A release delivered at the end of the meeting reads that «the participants reaffirmed that it is licit to stop the unjust aggressor, always in accordance with international law. Nevertheless, the resolution of the problem cannot be entrusted solely to a military response; the problem must be dealt with
more radically by addressing the root causes which are exploited by fundamentalist ideology.»

In his speech to the General Assembly of the United Nations, for the first time since he has taken over the post, the Secretary of State put on the table the issue of reform of international law, which also includes the reform of United Nations.

The Holy See has been speaking for a long time about a reform of the United Nations, and the debate is very lively. Yet, Pope Francis did not mention it in his meeting with the heads of UN agencies, preferring to focus on other topics. It was a period of high tension between the Holy See and the United Nations, following the release of the concluding observations of the UN committees on the Convention on the Rights of the Child and the Convention Against Torture. It almost seemed as if the Holy See had decided to note the charges levied against her and to carry forward the line of the diplomacy of prayer and dialogue, which is very close to Pope Francis’ heart.

The most recent developments of the international situation had instead suggested a turnabout. The attacks to the Holy See’ssovereignty are not new. As a moral authority, the Holy See has significant influence in international meetings. Though it is not a Member State of the United Nations (it is just a Permanent Observer) the Holy See is one of the most involved states in the organization of multilateral events.

Providence plays a big role in this work. When the Holy See experts negotiate treaties, they are always fewer than experts of bigger states. Despite this inferiority, they have succeed in inserting «positive viruses» within international treaties. Integral human development – a notion of Catholic Social Teaching – is mentioned in a 1986 UN document on development. The Holy See also introduced in many treaties “the right of protection” – a notion that Cardinal Parolin has reiterated in his speeches in New York.

With Pope Francis, diplomatic engagement seemed to have been left somewhat aside. The Pope loves to underscore the need for a culture of the encounter, and made of prayer its main diplomatic tool, focusing attention on some topics in which he has been interested since he was archbishop of Buenos Aires, i.e. human trafficking and fighting poverty. Vatican diplomats had naturally adapted to this approach, including these issues in their speeches and interventions more often.

A change of pace was needed in any case, at every level. The recently-released response of the Holy See to the Concluding Observations of the UN Committee on the Convention for the Rights of the Child has been made on fine points of international law, with a firm rejection to the request of changing Canon Law. Then, on the basis of reports from the extraordinary network of information of nuncios, the Holy See decided for a more proactive strategy, at least for the Middle East.

Looking back to documents and data, it is possible to see that the Middle East crisis could have been widely forecasted, and it had. Not by chance, the post-synodal exhortation “Ecclesia in Medio Oriente” – which Benedict XVI personally gave to the Middle East Church in Lebanon in 2012 – clearly invited Christiansto remain in the land of the Bible and not to flee, despite persecutions. The document also urged the international community to protect Christians.

In the meantime, Benedict XVI had inserted in his speeches references to Christiano-phobia, after a long discussion about the correct use of the word. The Holy See has always opposed this kind of categorization in an international context, because it labels the issue in category terms, and as if this category was “more equal” than others. There are the human rights, which are universal, and the Holy See advocates their full application.

The use of the word «Christianophobia» was the result of an internal discussion that also contemplated the notion of «Christ phobia;» i.e. fear of Christ and his message. This is a profound notion, which had not been properly developed. After Benedict XVI’s resignation and the change in the post of Secretary of State, Vatican diplomacy pointed in other directions.

The worsening scenario in the Middle East and in other usually overshadowed areas like Ukraine once more pointed to the need of pontifical diplomacy to take the reins of the international discussion about international law.

In the end, the current crisis may be seen as a failure of the United Nations, which had been unable to interveneat a multilateral level, and above all react very slowly. The Human Rights Council in Geneva finally held an extraordinary session on the plight of Christians in Iraq only in September, although the crisis had broken out months earlier. And it has been individual states, rather than multilateral forces, that have intervened in the Middle East until now.

This is the reason why a reform of international law and United Nations is needed, and Cardinal Parolin has decidedly reignited discussion about this reform. It was also a topic of discussion during the gathering of the Middle East nuncios to the Vatican, held Oct. 2-4. Even this meeting has taken place late in this crisis; according to some, it should have taken place a year ago.

