One area for improvement concerned the functions of the AIF, which operates both as a Financial Intelligence Unit (FIU) and an oversight mechanism.  MONEYVAL judged AIF «not compliant» in its oversight function (Intergovernmental Financial Action Group (GAFI) recommendation 23) and «largely compliant» as a FIU (GAFI recommendation 26).  MONEYVAL recommended a clear separation of the two functions, without addressing if they can remain under a common AIF umbrella.

After the publication of the MONEYVAL report, the Holy See resumed its initiatives for greater transparency.  The goal now was to address the «not compliant» or «partially compliant» assessment with respect to specific recommendations for transparency,  and to harmonize further reforms with the GAFI’s own realignment of recommendations.  GAFI had a list of 40+9 recommendations, which the MONEYVAL evaluators used as their guide.  Recently, GAFI realigned its set of recommendations: there are now 40 recommendations, including several that are completely new – for example, recommendations that deal with financing of the proliferation of weapons of mass destruction, which also meets the Holy See commitment.  The Holy See has always been engaged in raising awareness about non proliferation issues, and is thus particularly attentive to these new recommendations.

The Holy See needed to thrust a new impetus to the AIF.  Francesco De Pasquale had been AIF’s director since its establishment.  De Pasquale is an appeals lawyer, and had 20 years of experience dealing with anti-money laundering legislation.  He is also a former Bank of Italy official.  Marcello Condemi, who drafted the first Vatican City State anti-money laundering law (law n. 127, later reformed), had also been a Bank of Italy official.  But even if there were plenty former Bank of Italy officials at the Vatican, the Bank of Italy showed some hostility towards the Vatican.  Jeffrey Lena, the Holy See lawyer and international law expert, plainly stated in an interview that the Holy See maintains cordial financial relations with all the countries, except Italy, the only country that «considers the Vatican non equivalent for what concerns anti-moneylaudering»

(Ultimately, the way in which financial relations are managed is a matter in which the very sovereignty of the Holy See is at stake.  All too often, Italy falls into treating the Holy See as if the Vatican were a multinational company on Italian territory –which is not.  History reminds us how the Holy See preferred to sign a Concordat with the dictator Mussolini rather than with the previous Italian liberal administrations, as only Mussolini was disposed to recognize the Vatican City State’s sovereignty, «that piece of land that allows us to carry out our mission,» as Pope Pius X used to say).

How was the Authority for Financial Information improved? At first, by hiring René Bruelhart as a Secretariat of State ad hoc consultant for anti-money laundering issues. Young (he is just 40) and hailing from Freiburg, Bruelhart had ran for 8 years the Lichtenstein Financial Intelligence Unit.  In 2010 he was named vice president of the Egmont Group, the FIUs global network.  Bruelhart’s experience makes him one of the most eminent international experts in the prevention of money laundering and the financing of terrorism.  His recruitment also made the anti-money laundering team at the Vatican more international.

Now, the Holy See felt it was time for a further step.  Card. Attilio Nicora, president of the AIF Board of Directors, supported the notion that it was time for a change.  This was significant, because Nicora himself was one of the most strenuous defenders of the first Vatican anti-money laundering law.  The law had been later reformed, following the first on site visit of MONEYVAL evaluators (who felt very strongly about the need for this reform).  Nicora, however, referred to the reform as «a step backwards».  But Nicora held a position subject to «conflict of interests», as the MONEYVAL report points out, even if Nicora was never explicitly mentioned.  Paragraph 797 of the Report mentions a «serious conflict of interests» for a cardinal that is a member of the IOR Cardinals’ Commission and, at the same time, president of the AIF Board of Directors.  The report did not question Nicora’s personal performance.  Rather, it merely underscored incompatibility among these two responsibilities.

