The most relevant, positive ratings are two: the one concerning the IOR (the Vatican’s Religious Works Institute), which security standards surpass those required by Vatican law (paragraph 39 of the Executive Summary of the Report); and the one on the Vatican legislation on secrecy, that is considered largely compliant with international standards (paragraph 50).  It is also important to note the positive rating regarding the level of international cooperation. Unmistakably, the report dismisses a vision of the IOR as a place of opacity and illicit dealings, and of an uncooperative Vatican closed to scrutiny and full of financial mysteries.

The Holy See’s path to financial transparency dates back to 2009, when it signed the Monetary Agreement with Europe.  The agreement requested the Holy See to develop anti-money laundering legislation within one year. The year after, a Benedict XVI’s motu proprio promulgates anti-money laundering Vatican law n. 127 , and establishes the Authority for Financial Information (AIF). Cardinal Attilio Nicora is appointed president of the AIF, while Marcello Condemi – the “architect” of law 127 – and Francesco De Pasquale are respectively appointed member and general director of the AIF. Both Condemi and De Pasquale come from the Bank of Italy, where they were mid-ranking  bank officials.

Condemi drafted a law based on Italian legislation to combat money laundering.  In February, the Holy See asked MONEYVAL to submit to a peer evaluation process.  The process allows States to ensure financial transfers within and among them are legitimate.  MONEYVAL starts the procedure in April and – in November 2011 – the evaluators come for an on-site visit to the Vatican.  They seek to understand how the law worked, and above all to have it adhere to international standards. The evaluators found several vulnerabilities – in many cases these weaknesses are the same than Italy’s, described in that country’s GAFI peer evaluation in 2005 – and asked the Holy See to meet international standards. The Holy See complied:  Law 127 is revised and substantially amended.  In January, through decree 159, the changes go into effect.  In April, the revised provisions are more permanently enacted in a new law.The old world is turned upside down at the Vatican.  The MONEYVAL evaluation promotes positive change, and the evaluators themselves commend the new law, which separates roles and responsibilities, incorporates international recommendations and engages the Secretariat of State. The dynamics between the then president of the IOR, Ettore Gotti Tedeschi, the AIF members and the Vatican Secretariat of State change. It is an internal cold and hot war, that explodes in the media with the publication of several leaks.  In the meantime, the MONEYVAL evaluators return to the Vatican for a follow up visit, and overall  give the new law a thumbs up.

The MONEYVAL report is released on July, 18, and presented to the press by msgr. Ettore Ballestrero under-secretary for the relations with the States of the Vatican Secretariat of State.  The report is substantially positive.  It takes into consideration HOLY SEE peculiarities – like being an economic monopolistic State where the market does not exist.  The most serious flaw the report identifies has to do with the AIF: it underlines that the double role of Cardinal Nicora as President of the Authority and member of the Cardinal Commission –  n. 797 of the report – of the IOR constitutes a “serious conflict of interests”, and recommends to separate the Authority’s function of intelligence gathering from the everyday supervision of Vatican finances. The next step will probably be further reforms of the Authority for Financial Information.

So, Strasbourg locuta, causa finita? Apparently not, considering what followed the assessment of the Holy See’s financial transparency at the plenary assembly of MONEYVAL in the French city.  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 Institute for Religious Works. The Italian Minister of Economy did not deny it, and offered further information about the Italian intervention at the MONEYVAL plenary assembly. A sharing of information that probably will not please European Institutions. Discussions at the MONEYVAL assembly are, in fact, confidential. Yet an observer country, Italy, through an official statement, discloses details about the Italian delegation’s intervention and makes public observations about the report on the Holy See. What will the reaction of Europe be?

It is just one episode.  But it shows the perils on the Holy See’s path to financial transparency. A path that began with the Monetary Agreement with Europe in 2009, continued with the promulgation of the Vatican anti-money laundering law in 2010 and the Holy See’s request to be evaluated by MONEYVAL in 2011, and was followed by the reform of the anti-money laundering law at the beginning of 2012, at MONEYVAL’s request.

MONEYVAL is the body of the Council of Europe that evaluates the adherence of its member states to international standards to counter money-laundering and the financing of terrorism. The standards are informed by the body’s Financial Action Task Force (FATF) recommendations. There used to be «40+9» recommendations, but the most recent FATF plenary reduced them to 40, with significant revisions. MONEYVAL makes peer evaluations, and does not maintain a minimum threshold «white list». It engages, instead, on an ongoing and recurring process to constantly adjust recommendations in response to technological or other changes that criminals could try to take advantage of.

By submitting to a «technical» – non political – evaluation of its anti money laundering  protocols,  the Holy See showed that it is not interested in a fig leaf, but in materializing its commitment to implement a broad transparency policy. It opened its doors to European evaluators, who conducted two on site visits to the Vatican, delineating – together with Holy See officials – a path to transparency akin to that of any other state. No state has ever been found to be in compliance with all the recommendations.  Instead, each  state is on its own path to ever greater compliance.  Italy, for example, was found «not compliant» with 5 crucial recommendations, the so called «core and key» recommendations – and the FAFT document worriedly reported that Italy «has one of the highest cash payment ratios in Europe, and tax evasion that exists in sectors such as real estate provide a favorable environment to money laundering» (see p. 7).  According to the press, the Holy See was assessed «not compliant» or only «partially compliant» with 7 recommendations.

It is a  landmark achievement for the Holy See.  MONEYVAL, on its part, is focusing not on the past, but on the future of relations with the Vatican institutions. Paradoxically, the Vatican has better relations with Europe than with Italy.  As Europe praises the Holy See’s commitment to transparency and for having achieved overall compliance in a very short time, some foreign journalists who attended the recent «open door» meeting with the press at the IOR concluded that «relations with Italy are the issue for the Holy See».