In three days, nuncios and Secretariat of State top officials, together with some heads of Vatican dicasteries, discussed how to help Christians in the Middle East. Among the heads of dicastery, Cardinal Tauran. In his capacity of President of the Pontifical Council for Interreligious Dialogue, he advocated for his dicastery to draft a strongly-worded declaration that called on the main actorsin interreligious dialogue to take a strong stance against the Caliphate’s crimes.

Tauran, one of the main actors of pontifical diplomacy, had understood the need to restore a diplomacy of truth. Unpleasant as truth sometimes is, only truth leads to real dialogue.

In the 3-day meeting, the lack of coordination between those who provide assistance, local bishops and the Holy See was also discussed. A key issue. The amount of financial aid delivered in the last five years has been high. Globally, Aid to the Church in Need has sent 3 million euros to Iraq and 2,4 million to Syria – and we are just speaking about emergencyassistance. It was calculated that Catholic institutions globally have sent 100 million euros to the Middle East, at the beginning applied only to the Syrian crisis and then extended to the whole region.

Given this data, it is surprising that the initial response to the crisis was to provide emergency aid and to build bridgesof prayer and dialogue, while going beyond pontifical diplomacy.

Pope Francis, it seems, has now opted for a change of pace. He will not abandon his commitment to a culture of the encounter, nor to the diplomacy of prayer. Even though a conflict broke out in Gaza a few weeks after the historical meeting for peace in the Vatican, the Pope has always maintained that the meeting was not in vain.

The Pope’s efforts were more successful when he launched the day of prayer and fasting for Syria. That day was however preceded by a meeting between the Vatican’s “foreign minister” Archbishop Dominique Mamberti and the corps of ambassadors accredited to the Holy See. Archbishop Mamberti outlined the Holy See’s views on adiplomatic roadmap for peace.

Now, Pope Francis upcoming voyage to Turkey becomes crucial. There, the Pope will meet with the ecumenical patriarch Bartholomew. The Pope and the Patriarch have started a dialogue on topics of common interest and carried forward a joint effort for peace. During the trip, Pope Francis will likely be called to take a stance. And he will have to do it in a Turkey that had just decided to authorize the possibility of sending land troops to Iraq and Syria.The stance the Pope will take, whatever it may be, will be of extreme importance.

On September 23, it was announced that Archbishop Jozef Wesolowski, the former apostolic nuncio who spent his career in Eastern Europe and that ended up as papal nuncio to the Dominican Republic, has been put under house arrest in the Vatican and will be criminally charged by a Vatican penal court, after the tribunal of the Congregation for the Doctrine of the Faith had deemed him guilty in the first stage of the process and has defrocked (laicized) him.

On September 25, the Holy See press office announced the dismissal of Rogelio Ricardo Livieres Plano, bishop of Ciudad del Este, Paraguay. The archbishop was dismissed for “grave pastoral reasons” as a result of an Apostolic visit that Pope Francis tasked to the Spanish Cardinal Santos Avril y Castellò. The bishop of Ciudad del Este had been accused of protecting a pedophile priest.

These two moves have shown that Pope Francis really intends to forcefully confront pedophilia. Pope Francis’ determination is evident in the establishment of a Pontifical Commission for the Protection of Minors; the expected establishment of an office exclusively dedicated to “Delicta Graviora” in the disciplinary section of the Congregation for the Doctrine of the Faith; and the first meeting ever organized within the Vatican Walls between the Pope and some of the victims of clergy sex abuses. At the same time, all the attention is focused on Pope Francis’ goodness. Thus creating an all-too-simple contrast between a Pope with a saintly image and a Church depicted as completely corrupt.

So much so, that Joaquin Navarro Valls, formerly director of the Holy See Press Office, wrote an op-ed to clarify things the day after the Kesolowski arrest. Observing a public opinion that looks favorably upon Pope Francis, Navarro Valls noted the danger of the contradiction of revering the Pope while throwing mud against a Church labeled as pedophile. Data in hand, Navarro Valls underscored that celibacy is not the problem, and that the Church is the only institution that has really done something to fight pedophilia, a fight that stretches back two decades (and that Navarro Valls had witnessed) and which includes Kesolowski’s arrest. «The sickness is pedophilia, not the Church,» Navarro Valls concluded.

The clarification was needed, since the modest press statement of the Holy See Press Office– released late in the evening—failed to include any explanation of the legal context, especially with respects to legal aspects.

Kesolowsky had in fact already been defrocked and deprived of diplomatic immunity, and he was not a resident Vatican citizen any more. The Vatican court can exercise its jurisdiction on him only because he had committed the crimes while exercising his function as nuncio, which gave him ex officio Vatican citizenship.

