Financial supervision 2.0 in the vatican

Financial supervision 2.0 in the vatican

Once again, Pope Francis wants to end the perennial scandal surrounding Vatican finances. The coming months will show how well he was advised in his personnel decisions.

It was not a good year. Throughout the fall, the Vatican was dogged by a scandal over the AIF financial regulator. Under unspecified charges – Pope Francis spoke of a "suspicion of bad administration" – AIF director Tommaso Di Ruzza had been suspended in October. As a result, President Rene Brulhart and Supervisory Board members Marc Odendall and Juan Zarate threw in the towel.

They are in line with two others who were called by Francis to provide oversight and transparency in the Vatican's financial management and then resigned early: Cardinal George Pell as head of the Secretariat for the Economy (his successor, Jesuit Father Juan Guerrero, takes over at the beginning of the year) and Auditor General Libero Milone.

Allegation: improper conduct

Pell is said to have been too inconvenient for some to want to save him when he was accused of sexual abuse in 2017. The fact is that at the time Pell got into the way of Angelo Becciu, who at the time was managing a considerable amount of capital as a substitute of the Secretariat of State. Becciu, by now a cardinal, was also the one who pushed for Milone's removal as auditor general in 2017 – for allegedly exceeding his authority. According to Milone, the accusation has since been dropped without a sound bite.

From Beccius' time in the Secretariat of State comes a real estate affair, in the wake of which the financial regulator has now lost its leadership. The amount at stake is in the mid-triple-digit millions of dollars. After an initial investment in London fell through, Beccius' successor Edgar Pena Parra demanded 150 million euros from the Vatican's IOR bank for a rescue attempt. At this point, the IOOC turned to Vatican justice, accusing, among others, the financial supervisor of improper conduct.

Business results halved

That the Vatican bank would blacken its controller is not without piquancy. The IOR felt Di Ruzza's activities painfully; between June 2013 and the end of 2015, the bank had to pay around 4.Close 950 accounts due to objections, not without consequences for business results, which more than halved from 2014 to 2017 alone. Vatican prosecutor Gian Piero Milano, who is now investigating AIF, was also plagued by financial oversight: dozens of suspicious cases are piling up on Milano's desk. Unedited.

In its latest audit report at the end of 2017, Moneyval, the European committee of experts on anti-money laundering, attested that the AIF was doing a capable job – the reporting system was working, as the suspicious cases from the Vatican bank showed; the judiciary, on the other hand, received a rebuke: Moneyval found it incomprehensible why not a single case had gone to court so far, not a single seizure had been made.

Order of the financial system?

In April, anti-money laundering experts from Strasbourg will make a regular on-site visit to the Vatican to find out how things are going. For the new AIF president, Carmelo Barbagallo, an important appointment with little preparation time. As recently as November, the 63-year-old Sicilian was still working in banking supervision at the Italian central bank.

In addition to Barbagallo, the pope brought in another Italian from outside to a key position: former Roman prosecutor Giuseppe Pignatone will head the Vatican court in the future. Together with Vatican Bank chief Gian Franco Mammi, appointed in late 2015, whose judgment reportedly carries weight with Francis, they are part of a new circle in which Francis is placing his trust to put the financial system in order.

Pignatone and Barbagallo have dealt with the Holy See before in 2014 – then as its opponents. It was about dubious IOR accounts at Italian banks and the suspicion of capital flight of Italian taxpayers via the Vatican oasis. In 2016, Barbagallo signed a cooperation agreement with the Vatican financial regulator on behalf of the central bank.

After the appointment of Pignatone and Barbagallo to the Vatican, a Roman newspaper wrote that now the old controversies with the Italian prosecutor's office and the Banca d'Italia are on file.

By Burkhard Jurgens

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