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 euro transferred by the IOR. After the promulgation of the law, Italian magistrates restored the money.  But the money has not been released yet, because the closure of the investigation is still pending.  The negotiations for the Monetary Agreement with Europe were also held under duress from an investigation – that lead to nothing – about an IOR account in a Unicredit Bank branch in Via della Conciliazione.  Finally, the second on site visit of MONEYVAL evaluators was followed by the news of the closing of an IOR account in a Milan branch of the JP Morgan Bank.

Now, just as Strasbourg has given its evaluation and the transparency process is moving on, rumors are spread about the presumed «gagging» of the Italian delegation at the MONEYVAL assembly. A MONEYVAL assembly where Italy is actually just an observer State, without a vote or any influence over the assembly’s decisions.

After the no confidence vote. The words of Gotti Tedeschi

After receiving a no confidence vote by the IOR Board of Superintendence, Ettore Gotti Tedeschi became part of the investigation on the Italian defense company Finmeccanica. He is not charged with any crime, but he is suspected to have stored documents of Finmeccanica CEO Fernando Orsi. As Gotti Tedeschi, Orsi hails from Piacenza. They are long-time friends. That is why Gotti Tedeschi’s house in Piacenza and his office in Milan were searched. The police took 47 folders, that are said to contain Gotti Tedeschi’s private documents – and not IOR correspondence. These folders are now in the hands of the Public Prosecutor of Naples investigating Finmenccanica. The Public Prosecutor of Naples sent to the Public Prosecutor of Rome some of the documents. The Public Prosecutor of Rome is still investigating 23 million euro transferred by the IOR in September 2010 (20 million were transferred from a IOR account to a branch of Credito Artigiano and 3 million from a IOR account to Banco del Fucino toward a IOR account to a JpMorgan branch in Frankfurt). Gotti Tedeschi has been questioned by both Public Prosecutors. On the one hand – according to the press – he said he wanted to be discreet and not to speak about the IOR in order not to cause pain to the Pope (he insistently has asked for a private audience with Benedict XVI); on the other hand, he reportedly said that there had been opposition to him for his commitment to transparency, his desire not to have any more cipher accounts in the IOR, and his work to add the IOR to the list of virtuous banks compiled and monitored by the Bank of Italy.  On this, he would have had the collaboration of Anna Maria Tarantola, then number two of the vigilance in the Bank of Italy and now general manager-elect of Italy’s public broadcaster, RAI Television.

IOR transparency

These allegations  are a strong blow to the IOR image. But they are not true. One telling conversation – that is in some ways confirmed from what Paolo Cipriani, IOR general manager, recently told in an interview – even if no one will ever officially confirm it, offers insights.  When Ettore Gotti Tedeschi was still the president of the Institute, Paolo Cipriani, the IOR general manager, asked Gotti Tedeschi to show him where the cipher accounts were, since Tedeschi had been repeatedly calling for their closing. Gotti Tedeschi, angry, did not want to identify which accounts he was talking about and said: «There are such accounts, the Bank of Italy told me about them». Cipriani explained the IOR security and transparency procedures in an interview to the Italian newspaper Corriere della Sera. The policy of the Institute changed in 2002, when the KYC procedures was first and scrupulously applied. KYC stands for «know your customer», and involves a thorough screening of customers.

The IOR has always maintained informal but close cooperation with the Guardia di Finanza, i.e. the Italian financial police. The cooperation is so strong that it is told that Paolo Cipriani once got a letter from the Guardia di Finanza, thanking him for the expediency and the precision of his information in response whenever Guardia de Finanza asked for anything. This was a relationship based on trust.  But the handling of the IOR. account at the JP Morgan branch in Milan did not follow this pattern.

The news of the closing of the account was made public the day after the press release of the second on-site visit to the Vatican of the MONEYVAL advisors. The press release acknowledged the steps forward taken by the Holy See.

Il Sole24Ore – the Italian newspaper that spread the news – claimed that the account was closed because the IOR was «unable to answer» requests for further information regarding some payments of the account to the branch of Milan – a peculiar account, which balance was brought to zero at the end of every day. JPMorgan also recalled that the bank activities of the branch are subject «both to the law of the Italian State and to internal regulations». That is why – after looking atthe IOR needs and the requirements imposed by Italian law and bank regulations – JPMorgan reportedly did not think it had enough information to offer pay and cash services to the 1365 account. However, in fact, it was the IOR that closed the account. The decision to close it was in part also a response to the way in which Italian magistrates had asked for information about the account.

FIUs’ – Financial Intelligence Units –purpose is the exchange of internal information. When there is suspicion of money laundering, the bank alerts the vigilance of the Central Bank, which then alerts its financial intelligence unit. The alerts are kept anonymous, to protect the way that the systemprevents money laundering. These parameters are designed by the Egmont Group of Financial Intelligence Units, a «working group» of FIUs to improve cooperation in combating money laundering and the financing of terrorism, and to help develop each State’s programs against money laundering.

The confidentiality of information is a key element in efforts to combat money laundering, as is also stated in Italy in the law 231/2007, that deals with the competences of the Bank of Italy. Art. 6 of the law says that «the FIU carries its functions with full autonomy and independence. To implement these principles, the Bank of Italy regulates the organization and the functioning of the FIU, including the confidentiality of the information collected. The Bank of Italy provides the FIU with financial means and other adequate resources to insure the efficient pursuit of its institutional goals».