In fact, Nicora’s remaining on board is not at stake, even though he has reached retirement age.  Because Nicora understood that a change was needed, he named René Bruelhart director of the AIF, to make the authority increasingly more independent and international (even inside the Vatican, the board of the AIF was considered disproportionately Italian, compared with the relatively international Holy See personnel).  Francesco De Pasquale was promoted to member of the AIF Board of Directors (AIF Board of Directors members are named by the Pope).  This choice would indicate that De Pasquale had never lost the confidence of  the Secretariat State or the AIF.  Notwithstanding lively internal debates –De Pasquale was also a strong supporter of the first anti-money laundering law– the contribution of the now ex AIF Director was crucial during the first year of the AIF and during these past recent months. When the MONEYVAL report was then published, the Holy See vigorously undertook the commitment to achieve full financial transparency.

What will be De Pasquale’s new responsibilities? The AIF statutes note that AIF Board members must «program, manage and control the Authority’s activity.»  Thus, De Pasquale will be able to contribute his experience to the Vatican’s path to full financial transparency.

At the same time, the appointment of Bruelhart as new director of the AIF may be considered a first step toward the reforms in the Authority recommended by MONEYVAL, and certainly the first of the steps needed to strengthen the AIF’s internal structure.

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.

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.

After adopting the new law, the Holy See began a complex path to adequate to the international standard, according to GAFI (Financial Action Task Force) recommendations. This path would finally lead the Holy See to be enrolled in the «White List», the list of states most active in preventing and fighting the financial crimes.. In november, advisors of the Council of Europe made an on-the-spot investigation in Vatican. The news was not widely covered by the medias, and it did not seem to interest analysts and public opinion.

Still, the motu proprio delivered one year ago signed the change of an era. Before it, Vatican did not have an Authority of Financial Information. Before it, Vatican boundaries were just with Italy, and monetary agreements were to be signed just with Italy. Vatican Lira (the coin issuanced before euro) was not the international lira, but Italian lira. The entrance in the European Union changed everything. The changes did not deal just with the Vatican. But the changes dealing with the Vatican had been widely covered by medias, mainly focusing on the I.O.R. issue. This interest letted show – according to some Vatican insiders – other kind of goals, as – for example – the attack to the sovereignty of Vatican City State, in order to undermine the diplomatic importance of the Holy See.

Let us make a step back in time. February 2009: European Commission communicates that the Monetary Agreements with Monaco, San Marino and the Vatican are to be reviewed. If the three countries wants to remain hooked to the European Monetary System, they need to uniform to European norms and procedures, peculiarly for what concerns the countering of money laundering and of financial aids to terrorism.  The European Commission also asked to introduce a new uniform method for calculating the ceilings of euro coins issuance of the three countries and any country that would sign a Monetary Agreement with the Community in the future. In order to reach the objectives of the revisions, ad hoc bilateral commissions had been established.

Since February 2009, Vatican and European Commission advisors (Italy is part of the table as observer) start up the job to define the new monetary agreement. European Union conditions immediately seem to restrictive. The relationship between Holy See and European Union are fraught. Vatican has the will to keep its autonomy, and so every single point of the agreement needs to be discussed and weighed up. But time is short. 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. In some ways, it was a prophetic idea, considering the state-of-the-art of euro area and the choice of some countries – e.g. Great Britain – to keep out from the euro area. Someone also propose not to close the agreement within the year 2009, and to postpone the closure of the agreement to 2010. Hierarchies of the Holy See did not take in consideration both of the hypothesis. The costs would be so high, both for political and economical reasons. A postponing would bring – for example – to a suspension of the coins issuance and stamps issuance, which are among the most important incomes of Vatican City State. It is too complicated.

The monetary agreement is finally signed on December, 17th 2009. It is a day full of tensions. The monetary agreement would be signed contextually by Joaquin Almunia, Europen commissioner for Economical and Monetary Affairs, and mons. André Dupuy, Apostolic Nuncio to the European Union. Almunia refuse 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. Almunia fairly slight the Holy See, also because of the fraught relationships between the Spanish Socialists and Catholic Church. The same Almunia, once he will be appointed as European Commissioner for Concurrency, will start the procedure against the Italian State for favoritism toward the Church because of a special fiscal regime – in fact the fiscal regime enjoyed in Italy by Churches that signed a Concordat with Italian State.
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Inside the Vatican, things goes on quickly, even because time is short. The Vatican Law 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.