Yet, the unexpected acceleration of the procedure carries with it some issues that could be used to revamp the always alive campaign against the Holy See sovereignty.

When the Congregation for the Doctrine of the Faith first stage verdict on Wesolowski was made public, an op/ed by James Carrol was published on September 1 in the “Boston Globe” – the newspaper that had broken the story of priestly pedophilia with a series of investigations awarded with the Pulitzer Prize.

«In a show of toughness, Church officials defrocked Wesoloski and promised to try him according to the laws of Vatican City. In effect, though, Church officials once again shielded a predator priest from civil jurisdiction. Victims and officials in the Dominican Republic were left to stew,» stressed Carrol.

Carrol then highlighted that «Vatican statehood is part of the problem» and that the Vatican «defrocked Wesolowski, but an opposite remedy suggests itself for the larger problem – in effect, a “de-stating” of the Holy See». So much so, that – Carrol concluded – the Church’s activity should be put together with that of so many NGOs that the United Nations already acknowledges.

Is this the opening salvo of the umpteenth campaign to undermine the sovereignty of the Holy See? Possibly.

The Holy See is an acknowledged moral authority, and its commitment to peace in the last century has made it one of the most authoritative voices among nations. With no political nor economic interests, the Holy See can strongly pursue its defense of the human being in international gatherings without being accused of any hidden or selfish interests.

This is the reason why the Holy See was invited to become a member state and founder of the International Atomic Energy Agency, and it is one of the reasons why ever more states have entrusted the Holy See with a mediation role. But the United Nations has lobbies that promote their own interests more than those of the human being. For these lobbies, the Holy See has become an unbearable thorn in their side.

More and more often, the United Nations has asked the Holy See to become a full member of the organization. The Holy See has always refused, conscious that, as a member state, it would be obliged to accept as binding decisions coming out of the UN Security Council under Chapter VII of the United Nations. The Holy See has always maintained its neutrality. To be a full member of the UN when the use of force is authorized would be akin to silently endorsing war.

Having failed to impose on the Holy See the same regime that applies to other states (which carries many rights, but also diplomatic constraints), lobbies have focused on attacking the Church’s values, trying to undermine its moral authority, and at the same time starting a campaign to downgrade the status of the Holy See in the United Nations from that of a Permanent Observer to that of one of many NGOs.

The clergy sex abuses on minors scandal was one of the tools used to attack the Church’s moral authority. The scandal had such an enormous media impact, that the sociologist Massimo Introvigne described it as a “moral panic”. The Holy See responded according to justice. No pre-emptive verdicts of the accused priests, and a series of norms that centralized controls and strengthened the penal sanctions, while requesting every bishops’ conference to come up with guidelines, according to the sensitiveness and problems of the their countries,to combat this evil.

Asking all bishops to report to the Congregation for the Doctrine of the Faith was not a shrouding move. It was mostly informed by the need to know about a series of cases that came to light and where particularly dramatic because bishops had not reported anything to Rome and kept transferring pedophile priests from one parish to another. The guidelines were needed to ensure a high level of commitment against pedophilia at the local level, and in harmony with the civil and penal procedures of each country.

The cases of pedophilia had vast echo in the media, also with the aim to attack the Christian roots of countries, injecting in public opinion the notionthat change is necessary. It happened in Catholic Ireland, where the timing of the pedophilia scandal coincided with thedecision of the government of Enda Kenny to close the Irish embassy to the Holy See (officially for economic reasons) and the adoption of laws allowing same-sex marriage and in-vitro fertilization. And perhaps not by coincidence, the scandal of clergy sex abuses of minors also reached Catholic Malt right before Benedict XVI visited in 2010 – at the time of the Papal visit, there was still no abortion and no divorce in the Maltese legislation.

These are the reasons why the Wesolowski case had to be handled with care. Wesolowski had been convoked by the Vatican before the Dominican Republic authorities could summon him, a detail that media traditionally hostile to the Catholic Church like the New York Times have not failed to notice. The decision to deprive Wesolowski of immunity was announced by Father Federico Lombardi, director of the Holy See Press office, only in August, two months after the first stage verdict of the Congregation for the Doctrine of the Faith that laicized him had been made public. In that same announcement, Father Lombardi said that the Vatican penal authorities would try Kesolowskionly after the end of the second stage of his trial in the Congregation for the Doctrine of the Faith.