In the case of the closing of the JPMorgan account, none of the standard procedures were followed: the Rome’s Public Prosecutor directly alerted the FIU of the Bank of Italy; the FIU then alerted the vigilance of the Bank of Italy; and the vigilance asked the JPMorgan branch information on the account. But, if the public prosecutors want to investigate an account, they must do it through the Guardia di Finaza. Yet, Ettore Gotti Tedeschi maintained that there were valid reasons why  JPMorgan closed the IOR account of its Milan branch. Gotti Tedeschi’s lack of initiative to defend the Institute was noticed by the IOR Board of Superintendence in the now famous meeting of May, 24, when the board passed the no confidence resolution on its president.

The 24 May board of Superintendence

Usually, the meeting of the Council of Superintendence – called on trimestral basis – are divided in two parts: during the first part – that lasts about half an hour – the members of the Board meet; only after – and this is the second part – Paolo Cipriani, general manager of the Institute, enters, and reports on technical aspects and bank operations of the previous semester.

On May 24, Cipriani had to wait two and a half hours. When he was called by the board, Ettore Gotti Tedeschi had already left the meeting, and the no confidence vote had already taken place. The memorandum was already drafted by Carl A. Anderson, who was the secretary of the Board.

Gotti Tedeschi – as written in the memorandum – began the meeting, and spoke for about 70 minutes. After his speech, the members of the board raised some issues. They remarked to the president his unjustified absence to the last two scheduled meetings of the board (on February, 24 and April, 17). The absence to the last meeting was very disappointing: it was the meeting when the board approved the balances and the earnings to be allocated to the Pope. The IOR, in fact, is not a bank, and its fund are at the Papal disposal. Rumors says that Gotti Tedeschi was in Rome, and he was invited to join the meeting. He did not go.

The board also raised with Gotti Tedeschi news leaks. Among the several documents of the institute leaked to the press in the previous months, there was an e-mail sent by Francesco De Pasquale (general manager of the Authority for Financial Information, so formally a controller) to Ettore Gotti Tedeschi (formally, one of the ones controlled) that complained about the ramifications of the Vatican anti-money laundering law – the law n. 127.  The law had been amended as per MONEYVAL recommendations, and this had sparked a lively debate inside the Vatican.   The e-mail – the members of the board noticed – could have only been leaked by Ettore Gotti Tedeschi’s office.

Last key issue, the closing of the JPMorgan account: why did the president not defend the Institute from the attacks and the inaccuracies of the press? It was then that Gotti Tedeschi, angry, abandoned the meeting. It was – for the members of the board – the climax of a tense and overdue situation. In order to manage thecontroversy,it was decided to publicly release the memorandum of the meeting.

On May, 25 – the day after the no confidence motion– the IOR Commission of Cardinals was convoked to decide how to manage the new situation. Only Card. Odilo Scherer could not be part of the meeting, while Card. Telesphore Toppo arrived right in time from India. In that meeting, the cardinals decided how would Gotti Tedeschi be let go from the institute.

What will follow

While awaiting how the investigation would proceed, and as soon as the news of the «memorandum» of Gotti Tedeschi spread, the Holy See released a press communiqué in which it maintained that it trusted that «the prerogatives acknowledged to the Holy See by the international legal order are being adequately considered and respected by the Italian judicial authorities». It is a clear statement: the Holy See reminds all that those are documents from a sovereign country, seized from an ex president of a «body of State».

To think that this would be of detriment to the evaluation of the Holy See Transparency by the Council of Europe would be wrong. It seems MONEYVAL evaluated the IOR «largely compliant» with international standards.  It was just part of the evaluation. The evaluation is not just about the IOR.  It includes the 120 Vatican bodies that deals with budgets and financial transfers.

Holy See financial transparency. Risks and procedures.

It is worth to clarify some assertions made in the last few days. These assertions had partially come out from the same environment that defended Ettore Gotti Tedeschi. They claim that the Holy See risks not to be added to the white list of the virtuous States in terms of prevention of money laundering; the Holy See has been selected to undergo MONEYVAL inspections; and that the Holy See does not want to cooperate with Italian authorities. But these statements are false or grossly inaccurate. It is thus worthwhile to be  very thorough, and explain everything step by step.

White list

Let us begin with the so-called «white list» issue. MONEYVAL – the body of the Council of Europe that evaluates the adherence to the anti-money laundering norms of Council of Europe State members – does not have a white list. MONEYVAL is a body where peer-to-peer evaluations of member States takes place. There are no inspections. There are processes of mutual evaluation. And these evaluations are part of an on-going process. After the plenary assembly of MONEYVAL – 2-6 of July – the report about the Holy See will be public. The draft of this report was first discussed in Strasbourg, during the meeting between Holy See officials and MONEYVAL evaluators in May. Some weaknesseshave been noted. But these weaknesses often deal with the fact that the Holy See is a peculiar State. MONEYVAL reports are divided in three parts: legal, financial and law enforcement. The evaluators rate the adherence to each GAFI recommendation (40+9 until February, now 40, with several novelties). Rating can be: non-compliant, partially compliant, largely compliant or compliant. Of the GAFI recommendations, 16 are «key and core». Of these 16 key and core recommendations, the Holy See – according to the press – would be partially compliant or non-compliant in 8. Obviously, this could change after discussionsat the plenary assembly. If it got 10 negative ratings, the evaluation of the Holy See adherence to international standards would be then assigned to the GAFI International Cooperation Review Group, and so it would take more time to be evaluated largely compliant. There are also infringement procedures on particular ratings. In 2005, Italy was evaluated generally largely compliant. At the same time, there were – in the Mutual Evaluation Report – several non compliant or partially compliant ratings. After two years, the GAFI closed the infringement procedure.