But it is not downhill from there. In September 2010, two money transfers of the I.O.R. are subjected to preventive seizure for a suspected  violations of the norms against money laundering. I.O.R. moved money from an account it owned toward the Credito Artigiano ,a «friend bank», whose president, Antonio De Censi, seated in the Commission of Vigilance of the I.O.R. The I.O.R. ordered Credito Artigiano to make two transfers with the money in that same account: one of 3 million to an account at Banca del Fucino in Rome, and another of 20 million to a JP Morgan account in Frankfurt. Both the account were owned by the I.O.R.

The Banca d’Italia (Bank of Italy) demanded detailed information on the ownership of the accounts of the I.O.R. and the recipients of the transactions, but all the explanations are considered not sufficient. The money are seized, waiting for further investigations. They will be un-seized just when the Vatican counter money laundering regulations has come into effect.

In the meantime, Ettore Gotti Tedeschi – taking an  unprecedent and (according to many insiders) questionable decision – agreed to be questioned by the magistrates of Rome, and is questioned in the offices of the public prosecutor in Rome. His deposition filled 91 pages of transcripts. In it, he explained his action as «a demonstration of the desire to comply with a new era», and he also explained why and how the transfer took places. The magistrates did not deem satisfactory the clarifications given.  Gotti Tedeschi’s deposition created a disagreeable precedent in the diplomatic relationships between Holy See and Italy: if Holy See is a sovereign country, magistrates of a foreign country – Italian ones included – must submit a request internationally,forwarding the request through diplomatic channels to the Holy See as a foreign state, to question one of its employees. More. The president of the body of a country cannot be questioned from a judicial authority of another country but renouncing his immunity. Otherwise, his personal choice would imply to the a de facto demission to the immunity of the body itself. Gotti Tedeschi’s choice is something incomprehensible in terms of international relations.

This is one of the topics in discussion within the Authority for Financial Information, headed by card. Attilio Nicora (former president of the A.P.S.A., a sort of “central bank” of the Vatican) and leaded by a directive council that enlists among his members Giuseppe Dalla Torre, one of the most authoritative and trusted people of the Holy See. Excepted Nicora, Dalla Torre and an internationalist jurist come from other charges within the Holy See, many members of the Authority for Financial Information come from Italian banks and from Bank of Italy, where they were not appointed in important charges. Is the composition of the board coherent with the universality of the Holy See, whose employees are traditionally chose internationally? The imbalance to Italy is considered by many Vatican insiders a sign of weakness and source of risks, more than of opportunity, since the troubles of the Holy See came from a request of the Bank of Italy headed by Mario Draghi (now president of the European Central Bank).

On September, 14th 2011, Holy See delivered to European Union a preliminary paper, in order to illustrate the normative and institutional framework of the Holy See and of Vatican City State, and to explain the initiatives issued to adequate the regulations to the international standards. At the end of November, the advisors of the European Council made an on-the-spot investigation. Contrary to expectations – maybe especially to Bank of Italy’s expectations – it seems that the I.O.R. has been found healthy regarding international standards.

At the half of 2012, MoneyVal – the body of the Council of Europe that ensure that its member states have in place effective systems to counter money laundering and terrorist financing and comply with the relevant international standards in these fields – will discuss the report on the Holy See and on the State of Vatican City. In the meantime, the reformation of Vatican finance is intensively in progress. The game is not yet over, and no one knows how it will end.

In fact, there are still several steps to do. The Authority for Financial Information was created as the Vatican issued new laws to fight money laundering and terrorist financing in a major effort to comply with EU norms and shed its image as a tax haven mired in secrecy and scandal. The Vatican had pledged to pass such legislation by when it entered into a monetary agreement with the EU in December 2009. It is commonly thought that the effort went into high gear following the money laundering probe at the Vatican bank, which greatly embarrassed the Vatican and its bank chairman, economist Ettore Gotti Tedeschi. Actually, the steps were already ready to be done. But, after the laundering probe, everything has been presented – even by media – as part of the Gotti Tedeschi’s effort for transparency, and this annoyed the former president of the Ior, Angelo Caloia.