After that, there was the sudden acceleration of September 23. The most attentive observers noticed that the Wesolowski case had been one of the topics of discussion at the 15th International Congress on Canon Law that took place at the Catholic University of Washington. There, some canon law experts complained about the impunity and freedom Wesolowski enjoyed, after he had appealed the verdict from the first stage of the Congregation for the Doctrine of the Faith process. The complaints, reportedly transmitted to the Vatican, brought about the decision to immediately try Wesolowski in the penal court, also to avoidundermining, because of negative press coverage, the effortsof the Church to combat pedophilia.

The Vatican decisions leavethe Dominican Republic (where the alleged abuses have taken place) out of the picture, without the possibility of extraditing or trying the former nuncio. The same is true for Poland, the country Wesoloswki hails from: he was ordained priest by Karol Wojtyla and enjoyed the friendship of Wojtyla’s secretary, Cardinal Stanislaw Dziwisz (who is preparing to become the Master of Ceremonies of the 2016 World Youth Day, to be held in Krakow).

Wesolowski’s case intersects with a wholly Latin American case, that of the bishop Livieres of Ciudad del Este, the second largest diocese of Paraguay. In an unusual move, Pope Francis made public an apostolic visit led by Cardinal Santos Avril y Castellò – who is very close to the Pope’s heart. Cardinal Avril had been sent to unravel the tangle of accusations between bishop Livieres and the Paraguayan bishops. The accusations had started when the bishop opposed the candidacy to the presidency of bishop Fernando Lugo who,after winning the elections, left the priesthood. But later the criticism continued.Livieres had been very active in his diocese, he established a new seminar and liturgical and sacred art commissions. He also had a public argument with the Archbishop Cuquejo of Asuncion, whom Livieres described as “homosexual.”

In the meantime, rumors about reported sexual incontinence in the seminaries Livieres had established flourished, and about the poor instruction– given that the curricula studiorum was of just 5 years, while in the rest of the Paraguayan seminariesit was 7 years. Bishop Livieres was also accused of having illicitly sold assets of the diocese and of having allegedly protected Carlos Urrutigoity, an Argentine priest who served as his Secretary and then Vicar of the diocese, who in the past had been accused of abusing minors (the students at the academy where 9 to 12 years old).

Pope Francis first took away from bishop Livieres the power to ordain new priests, and then removed him from the post. The news of his removal was justified by an alleged cover-up to protect a pedophile priest, thus giving once again life to the equation “Church=pedophilia”, though the problem must be seen in wider terms – as a letter bishop Livieres published on the website of the diocese suggests.

Perhaps, the Holy See communication experts should think about this. The committee on Vatican media met for the first time from September 22 to 24, and started to analyze the Vatican media. In the offing, the review of the composition of departments, to save money. But there seemingly is no revamping of the way the Church’s message is delivered.

So, while speaking of techniques of communications and rationalization of expenses, the sense of the Gospel is lost and the wide commitment of the Church against pedophilia is not communicated. As a result, everything evolves around the image of the Pope, but perhaps not around the image of the Church. It will work only until someone uses this image to launch another attack, using the abuses of minors as a crowbar to question the very teachings of the Catholic Church. Experts of the UN Committee on the Convention of the Rights of the Child and of the Convention Against Torture already have. It will happen again.

The pillars of this structure had been built by Benedict XVI, from the 2010 Motu Proprio through which he established the Financial Information Authority and issued the first anti-money laundering law, subsequently improved and superseded under Pope Francis in order to make a financial system that would meet international standards and at the same time was cognizant of Vatican sovereignty and uniqueness. Both sovereignty and uniqueness are indispensible to carry on the mission of the Church.

IOR, Myths and Facts

The Institute for Religious Works, also known by the Italian acronym IOR, is only one part of the financial structure of the Holy See, even if it is constantly identified as one of its most important. It is commonly known as the “Vatican bank”, and even when it is properly described as a financial institution, press editors tend to revert to the expression “Vatican bank”.

In fact, defining the IOR as a “bank” overlooks a series of essential nuances which are very important in a public discussion  about it.

The first “essential” nuance is that the IOR is not a bank, but a financial institution. It carries out some banking functions, but not all. The IOR’s ultimate goal is not to earn banking profits. The IOR does not give out credits and loans. The IOR is a central body of the Church, whose funds and profits are at the Pope’s disposal. It serves the mission of the Church and it is at the service of the Church.