The meetings with the evaluators.

In fact, there is no intention to vote out a State. And the fact that there are 8 points to discuss does not necessarily lead to a general negative rating. The meetings with the MONEYVAL evaluators are characterized by an open discussion. The Holy See could eventually challenge the rating, and explain to the evaluators the reason for some of its peculiarities. The procedure is very well defined in several steps. During the plenary assembly of MONEYVAL, at least one whole day will be dedicated to discuss the draft report about the Holy See/Vatican City State. Three countries must canvass each of the three parts of the report. Then, the assembly as a whole will hold an open discussion. At the end of this discussion, the draft report could be amended. The final decision will be taken by all the delegates that will take part in the plenary assembly in July.

This will not lead directly to the Holy See being added to the white list. There is not a white list that is directly linked to the MONEYVAL evaluation. The white list generally refers to the Common Understanding – i.e. the criteria (defined by the EU. regulation 2005/60/EC) used by EU members about efforts against money laundering. A country is added to this white list only if sponsored by a member State, and only after getting a positive evaluation on its AML/FT (Anti Money Laundering/Financing of Terrorism) policies by an independent and authoritative international body. This white list is not perfect or definitive. For example, the list of virtuous countries published every year by the American Secretary of State follows a different approach. Another aspect of this white list is that States can acknowledge the European white list, and still consider a particular country not trustworthy. For example, Italy has excluded Switzerland from Italy’s white list.

Financial transparency is never ending

Even if MONEYVAL will positively rate the Holy See/Vatican City State, the path to transparency will not stop there. MONEYVAL has already done three evaluation rounds, and at this time some countries are being evaluated for a «follow up round», i.e. a fourth round that – beyond the implementation of specific GAFI recommendations – takes into consideration statistics and effectiveness of the legislation adopted by the member States. The first evaluation round took place in 1998-2000, the second in 2001-2004 and the third in 2005-2009. The Holy See became a MONEYVAL member on April 6^th 2011, and it was promptly admitted to the third evaluation round, that looks at the legislation of a country and the international  standards – for example, if the countries evaluated signed and ratified the Palermo and Wien conventions.

MONEYVAL on site visits to the Vatican

MONEYVAL evaluators went for the first time for an on site visit to the Vatican on November, 21-26. The evaluators assess the legislative situation of the countries incombating money laundering. The result of the visit is reserved to the counterpart: it is a report that shows the key findings of the evaluators and that rates the adherence of the country evaluated to each GAFI recommendation. After the completion of the report, the evaluated country has two months to implement the MONEYVAL recommendations.

On January, 25 2012, with the decree n. 59, the Holy See amended its anti-money laundering law n. 127, following MONEYVAL recommendations, and making it more compliant with international standards. That same day, the Holy See signed and ratified the conventions of New York, Wien and Palermo: this was proof of a long-term commitment to financial transparency. The new law was substantially different from the old one, and outlined a better power distribution. The control of Vatican finances was not exclusively entrusted to the one and only Authority for Financial Information. The amendment of the law was the focus of a strong internal debate, and some – in primis Card. Attilio Nicora, president of the Authority for Financial Information – defined the new law «a step back». In fact, the Holy See followed the MONEYVAL recommendations. Jeffrey Owens, head of tax issues at the Organization for Economic Cooperation and Development, praised the Holy See’s reforms. «The Vatican is heading in the right direction with the revised norms», he said to the Associated Press.

This amendment profoundly changed the Vatican legislative scenario. That is why there was the need for a second on site visit of MONEYVAL evaluators, that took place March 14 to 16 . This visit was not an inspection: it was an assessment of progress. After this second evaluation, the draft report was completed and sent out to the Holy See in April. In May – from the 14th to 16th – a delegation of the Holy See went to Strasbourg to comment on the report and get it ready to be presented to the next plenary assembly. Now, a pre-meeting will probably be held before the plenary assembly of July. And finally, the plenary assembly in July, where a decision will be taken: will the Vatican be subjected to an infringement process? Or will its efforts be awarded? « I have not seen any State – a MONEYVAL evaluator said informally to a Vatican official – going so quickly toward the financial transparency, and making so many changements». These words confirms the Strasbourg appreciation for the Holy See job. Neverthless the difficulties, one could also preview a positive MONEYVAL evaluation. And this would be gained in a very short time.

His reform is something more similar to Gregory VII. That of Gregorian reform is an heroic enterprise, brought on by a few man that works to re-moralized their society and so purify the Church. People gathered around Ildebrando of Soana begins a movement whose effect were so vast that a whole world change. Will this happen with the Benedict XVI’s Papacy?

Elected Pope with the name of Gregory VII, Ildebrando do not only care about the purification and moralization of the Church. He also collect the ancient sources, so creating a corpus of papers that will be the first global law of the world, the Canon Law. More, he defends the autonomy of the Church. In Dictatus Papae, Gregory VII affirms the supremacy of the Pope on any other power, the imperial one included. Then, he organizes the Pontifical Legates network. He establishes two kind of Pontifical Legates: the one in loco, charged by the Pope to look after the application of Gregorian reform on a territory; and the one sent by  Rome to accomplish mission in a foreign countries. The defense of the autonomy and sovereignty of the Church is also brought on, during the Gregorian Age, by creating new canonic collection. Gregory VII auspicates the research of the sources of the law, and so many researchers look for documents that affirms that the Papal authority is the source of the law. This research will bring to light the writings of Attone, Anselm from Lucca, Deusdedit.