Cardinal Attilio Nicora had been nominated president of the Authority for Financial Information.  For a few months, Nicora also remained president of the Administration of the Patrimony of the Apostolic See, a sort of Vatican Central Bank. But there had been questions about possible conflicts of interests, given Nicora’s dual roles.  In May, a Dutch liberal member of the European Parliament, Sophie in ‘t Veld, formally asked the European Commission to look into whether the Vatican’s financial authority can be truly independent given Nicora’s jobs and whether there wasn’t a conflict of interest. So, Nicora asked to be relieved of his administration job to focus exclusively on the financial authority, and Pope Benedict XVI agreed.

In fact, Nicora’s job is not that easy. Inside the Authority of Finacial Information, there are two different points of view on how to procede to be enrolled in the ‘white list’. The first one is carried out by Ettore Gotti Tedeschi, president of the Ior (Institute for Religious Works) and his ‘disciples’. Marcello Condemi was the attorney who wrote great part of the new legislation for the prevention and countering of illegal activities in the financial and monetary sectors. Francesco De Pasquale, lawyer, has been appointed director of the Authority for Financial Information. They had both been backed by Ettore Gotti Tedeschi, and they share with the president of the Ior the aim to show the Holy See the most transparent they can. Even if the Authority for Financial Information is to control the Ior itself. Even if the Prefecture for Economic affairs – soon there will be a new prefect – has itself the charge to monitor Vatican’s financial movements.

On September 30, Gotti Tedeschi agreed to be questioned by the magistrates of Rome, like any Italian person of interest. His deposition filled 91 pages of transcripts, portions of which were leaked to the press. Gotti Tedeschi explained his action as «a demonstration of the desire to comply with a new era».

This new era was not free from complaints within he Vatican walls.  In 1993, when he was called for questioning by the magistrature of Milan, the president of the IOR at the time, Angelo Caloia, got the magistrates to submit a request internationally, with the request forwarded through diplomatic channels to the Holy See as a foreign state. In 2010, many within the Vatican would have reacted in the same way, but Gotti Tedeschi’s line prevailed.

Holy See is a State with its own sovereignty. Every single country can use its money at his personal discretion. If a country wants – through diplomatic channels – secretly finance any sort of organism or association, no one has the right to control the money they transfer. The same can do Holy See. One of the strong points of the accusation on Wojtyla beatification was brought on the basis of the money Wojtyla and his entourage would eventually send to Solidarnosc. A Vatican official – who wants to remain anonymous – explains that «this is part of the mission of the Church. The Church is free to use its money in the way is believed more proper, in order to help the populations to set free from the oppression or to help Christian communities wherever in the world».

The risk for the Holy See is to renounce to part of its sovereignty to respond to GAFI’s requests in order to enter in the White List. Holy See commitment has – until now – been higher than the one of any other State. When the Holy See will be enrolled in the White Lists – the Vatican official says –  it will commit itself to make its peculiar moral impact weigh on the World financial organisms. On the other hand, it has to watch out for not being considered on a par of a Ngo Organization, with the duty to give the complete accountability of their sources of money and the way they use their money.

The request for transparency seems to be the subtle part of the campaign to eject the Holy See from the concert of nations.  Since April 6, 1964, the Holy See has been a permanent observer state at the United Nations. In that capacity, the Holy See has since had a standing invitation to attend all the sessions of the General Assembly, the United Nations Security Council and the United Nations Economic and Social Council. As a matter of diplomatic courtesy,  the Holy See was also allowed to make formal policy statements in the General Assembly, and it was invited to observe all open meetings of the intergovernmental subsidiary bodies of the General Assembly.