These are the facts. There is a IOR reality that goes beyond its 6 billion in assets and 18,900 customers. During an unprecedented closed-door meeting with journalists on June 28, 2012, the then General Director of the IOR Paolo Cipriani noted: «We provide financial support in more than 150 countries. Where a diocese is, it is our duty to support it in its most important services. I had the honor to visit some of the poorest countries, and I found out that the Church does fantistic things. I have been in Peru, I saw missionaries taking care of people in villages with houses made of mud. It is incredible what the Church does in the world».

Yet, the IOR is put on the spot every time there is talk of scandals in Vatican finances. As if the roots of evil present in the Church were to be found at the IOR. There are often references to the so-called IOR/Banco Ambrosiano scandal. The IOR became enmeshed in the bankruptcy of Banco Ambrosiano, which president, Roberto Calvi, was found hanging dead from the Blackfriars Bridge in London in 1981.

In a book entitled “Ambrosiano: il contro processo” (Ambrosiano: a counter investigation), Mario Tedeschi, certainly not a Catholic, analyzed all the documents of the trial and reached the conclusion that the IOR was just a scapegoat, a distraction by men of the Italian government and of the Bank of Italy to hide their dangerous liaisons.   These men failed to exercise proper oversight on the financial operations carried out by Roberto Calvi, the so-called “God’s banker”, which in fact financed communist parties and the Sandinista rebels in South America.

That of Mario Tedeschi is a reading of the facts that is never considered in the public discussion. The myth of the IOR as a place of illicit dealings has persisted until today. So much so, that the president of the IOR Board of Superintendence, Ernst von Freyberg, has had to work hard to rebuild the Institute’s image.

Pressures on the IOR

Appointed president of the IOR on Feb. 15, 2013 (four days after Benedict XVI had announced his renunciation) von Freyberg had to overcome opposition to the Institute from even some members of the College of Cardinals. During the pre-conclave meetings, some of the cardinals clearly attacked the existence of the “bank”. Thus, von Freyberg had to work faster to clean up the Institute’s image, substantially accelerating the execution of what was already planned.

The election of Pope Francis, the expectation of renewal created around his election, the eagerness of many to set an agenda for the pontiff himself (probably hoping to weaken the Holy See’s sovereignty) called attention on IOR issues. The pressure was also coming from some of Pope Francis off-the-cuff remarks during his homilies in the morning masses he celebrates at the Domus Sanctae Marthae. The day IOR employees were attending the mass, Pope Francis said that «institutions are not essential». In another occasion, Pope Francis underscored that «Saint Peter did not have a bank account.»

These words sounded like the Institute’s final condemnation. But, also in this case, facts diverted from the myths.

The IOR according to MONEYVAL

Taking into account that the IOR is just one part of the Vatican “financial branch,” and that the reform began by Benedict XVI and continued by Pope Francis is not centered on the so-called Vatican bank, it is worthwhile to revisit the MONEYVAL report, the Council of Europe’s committee which provides an independent and internationally recognized evaluation of the financial transparency standards of the Council’s member states.

The report, issued on July 4, 2012, gave a generally positive evaluation of the measures and reform adopted by the Holy See and the Vatican City State to prevent and combat illicit activities of a financial nature. The report recognizes the IOR’s commitment to meet international standards.

According to the report, the IOR procedures on customer due diligence «went, to some extent, beyond the requirements set out by the Law» (i.e.. law n. CXXVII, reformed with a decree issued January 25, 2012 precisely to fix some of its shortcomings in this regard). Paragraph 471 of the report states that «the procedures partly contain requirements which were missing or unclear in the original version of the Anti-Money Laundering/Combatting the Finance of Terrorism (AML/CFT) Law. This mitigates to some extent the negative impact on effectiveness attributable to the fact that a significant number of elements in the legal framework were introduced only after the first MONEYVAL on-site visit.»

The MONEYVAL report also stressed (paragraph 476) that «the IOR had launched a process of review and update of its client database in November 2010. The IOR demonstrated its commitment and dedication to the completion of this process by the end of 2012. Six persons are involved in this project and are actively approaching clients to receive updated information. By the end of 2011, the Institute had updated the information of approximately 50% of natural persons and 11% of legal persons in its client database module (Sintacs)».