It is the work Benedict XVI is doing as well. Joseph Ratzinger began his theological research with his Doctoral thesis on the «People of God and House of God in Saint Augustine’s Doctrine of the Church» – defended in 1951 -, and he has always been aware that he needed to look back to the Church, and then he understood that the Church needed to be less worldy, and that being less wordly means to change and unify. Finally, the Canon Law is the tool that the Church has to do it.

Benedict XVI wants to focus on Canon Law, and this is one of the reasons why the Secretary of State is a Canonist and the last Papal nuncios appointed is Charles J. Brown, a non diplomat that served for years in the Congregation for the Doctrine of the Faith. This comeback of the Canon Law is driving the Benedict XVI’s choice for what concern international relations, and even for what concern its commitment for financial transparency. This led to a renewed Vatican anti-money laundering law. Not everybody had been happy about it, inside and outside the Vatican Walls. Why?

The new text of anti-money laundering Vatican Law come into effect

There had been no modification to the Decree n. 159 issued by the Pontifical Commission for Vatican City State. The last 25th of January, Holy See issued the decree n. 159 to amend the Vatican City State Law n. 127 concerning the countering of money laundering and financing of terrorism. As the art. 7 of the Fundamental Law of Vatican City State, the President of the Pontifical Commission for Vatican City State  «in cases of urgent necessity, he can issue dispositions having the force of law, which  however lose their force if they are not confirmed by the Commission within ninety days». The Commission confirmed the decree and – beyond whatever it has been written and told during these last three months – there were no doubts about it.

Anti money-laundering Vatican law: a never ending debate

Ever since the Law n. 127 had been issued, the Governatorate knew that this law had been written in a hurry, under the pressure of the investigation of the Public Prosecutor of Rome on two money transfer ordered by the I.O.R. (the Institute for Religious Works), and with the necessity to fully comply to the norms required by the European Union in the Monetary Convention signed by the Holy See in 2009. Yet while Holy See and European Union were discussing the terms of the Monetary Convention, the then number two of Vatican City State Carlo Maria Viganò showed himself doubtful about what the on-going discussion was going to ask to the Holy See, and proposed to unhook the Holy See by Euro area, in order to preserve its sovereignty.

The law n. 127 reassured Italian prosecutors, but on the other hand it did not completely fit to the international standards. The decree was an improvement of the law promoted by the Vatican City State administration in order to fit to international standards and at the same time to let them adhere to a peculiar State that is Vatican City State, while preserving the Holy See sovereignty.

An Italian problem?

Yet, during these last three months, Italian medias highlighted several rumors coming from «inside the Vatican» against the improvement of the law 127. Il Fatto Quotidiano – one of the most prominent and aggressive Italian newspaper – published a series of leaks of reserved documents. Among these documents, there was also an e-mail sent by the Director of the Authority for Financial Information Francesco De Pasquale (the controller) to the president of the Council of Superintendency of the I.O.R. (the controlled). This documents proved a questionable relationship between two parts of the mechanism of control of the Holy See, and at the same time proved that an animated debate took place within the Sacred Walls about the improvement of the Vatican Law n. 127.

It had been also leaked to Il Fatto Quotidiano a notation by cardinal Attilio Nicora, president of the Authority for Financial Information (but also member of the Council of Superintendecy of the I.O.R., member of the Commission for the Governatorate of Vatican City State and member of the so-called Council of 15, the assembly of 15 cardinals that periodically meet to take stock of the Vatican financial situation). In this notation, Nicora described the amendments to the Law n. 127 as “step behind” confronting with the previous text, which he blessed and promoted. More. The last March, the 19th, an article published on Il Corriere della Sera, the most spread Italian newspaper, let understand that Nicora himself was working to rewrite the text of the decree n.159, in order to bring the law back to the “old” law n. 127. The article proved that – inside the Vatican – the debate never ended.

Why the anti-money laundering law changed

The amendments to the Law n.127 had been requested by the advisors of MONEYVAL, the body of the Council of Europe that analyze and judge the adherence of the States to the 40+9 GAFI recommendations for contrasting money laundering and financing of terrorism. Marcello Condemi, a member of the Vatican Authority for Financial Information and draftsman of the first sketch of the old law n. 127, worked on a second sketch of the law right after the first on site visit of the MONEYVAL advisors in Vatican, that took place in November 2011. Several debates within the Sacred Walls followed. Finally, with the decree n. 159, the law n. 127 had been essentially modified. The “new” law n. 127 is now more adherent to international standard. It strengthens the power of controlling of the Authority for Financial Information, but at the same time distributed the controlling powers on several bodies of the Holy See, according to the principle of the separation of powers (even the Gendarm Corps is now encouraged to strengthen its intelligence in order to take part to the countering of money laundering with proper tools of investigation).  It gave to the Vatican Secreteriat of State the complete management of the relationships between States – «The Secretariat of State – it is written in the decree n. 159, art. 2 quinquies – foster the adhesion of the Holy See to treaties and international agreements, as well as the relations and the participation of the Holy See to institution and international organization qualified to define norms and good practices for what concerns the prevention and countering of money laundering and financing of terrorism».