From 1999, the non-governmental organization, Catholics for Choice, lobbied against the participation of the Holy See in the United Nations, arguing that the Holy See is a religious organization and not a state, and that, therefore, it should not have the right to participate, in a position analogous to that of states, in the intergovernmental decision-making process on social, cultural and economic matters. No State supported this initiative. On the contrary, the United Nations General Assembly confirmed further its observer status within the UN, through its Resolution 58/314 of 16 July 2004. Through that resolution, all Member States of the United Nations decided to confirm to the Holy See its status as a Permanent Observer State of the United Nations and to grant it all the rights of full membership except the rights to vote and to present candidates.

Currently, the Holy See has the right to participate in the general debate of the General Assembly and to intervene in the discussion of any issue inscribed in the agenda of that assembly. It has the right to participate in all meetings open to all Member States, the right to make points of order and to exercise the right of reply, the right to circulate proposals and position papers as official documents, and the right to co-sponsor draft resolutions and decisions. Commenting on that resolution, Archbishop Celestino Migliore, the then Holy See Permanent Observer to the United Nations, said: «We have no vote because this is our choice». He added that the Holy See considers that its current status «is a fundamental step that does not close any path for the future. The Holy See has the requirements defined by the UN statute to be a member state and, if in the future it wished to be so, this resolution would not impede it from requesting it».

When the Permanent Observer of the Holy See speaks in the General Assembly, everybody is silent. The statements of the Holy See are took in great consideration. Its international status is prestigious. The Holy See took advantage of the prerogatives of its observer status to incorporate Christian values within the decisions and recommendations of the United Nations. Notable were its successful efforts, in cooperation with like-minded countries, to ensure the adoption of a Nations Declaration banning all forms of Human Cloning and to prevent the adoption of a proposed resolution on sexual orientation and gender identity.

Now, the Holy See’s international prestige is trying to be undermined. And the request for transparence can be – for many inside the Vatican – the first step to make of the Holy See an organization on a par of a Ngo. Was not this the Economist asked in 2007?

As the patriarch was unaware, on that day Pope Benedict’s Motu Proprio had become effective. The Motu Proprio, which regulates Vatican finances, has become the law no. 127 of the Vatican State.It regulates the competences of the Authority for Financial Information, wanted by Pope Benedict to fight money laundering. From now on, nobody can enter the Torrione Niccolò V with more than 10,000 euros cash. If they do, they need to pass very strict checks, justifying the money transfer. All information will be stored in the archives of the Authority for Financial Information, which will also work to guarantee that all operations be conducted at their best and according to European regulations.

But the question of who controls the controllers was, since the start, a thorny issue. All members of the Authority are, in fact, ‘internal’. Their president is Card. Attilio Nicora, who is also head of the Apsa, the “central bank” of the Vatican. Moreover, Giuseppe Dalla Torre, president of the Vatican Court, and Marcello Condemi former appeals attorney for the Bank of Italy and former member of the Gafi (the Financial Action Task Force against money laundering) figure among the members of the board, while the director apppears to be Francesco Di Pasquale, current appeals attorney, and anti-money-laundering expert.

The authority had to be formed according to the agreement between the EU and the Holy See, which allowed the latter to adopt the Euro as a currency while binding it to agree to European norms regarding financial instruments and currency circulation. If the Holy See had not agreed in an year’s time, they would have not been allowed to issue currency or stamps. On December 30, 2010, the Authority for Financial Information was instituted with Pope Benedict’s Motu Proprio.

In this span of time, Ettore Gotti Tedeschi’s “black Tuesday” had taken place. On the 21^st of September, in fact, the president of the IOR was being investigated from judicial authorities under suspicion of omitting anti-money-laundering procedures. This emerged in operations regarding one of the IOR funds in an Italian bank, for a total of 23m euros.

