it is not an actual bank because it does not lend money or make investments. But it does hold account holders’ funds in foreign banks and is less than transparent when it comes to its clients’ transactions. Von Freyberg issued a statement after the resignations were announced hinting that this is just the beginning. "While we are grateful for what has been achieved, it is clear today that we need new leadership to increase the pace of this transformation process,” he wrote, causing many to wonder if his will be the next head to roll.

The latest scandal is not the first trouble in the bank’s history. In the 1980s, the bank was embroiled in a fraudulent loan scandal with Italy’s Banco Ambrosiano, whose president, Roberto Calvi, was found hanging under Blackfriars Bridge in London under suspect circumstances. The head of the Vatican Bank at the time was American prelate Archbishop Paul Marcinkus, who faced charges as an accessory to fraudulent bankruptcy, but was never prosecuted thanks to immunity he enjoyed under a bilateral Vatican-Italian treaty. That treaty is no longer in place, and with Pope Francis’s vow to reform the Holy See’s most questionable entities, the latest Vatican scandal may be just the tip of the holy iceberg.