That the effort of the Holy See had been to adhere to international standards for what concerns the countering of money laundering without denaturalize its own institution is evident when – in the decree n. 159 – the procedures to take into consideration the list of terror organizations issued by the Security Council of United Nations. According to the law n. 127, Holy See does not mechanically transpose the United Nations Lists. This choice is aimed to preserve the Holy See and Vatican neutrality. In fact, lists are written under the «Chapter 7» of Charter of the United Nations, and that Chapter is applied in war time. Holy See could be embarrassed by a mechanical transposition of the lists, since it could be in contradiction with the Holy See orientation –  Holy See is traditionally neutral and in favor of peace. Since Holy See is a Permanent Observer to the Assembly of United Nations, and not a Full Member, a settlement has been made to the autonomy of the Holy See: the Vatican Secretariat of State – according to the new article 24 of the law n. 127– will draw up its own list of terror organizations that will be based on the one issued by the United Nations, so keeping its autonomy, and at the same time showing to be sensitive to the international security goals. Holy See so maintain its autonomy, but at the same time proves sensibility to the international security goal .

Is there a biggest target?

Maybe there is a biggest target on the basis of the polemics that followed the one the another from the moment in which the Holy See began the process enrolled in the «White List», the list of states most active in preventing and fighting the financial crimes.. The critics to the lack of transparency of Vatican finance would hide a sort of attack to the sovereignty of the Holy See itself. Documents leaked by the press – the so-called Vatileaks, that are now under the investigation of a commission made up of the cardinals Herranz, De Giorgi and Tomko – prove that the «sovereignty issue» has never been taken into consideration by the «step behind» theorists. The leaks are about the retroactivity of the «new» law n. 127; about the will to cooperate with Italian investigators; about a diligence toward Italian authorities that led Ettore Gotti Tedeschi to be voluntarily questioned by the Italian magistrates without these latter submitted the request internationally.

Yet, Paolo Cipriani, General Director of the Institute for Religious Works, explained – during one of the seminars periodically held by the I.O:R. to train the administrators of the Congregation with deposits in the «Vatican bank» – that the Institute has always responded to any request submitted by Prosecutors or Central Banks. The responses by the Holy See, Cipriani explained, had come formally – there had been during the last ten years 20 requests submitted internationally to the Holy See (it is a global data, it does not concerns the only I.O.R.): 19 had been fulfilled by the Vatican City State, the last one has been judged by a Vatican Court – and not formally, for a sort of «good neighborhood relationships» with the other financial institutes. Holy See – Cipriani also underlined – did not answer in the only case the request would be considered a vulnus to its sovereignty.

A wider – international – perspective

It is now time to see things from a wider perspective. The announcement of the improvement of the law n. 127 has been launch in the Osservatore Romano, the newspaper of the Holy See, in an article by msgr. Dominique Mamberti, the «foreign minister» of the Holy See. Mamberti linked the news of the improvement of the law n. 127 to the ratification by the Holy See of three international threaties – the news about the ratification had been given the 25th of January as well. Holy See adhered to and ratified the International Convention for the Suppression of the financing of terrorism(Onu, New York, 1999) and the United Nations Conventions against the transnational organized crime (Palermo, 2000). Holy See also announced the ratification of the United Nations Convention against illicit traffic in narcotics drugs and psychotropic substances (Wien, 1998): this latter Convention had been already signed by the Holy See when it had been adopted by United Nations.

It’s a long time that the campaigns to expell Holy See by the concert of Nations – as the See Change campaign – broke down in the public opinion. In 2007, The Economist – one of the most authoritative magazines in the world – published an article headlined “God’s ambassadors” about the Vatican diplomacy. The article ended with this advice for the Holy See: «It could renounce its special diplomatic status and call itself what it is – the biggest non-governmental organization in the world».

Within the bureaus of the United Nations and of the other major international organization in which the Holy See seats as an observer, the idea to expel Holy See from the concert of nations is widely spreads. Even if this idea did not succed, and – on the other hand – on July 2004 the General Assembly of United Nations approved a resolution that not only confirm, but even enhanced the presence of the Holy See within the United Nations.

So, a more subtle strategy began. This strategy – brought on in international environments – aims to undermine the moral power of the Catholic Church and of religions in general. It consists in remarking that religious freedom is something like the freedom of expression, or in confusing the religious freedom with the freedom of worship. Vatican diplomacy is undermined, too. If Italian Prime Minister Mario Monti caused an «earthquake» at the Italian Ministry for Foreign Affair by showing his intention to appoint ambassadors not raised up with a diplomatic career, Vatican insiders refer about the intention to appoint lay people as diplomatic representative of the Holy See. Pontifical Legates must be bishops, since they represent the Pope. This rule is valid and effective only for Papal nuncios: they work as Papal ambassadors, they keep relationships with the governments, and at the same time they work as bishops, speaking to the Episcopal Conferences of the countries they are appointed at, give their opinion about the to-be-appointed bishops.

Nuncios that are appointed as permanent observer within the International organizations (United Nations, U.N.E.S.C.O., F.A.O., European Parliament) must only care the relationships between the Holy See and the governments. This would open to the appointment of lay people as permanent observers of the Holy See.

Could this be the beginning of a weakening of the Vatican diplomacy? In the book C’era una volta un Vaticano (Once upon a time a Vatican), Massimo Franco, underlines this lack of international appeal of the Holy See. Too appeased on Italy and on its relations with Italy – Massimo Franco writes .- the Holy See lost sight of its wide global horizon that made of it the most long-lived and solid institution in the world. Canon right is the first really global and globalized law of the history, and it still consists in a solidity that no friendly diplomatic relations would touch.

This same problem spoiled the path to the Vatican financial transparency. 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 (the investigation of the Roman prosecutors undermined the Holy See sovereignty, since prosecutors asked for information to the Financial Intelligence Unit of the Bank of Italy – which should be independent – instead of investigating with the Guardia di Finanza).