These procedures were based, of course, on some guidelines. There was already a manual (cited, for instance, in paragraphs 411, 412, and 482), and also a categorization of the risks: the different types of clients accepted by the IOR had been classified into five different risk categories (par. 478). In any case, the categorization needed to be updated, because (as mentioned in paragraph 479) «the current approach does not take into account geographic risk, product/service risk, type and frequency of transactions, activity carried out, operative volumes, behavior of the client, or others.» This was normal, as all procedures can be improved.

The new management and the Scarano case

Von Freyberg work started from the basis of this good framework set by the previous management. The new president had also the goal of freshening up the image of the Institute. Von Freyberg promised the publication of the balance sheet, later published and even posted on the IOR official website. At the same time, he had to manage the storm linked to the Scarano Case.

Monsignor Scarano, a suspended accountant for the Administration of the Patrimony of the Apostolic See (APSA), is currently under house arrest and charged with planning to illegally bring 20 million euro in cash from Switzerland into Italy aboard a government airplane. Msgr. Scarano is also under investigation for a separate alleged instance of money laundering, which is what triggered his funds being frozen by the Vatican on July 9, according to a source who works in one of the Vatican offices related to APSA.  The investigation concerns transactions Msgr. Scarano made in 2009. At that time, he took 560,000 euro in cash out of his personal Vatican bank account and carried it into Italy, to help pay off a mortgage on his Salerno home. According to the Salerno public prosecutor, Msgr. Scarano asked 56 close friends to accept 10,000 euros in cash in exchange for writing checks for this same amount for deposit into an Italian bank account

The 20 million euro to be brought into Italy would come from the D’Amico brothers, rich ship-owners friend of Scarano, donors to charity causes like the opening of a center for the terminal ill in Salerno. The Vatican Financial Information Authority promptly froze funds and sent – for the first time ever – an international letter rogatory to Italy.  There has been no news of a response to the letter so far.

Following the case, it is evident that Scarano’s is an Italian scandal: it is yet to be proven that funds to be donated by the D’Amico brothers were part of the 20 million euro that were going to be transferred into Italy; all of those involved in the trial are Italian and are claiming that the money was going to be transferred to Italy; and tax evasion is not a crime formally linked to money laundering in Italy or in the Vatican. The Rome prosecutor is investigating tax evasion on the part of the Italians D’Amico and corrupted Italian officials.

However, there is the image of this being a Vatican scandal with Scarano under the spotlight. When the scandal broke out, the Institute’s General Director and his deputy resigned (July 1, 2013) and von Freyberg called the American experts of the Promontory Financial Group to carry out a more in depth  screening of the accounts, that should be completed within the half of 2014. It was a way to show an acceleration of the process of transparency and projecting an image of renewal.

The mission continues. Despite the pressures

The public discussions about the Institute and the Scarano scandal once again showed that the IOR is often shortchanged by the media narrative. This narrative has simplistically divided the work of the IOR in what has happened before and after Pope Francis, and before and after the change of management.

The pressure continued, embolden by the fact that Pope Francis decided to take stock of the aim and mission of the IOR without reservations, appointing a pontifical commission of reference for the purpose headed by Cardinal Raffaele Farina. The work of the IOR Commission was then sustained by the work of the Pontifical Commission for Reference on the Organization of the Economic-Administrative Structure of the Holy See, and finally by the establishment of a Secretariat for the Economy.

In the end, all of these commissions and offices agreed that the mission of the IOR must not be brought to an end. A press release on April 7 states that the IOR «will continue to serve with prudence and provide specialized financial services to the Catholic Church worldwide. The valuable services that can be offered by the Institute assist the Holy Father in his mission as universal pastor and also aid those institutions and individuals who collaborate with him in his ministry.»

Pell has requested von Freyberg, and the management of the IOR, to «finalize their plan to ensure that the IOR can fulfill its mission as part of the new financial structures of the Holy See/Vatican City State. The plan will be presented to the Holy Father’s Council of Cardinals and the Council for the Economy.»

«In that respect, the Cardinal-Prefect Pell has confirmed the importance of a sustainable systematic alignment of the legal and regulatory framework of the Holy See/Vatican City State with regulatory international best practices. Strict regulatory supervision and improvements in compliance, transparency and operations initiated in 2012 and substantially accelerated in 2013 are critical for the Institute’s future,» the press release stresses.

The IOR activities should remain the same, and will be inserted within the framework that Dominique Mamberti, Vatican Secretary for Relations with States, described as a sort of Holy See unified text for financial matters, i.e. the law n. XVIII on transparency, supervision and financial information which went into effect on October 8, 2013. The law introduced a broad and articulated legal and institutional framework to regulate financial activities within the Holy See and Vatican City State.

