The Reformation

Vatican Bank: No More Secret Accounts For Politicians And “Bad Families”

Tony Gentile/Reuters

Vatican City — When Cardinal George Pell, the Holy See’s new Prefect of the Secretariat for the Economy, addressed the Vatican press corpson Wednesday to lay out the new economic framework for the universal Catholic Church and introduce the Vatican Bank’s new president, he made what could easily be interpreted as a Freudian Slip. “We are working towards transcendence,” the cardinal said to the packed press room before quickly correcting his mistake. “I mean we’re working towards transparency.”

Pell could have just as easily stuck with the word “transcendence” given his enormous task to lift the Institute for Religious Works or IOR as the Vatican bank is officially called, from its sinful past to a loftier future. The IOR has been mired in a litany of scandals including the criminal corruption trial of its former general director and assistant, and the ongoing money laundering trial against a prelate referred to as Monsignor 500 for his penchant for big bills. The prelate, Nunzio Scarano, who once worked in the Vatican Treasury, is standing trial for allegedly trying to smuggle more than $25 million from Switzerland to a secret Vatican Bank account.

The bank was nearly closed by Pope Francis in 2013 before the pontiff decided to give the administrators one more chance. Since then, the bank has cleaned up its act, but not without a hefty price.

In conjunction with the not-so-surprising announcement that IOR president Ernst von Freyberg would be replaced by asset fund guru Jean-Baptiste de Franssu, the bank also released its 2013 Financial Report, in which it reported a somewhat dramatic 97 percent plunge in net revenue from €86.6 million ($118 million) in 2012 to a paltry €2.9 million ($4 million) in 2013.

According to the IOR press release, the loss was due to a fluctuation in the Vatican’s gold reserves and losses in “proprietary investments in externally managed investment funds.” But at Wednesday’s press conference, outgoing president von Freyberg implied there were other factors, including the closure of thousands of individual and institutional client accounts after external examiners pored over the bank’s financial records. “After examining all the legacy cases the IOR is burdened with, we can be sure we now know who our customers are,” von Freyberg told reporters, when asked about the type of accounts that were closed down. “There are no enormous accounts belonging to Italian families, politicians and bad families.”

In fact, the IOR has been quietly terminating relationships with unseemly clients since before Francis was elected, including those held by diplomatic missions, embassies, and consulates to Syria, Iran, Iraq, and Indonesia after “vague cash transactions” including some for more than half a million euro were discovered when the Vatican was trying to be listed on Moneval’s white list of virtuous financial institutions.

In 2012, Moneval’s investigations led to a temporary block on all credit card transactions in Vatican City, which meant that for a time tourists had to pay cash for tickets and trinkets at St. Peter’s Basilica. After the implementation of a new board and an outside Financial Intelligence Authority tasked with supervising the IOR for “the prevention and countering of money-laundering and financing of terrorism” the IOR started refocusing its purpose. “Subsequent to the screening process as per 30 June 2014, the IOR has terminated around 3,000 customer relationships, in an orderly process,” said the IOR statement. “Thanks to this decision, the IOR now focuses only on Catholic institutions, clerics, employees or former employees of the Vatican with salary and pension accounts, as well as embassies and diplomats accredited to the Holy See.”

But that doesn’t mean the IOR is a charity. Both Pell and Franssu, the IOR’s new president, insisted that making a profit was not a sin, with Franssu saying his goal was for the IOR to grow, which meant they would be signing up new customers that fit the new “ethical” criteria. “Clients come first. We want to ensure that clients with money at IOR have the best possible service,” Franssu said. “If we can ensure that, new clients will naturally find us.”

Pell said the goal of the bank was to become a reputable, trustworthy institution rather than one shrouded in secrecy and allegations of financial impropriety. “Our ambition is to become something of a model in financial management rather than a cause for occasional scandal,” Pell said. If they can manage that, they will have indeed achieved transcendence.