The “old” law n. 127 would have probably solved the “judicial” problems with Italy, but certainly it would also set back – if not avoided – the Holy See path to the white list. The Plenary Assembly of MONEYVAL will meet the next July, and on that occasion the report about Holy See will be issued. It will not be at that moment that the Council of Europe will decide about the enlistment – or the not enlistment – of the Holy See among the virtuous States. But probably, the possibility to be part of the white list would have been more difficult without the improvement of the law n. 127, that the MONEYVAL advisors auspicated.

There was not just law “n. 127 question”. In the last meeting with heads of Vatican departments (Prefectures and Pontifical Councils), Bertone asked more coordination among the several branches of the Vatican curia. He also pointed at the encroach of the «passion for the little news of ecclesiastical gossip, that undermine the Holy See prestige and sometimes crab the climate of confidence and trust among the Holy See’s bodies». The Pope presided the meeting, and he agreed with each word of his Secretary of State. In 2009 – in his letter to the bishops of Catholic Church concerning the remission of the excommunication of the four bishops consecrated by Archbishop Lefevbre – the Pope quoted this paragraph from Galatians 5:13-15: «Do not use your freedom as an opportunity for the flesh, but through love be servants of one another. For the whole law is fulfilled in one word: ‘You shall love your neighbour as yourself’. But if you bite and devour one another, take heed that you are not consumed by one another».

There has been some «bite and devour» against Bertone, too. Since he has been appointed as Secretary of State, the attacks against him had been continuous. Before Bertone turned 75, several influential cardinals had asked Pope Benedict to make a change in Secretariat of State, because of problems with curial government and the lack of coordination that had taken place. Now that he turned 77, many observers spread the voice that there should be a change of leadership in the control room of the Roman Curia.

Benedict XVI and Bertone are following the same footsteps. Step by step, they are changing the Vatican approach. Not casually, Benedict XVI wanted an expert of Canon Law as Secretary of State, and not a diplomat. This choice was not well taken by diplomats and his protégés, that increased their influence under the former Secretary of State, cardinal Angelo Sodano. But it is part of a long-sighted project of Benedict XVI. The Secretary of State must not necessarily come from the diplomatic service. His function is to «provide close assistance to the Supreme Pontiff in the exercise of his supreme office», and  this close assistance does not deal just with diplomatic relationships. For example – according to Pastor Bonus pastoral constitution – the Secretariat of State must «draw up and dispatch apostolic constitutions, decretal letters, apostolic letters, epistles, and other documents entrusted to it by the Supreme Pontiff».

An expert of Canon law –  and Bertone is – could better coordinate the drawing of documents. The Pope himself – in the 2010 letter to the Catholics of Ireland – wrote that  «the program of renewal proposed by the Second Vatican Council was sometimes misinterpreted and indeed, in the light of the profound social changes that were taking place, it was far from easy to know how best to implement it. In particular, there was a well-intentioned but misguided tendency to avoid penal approaches to canonically irregular situations». Turning back to the solidity of law, to remember Christian roots and to turn back to God. This seems to be the Benedict XVI’s plan for the universal Church, as the next Consistory would show.

So, attacking Bertone means attacking Benedict XVI. Was that a case, some insider questions, that the strongest attacks against Bertone leadership – the Viganò’s scandal and the consistory itself – came right when the Holy See was strengthening is international impact?  Who wants to undermine Holy See international impact? In fact, in those days Holy See rewrote its 2010 anti-money laundering law, the Vatican law n. 127. It is important to see what the new law really is about, going beyond the possible «bite and devour strategy». It was maybe to prevent that strategy that Holy See made no major announcement of the revision, while the Vatican’s foreign minister, Archbishop Dominique Mamberti, referred obliquely to it in an article Friday in the Vatican newspaper L’Osservatore Romano. This is probably also the reason why the law come into effect with an urgent decree, to be ratified by the Pontifical Commission of Vatican City State within 90 days.

The first point of the new Vatican law n. 127 is about financial transparency; the law acknowledges the right to privacy, and at the same time shed the obscurantist myth of Vatican secrecy. In fact, the Vatican law n. 127 aims to protect the right to privacy acknowledged in all the civil countries – the right to privacy is even mentioned in Gaudium et Spes, one of the Constitutions of the Second Vatican Council  – and at the same time it aims to favor the international exchange of financial information.

Why did the Vatican modify the law just one year after its introduction? In fact, the law n. 127 had been written in haste because of several reasons. One of this reasons was the need to solve the «IOR case», that is the seizure – ordered by Italian magistrates – of 23 million euro transferred by the IOR from an account it owned to the Credito Artigiano toward Jp Morgan (20 million) and Banca del Fucino (3 million). Another reason was the need to bring into effect the Monetary Convention with European Union signed in 2009.

It was not downhill to the Monetary Convention. Since February 2009, Vatican and European Commission advisors (Italy was part of the table as observer) start up the job to define the new monetary agreement. European Union conditions immediately seemed too restrictive. The relationship between Holy See and European Union were fraught. Vatican had the will to keep its autonomy, and Mons. Carlo Maria Viganò, then secretary of the Governatory of the State of Vatican City, even proposed to unhook Holy See from the Euro area, in order to let the Holy See avoid to be subjected to too restrictive conditions. Someone also proposed not to close the agreement within the year 2009, and to postpone the closure of the agreement to 2010. But time is short, and hierarchies of the Holy See did not take in consideration both of the hypothesis. The monetary agreement was finally signed on December, 17th 2009. Joaquin Almunia, Europen commissioner for Economical and Monetary Affairs, and mons. André Dupuy, Apostolic Nuncio to the European Union should sign together. But Almunia refuses to sign the agreement in the same room with the pontifical representant, and so Dupuy and Almunia sign the agreement each one in their own office.