The IOR, in fact, is not a bank in the strict sense of the term. In order to operate financially, it needs other banks’ accounts. There are IOR accounts held, for example, in Deutsche Bank, Credito Artigiano or Unicredit branches. In 2009, an investigation had been launched starting from one of these accounts. However, the investigation led nowhere. Many thought that this transparency move was due to the investigation on Gotti Tedeschi, but that was not the case. Others noticed instead the IOR’s president’s choice to spontaneously testify in front of Italian judges with the general manager Roberto Cipriani. In the 91-page report -much of which is, predictably, kept secret- they explained the mechanisms of the Vatican Bank. But that did not satisfy the jury, and the 23 millions remained confiscated.

It is paradoxical that Gotti Tedeschi, the man designed to bring to a close the ‘transparency move’, had been investigated for money laundering. The IOR president is now the last representative of a so-called ‘finanza bianca’, a Catholic-inspired kind of finance. He can boast a sound educational track record, a powerful bank, and the ability to open his way through the Catholic world through his well-known laissez-faire and books such as ‘Denaro e Paradiso’ (Money and Heaven) , for some an enlightened book;  for some others, heresy.

However, Gotti Tedeschi is not the only heretic in the Vatican. As head of the IOR he is, in fact, a second choice. A quality second choice, of course. Backed by Mr. Gian Maria Vian, director of Osservatore Romano – the daily news of the Holy See – and therefore card. Tarcisio Bertone, Vatican Secretary of State (who would have backed as well Giovanni Bazoli, president of Gruppo Intesa San Paolo, the other big Italian bank), Gotti Tedeschi got the better of Giovanni De Censi, president of Credito Valtellinese, which also controls the Credito Artigiano. And it was Credito Artigiano the one involved in the 23m confiscation affair. It might have been a simple bank transfer, an operation that could be solved with a simple phone call between De Censi and Gotti Tedeschi. That phone call never happened, and De Censi has recently left the board of the Vatican Bank -officially for medical reasons. He was replaced by Antonio Maria Marocco, a solicitor from the Unicredit group.

In the meantime, the IOR money is still under confiscation, while the financial scenario around has changed. On the Financial Times, the news regarding the investigation on Gotti Tedeschi obscured the one regarding the Ceo Alessandro Profumo’s farewell to the former bank of Cesare Geronzi. After moving to the insurance company Generali, Geronzi was forced to resign confronted by the board’s lack of trust. A certain part of the Vatican world trembled in front of the ‘fall’ of one of their gods.

The other god is Mr. Tremonti. The Italian Minister of Economy has Ettore Gotti Tedeschi as financial advisor and paved his way in the Catholic world a long time ago. Mr. Tremonti‘s participation to a periodic Ior meeting with its account holders was meaningful.  Somebody claims it was him to lure behind Geronzi’s fall and he’s aiming at a ‘winner-takes-all’ situation as next prime minister and controller of Italian finances.

His ‘rival’ is Mario Draghi, the Bankitalia governor. He is the one who had been handed a draft of the Caritas in Veritate, Pope Benedict’s social encyclical. Draghi had (in the first months of 2010) a meeting in the Vatican Social Sciences Academy with Hans Tietmeyer (former president of the BundesBank), Ettore Gotti Tedeschi and the president of the Bank of Greece Lukas D. Papademos, in order to solve the Greek financial crisis. Some press even claims there was Draghi behind some advice during the make-up of the Authority of Financial Information.

The bond between Italy and the Vatican is therefore tighter than ever. This is not seen as favourable throughout the whole of the Holy See, and some would like to pursue a different line. Thus it happened that Gotti Tedeschi went to speak about the Caritas in Veritate to the Pontifical Council for the Laity, with spectators such as the vice-president of UniCredit Luigi Gilli and the president of the Banca Monte Paschi di Siena, Giuseppe Mussari -as well with other entrepreneurs, priests and intellectuals. They were all engaged in a discussion on the ethical basis of finance. The Osservatore Romano highlighted Gotti Tedeschi’s speech. However, nobody told of a small diplomatic accident between the Pontifical Council for the Laity and the Pontifical Council for Justice and Peace. The two councils are, in fact, based one a few yards from the other, and while it had been the latter to be involved in the edition of Pope benedict’s last social encyclical, only the former took part in the initiative.