In the end, Pope Francis is not thinking about a revolution of Vatican finances. It would not make sense. The Pope is very well aware of the importance of the mission of the IOR. The Argentine Church, in financial turmoil, was saved by the intervention of the Institute at the end of the nineties. More than a revolution, Pope Francis is carrying forward the updating and renewal started with Benedict XVI.

The new statute of the Vatican Financial Information Authority (AIF) better aligns the Authority with new Vatican legislation, and with international standards. It also develops a new kind of Authority. Conceived by the drafter of the first Vatican money laundering law as a sort of «monocratic» authority (a Vatican dicastery presided by a cardinal with broad overall powers) the Financial Information Authority is taking a new shape as a result of progressive improvements to its statue.  

The appointment procedures for the president of the authority have changed. According to article 4 of the old motu proprio that established the Authority, the president was appointed by the pope, just like the head of a Vatican dicastery, and so it was taken for granted that the president should be a cardinal, or at least an archbishop. From November 21 on – when the new statutes has come into effect – the president will be chosen, together with the other four members of the board of directors, «among persons of proven reputation, free from any conflicts of interest and having recognized professional competence in the legal, economic and financial fields as well as in the subject-matters that fall within the scope of activity of the Authority.»

The statute of the Financial Information Authority makes the Authority brand new. The director becomes one of the statutory office holders, to be appointed together with a deputy director. Both are appointed by the Secretary of State.

This is how the Vatican legal/institutional framework to counter money laundering and prevent the financing of terrorism has been further improved, following the recommendations given by MONEYVAL, the Council of Europe’s committee that evaluates the path to financial transparency of its member states.

Tracing back the path that led to this new statute helps us to appreciate all the work done at an institutional level by the Vatican.

The old money laundering law, modeled in the Italian money laundering law, focused the Authority’s functions on its president, just as if he was the head of a Vatican dicastery. Cardinal Attilio Nicora, one of the sponsors of the former law, was appointed president of the Authority. Nicora is still the president of the reformed Authority, which will oversee all the Holy See’s financial and economic affairs.

At the time he was appointed president of the AIF, Nicora was also president of the Administration of the Patrimony of the Apostolic See (APSA) and a member of the board of cardinals of the Institute for Religious Works (IOR) and of the Governorate of Vatican City State. All of these entities were under his supervision as president of the AIF.

The former money laundering law had several shortfalls. For example, a division of labor was missing. The responsibilities of the Vatican Gendarmes Corps, Vatican City State Governorate and Secretariat of State were not precisely delineated. The international cooperation system did not take into account the Holy See’s idiosyncrasies.

These «shortcomings» were a result of the law having been written by external consultants, surely competent on money laundering, but seemingly not cognizant of the Holy See’s sovereignty and its particular nature.

This is why Holy See officials had to adjust the legal/institutional framework. The new money laundering law was issued in a decree on January 25 and met many of the MONEYVAL evaluators’ observations. The new law represented the first quick fix of the institutional framework, to give more weight to the Secretariat of State and to build a customized financial system, tailored to Vatican City State’s particularities (such as the Vatican having no banks and no market economy.)

The MONEYVAL plenary assembly welcomed the changes, and it issued in July 12, 2012 a generally positive report on the Holy See/Vatican City State. The report, as could be expected, requested some adjustments to the law.

Some of these adjustments regarded the Financial Information Authority, and the Holy See carried forward the reform process step by step. In December 2012, two adjustments to the money laundering law gave the AIF the power to issue memorandums of understanding with its counterparts in other countries without the prerequisite of a nihil obstat (no objection) from the Secretariat of State.

These two adjustments further improved the procedures for cooperation and international exchange, and facilitated the AIF joining the Egmont Group (comprised of financial intelligence units from all over the world) in July 2013.

The enhanced authority of the AIF led to the signing of several memorandums of understanding, the most important of them with the U.S.’ FinCEN and with the Italian Unit for Financial Information.

In the meantime, a more general reform of the Vatican financial system was being prepared. With a motu proprio issued August 8, 2013 Pope Francis established the Financial Security Committee (whose members include the director of the Authority), and in October 8, 2013 a new law was issued, which gave the Holy See a sort of «single reference text for financial issues,» according to its characterization by the Vatican Secretary for the Relations with States, Monsignor Dominique Mamberti.