Even inside the Vatican, things went on quickly. The Vatican Law n. 127 is adopted and it is decided to extend the effects of the new regulations to the Holy See via a motu proprio by Benedict XVI. The Motu Proprio is released the 30th of December 2010, right in time not to let the agreement lapse. According to some Vatican insiders, the institution of the Authority for Financial Information would mean that the same Ettore Gotti Tedeschi, president of the Commission of Vigilance of the I.O.R., is not given a blank cheque by the Pope, since the I.O.R. itself is subjected to monitoring. This is even truer for what concerns the new law: Jeffrey Lena, the Vatican’s U.S. attorney, noted for example that the new law allows for the IOR itself to be sanctioned up to €2 million if it violates the law — and it also allows for the IOR to have recourse to the Vatican’s court system to appeal.

Modifications of the law – promoted by the Vatican Secretariat of State and the Pontifical Commission of Vatican City State – seem to mean that the new law is not merely «a slap on the face» for some contingent problem. Holy See is going to meet the international standards, and it does not seem to be an occasional concurrency that the same day the implementation of law n. 127 came into effect with an urgent regulations, Holy See announced the ratification of three international agreements. Holy See adhered to and ratified the International Convention for the Suppression of the financing of terrorism (Onu, New York, 1999) and the United Nations Conventions against the transnational organized crime (Palermo, 2000). Holy See also announced the ratification of the United Nations Convention against illicit traffic in narcotics drugs and psychotropic substances (Wien, 1998): this latter Convention had been already signed by the Holy See when it had been adopted by United Nations.

It was January, 25th. During those days, medias highlighted Vigano’s scandal, depicting it in the terms that Vatican could be considered a multinational company whose seat is in Italy. Some days later, a confidential memo on IOR-Aif (Authority for Financial Information) relationships had been leaked to the press. This memo was equivocally a blight on the Vatican transparency toward Italian authorities.

Anyway, the IOR case emphasized almost an excess of diligence by Ettore Gotti Tedeschi, president of the Supervisory Commission of the IOR. Gotti Tedeschi agreed to be questioned by the Italian magistrates, even if these latters did not submit the request internationally. Many Vatican insiders considered the Gotti Tedeschi’s one a «questionable decision». It is because this decision seems to be a renounce to the immunity by Gotti Tedeschi, and this renounce to immunity could be eventually extended to the body of State he presides.

It is important to say that it is not only an Italian-Vatican matter. The improval of the Vatican law n. 127 bodes to a long-sighted choice. In fact, Jeffrey Owens, head of tax issues at the Organization for Economic Cooperation and Development which maintains the «white list» of the virtuous State in countering money laundering, said to Associated Press that the Vatican is heading in the right direction with the revised norms. «What I see in these developments – Owens said – is that the Vatican has recognized that in today’s financial environment there is a premium on transparency and that to achieve this, this must conform to the highest international standards, whether in the area of money laundering, tax evasion or bribery».

If the «old» law n. 127 had been written in haste, the «new» law shows that Holy See means business on contrasting money laundering. After just one year, Holy See changes his law as requested by  MONEYVAL Adivsors, come for an on-site visit in the Vatican the last November. The advisors noted inadequacies in the Vatican legislation. According to MONEYVAL official communiqué,  «at the conclusion of its mission, the MONEYVAL team  shared and discussed its initial findings with representatives of the Holy See, after which initial views were exchanged». Of these inadequacies, the Holy See was aware. The common references are the 40+9 GAFI recommendations – references that every country should follow.

There are substantial news. For example, the “old” law n. 127 gave the power to supervise and contrast the  money laundering to one only authority, the Authority for Financial Information – established via Motu Proprio by Benedict XVI in 2010. The “new” law fairly share the power among other authorities, that are the Vatican Secretariat of State, the Pontifical Commission of the Governatorate of Vatican City State, the Authority for Financial Information, and also the Vatican Gendarme Corps. This technicality confirms the long-sighted Vatican policy. Jurisdictions are called – coherently to the principle of rule of law – to involve all their institutions, thus competent authorities must follow the same rigour and transparency policy in order to prevent and countering money laundering and financing terrorism.

It is interesting to see that Holy See met the challenge to adequate to International standards without denaturalizing their institutions. In Vatican City State, in fact, there is no market and there are no banks. According to the Italian Supreme Court, IOR is «a central body of the Church», that is a governmental body that does not aim to distribute assets.

One example of the effort of the Holy See is the procedures to take into consideration the list of terror organizations issued by the Security Council of United Nations. According to the law n. 127, Holy See does not mechanically transpose the United Nations Lists. This choice is aimed to preserve the Holy See and Vatican neutrality. In fact, lists are written under the «Chapter 7» of Charter of the United Nations, and that Chapter is applied in war time. Holy See could be embarrassed by a mechanical transposition of the lists, since it could be in contradiction with the Holy See orientation –  Holy See is neutral and in favor of peace. Since Holy See is Permanent Observer to the Assembly of United Nations, and not a Full Member, a settlement has been made to the autonomy of the Holy See: the Vatican Secretariat of State – according to the new article 24 of the law n. 127– will create its own list of terror organizations based on the one issued by the United Nations, so keeping its autonomy, and at the same time showing to be sensitive to the international security goals.

Some superficial observer would think that Holy See is not working seriously. It is not true. Holy See is working seriously, and not to respond to internal problems, or to answer to European or Italian claims. More probably, Holy See wants to give its contribution to achieve strategic goals as the countering to money laundering and to international terrorism financing.