There are three important novelties in the new AIF statute: first of all, it strengthens the independence of the Authority, thus protecting it from possible interferences and power struggles among very prominent people within the Roman Curia; it officially assigns to the Authority prudential supervision, an important issue noted in the MONEYVAL report; and, lastly, as requested by the evaluators, it distinguishes the two functions of the Authority, by establishing two different departments, the Office of Supervision and Regulation and the Office of Financial Intelligence. This distinction made some observer note that the Authority for Financial Information could even be renamed “Authority for Oversight and Financial Information.”

The new AIF president will probably be a lay person, while the tenure of current board of directors seems to be reaching to an end. The board is comprised of Italians, coming (with a couple of exceptions) from the Bank of Italy milieu, who view their work through the anachronistic lens of  a Vatican-Italy special relation.

The appointments of the new president and board of directors, expected soon, will put an end to the only conflict of interest that the MONEYVAL report highlighted. The report did not name the person in the conflict of interest, but it was evident that it was Cardinal Nicora. In paragraph 797, the report underscores that «one of the members of the Cardinals’ Committee is also President of the AIF. This could raise concerns regarding a serious conflict of interest. It is therefore strongly recommended that the same person should not hold positions in the supervisory body and a supervised body.»

One of the very last actions of Benedict XVI was the renewal of the IOR cardinals’ commission. In the commission, Nicora was replaced by Cardinal Domenico Calcagno, his successor as head of the APSA. The decision was clearly to avoid a conflict of interest, but it was nevertheless criticized.

In the Holy See Press Office Bollettino that broke the news about the issuing of the new AIF statute, it was also announced that the professional services agency Ernst & Young was being hired by the Vatican City State Governorate as a consultant. According to the Bollettino, the choice was made after a «procedure of selection, » but this note cannot dispel the shadow of a conflict of interest, since Francesca Immacolata Chaouqui, one of the members of the commission that Pope Francis appointed to rationalize expenses and functions in the 37 Vatican offices, works for Ernst & Young.

Are external consultants really able to understand the Vatican’s peculiarities? The progression of the money laundering law proved that, ultimately, only institutional decisions taken within the walls of the Vatican succeed in projecting the Vatican forward to face new challenges in the world.

The experts of the Promontory Financial Group, retained by the IOR to screen its accounts, are doing nothing more that carrying out what the IOR was already doing. MONEYVAL’s report praised the IOR’s commitment, welcomed the Institute guidelines to apply international transparency standards, and underscored (in paragraph 476) that «the IOR launched a process of client  database review and update in November 2010. The IOR demonstrated a clear commitment and dedication to complete this process by the end of 2012. Six persons are involved in this project and are actively approaching clients to receive updated information.»

Some complaints are already percolating inside the Vatican Walls. It is rumored that the hiring of the Promontory Financial Group has been particularly expensive, although it is not known how much it is actually costing. It would also be interesting to know how much the Vatican is spending to have the Spanish bank Grupo Santander (whose representative in Italy is Ettore Gotti Tedeschi, former president of the IOR Council of Superintendency until he got a no confidence vote) to counsel the Prefecture for the Economic Affairs of the Holy See.

While nothing is known about these costs, there is a downsizing of the Vatican dicasteries’ personnel taking place. It has been explained as a response to a needed austerity and spending review. Five people have been reportedly removed from the Congregation for the Clergy, and it is rumored there is a list of 30 people in the various Vatican dicasteries ready to leave, some of them recalled by their dioceses but others sent back by initiative of the dicasteries themselves. This list would have been put together at the request of Cardinal Giuseppe Bertello, President of the Vatican City State Governorate and, it seems, a veritable deus ex machina inside the Vatican.

Reasons for downsizing the Curia would be part of a wider project of reform. Instead of sending Vatican officials around the world to report back any problems, the Vatican Congregations would be asking the countries’ conferences of bishops to report any problems, leaving them the possibility to take decisions and thus making Roman central power gradually less important. Pope Francis’ reform is intended to give more power to the «peripheries». In the meantime, in the very center of the «empire», there is a risk of a multiplication of small conflicts of interest that would damage the Holy See’s reputation. Consultants are external, with a finite commitment defined in contracts subject to expiration and early termination. The mandates of the commissions appointed by Pope Francis are also limited in time.  Is it truly a good idea to base the reform of the Curia on the advice of outsiders? Is outsourcing in the Vatican really the solution?

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.