With a similar commission (although an internal one), Pope Francis sent the message that he wanted clarity in the activities of the so-called Vatican bank, the Institute for Religious Works (IOR).

For an eventual reform of the Curia, Pope Francis more pragmatically named a group of eight cardinals, including Cardinal Oscar Andrés Maradiaga as their coordinator. The terms of reference for this group have not yet been defined in an official document. It is expected that Pope Francis will soon do so, making the group an official entity of the Church.

It is typical of the Jesuits to form external commissions to confront and resolve problems. Pope Francis has embraced this approach, common in the management of Jesuit provinces, and he is applying it to his pontificate.

Bergoglio’s goals are enormous. He wants to change the way the entire Roman Curia thinks and behaves. A Curia rightly or wrongly perceived by many as out of touch with the people. Pope Francis’ way of proceeding reveals distrust for the Curia.

Pope Francis meets, reportedly quite often, with Benedict XVI. He also phones the dicasteries very frequently, speaking with employees at all levels and asking them about their work.  Some of the employees have also been invited to pay him a visit in the Domus Sanctae Marthae.

Pope Francis has taken the reins of the situation, or he’s trying to. It is an exhausting approach, that which he is taking.

The most recent obstacle he has faced was the appointment of the prelate of the IOR, i.e. the Holy See representative who works as a link between the cardinals’ oversight commission and the board of laymen. Pope Francis decided that Battista Ricca should take that job. Bergoglio knows Ricca very well, they often had lunch together.

Ricca was a career diplomat who – after having served in several nunciatures – was sent back to Rome. There, he gained the reputation of “incorruptible” in his managing of the accounts of the nunciatures. He was also appointed director of three residences for prelates. One, the residence in Via della Scrofa in Rome, was where then-cardinal Jorge Mario Bergoglio usually stayed during his trips to Roma. Another residence managed by Ricca, the Domus Sanctae Marthae, is now the Papal residence.

So Ricca was very close to the Pope, and this is how he earned the Pope’s confidence. But when the Pope chose Ricca as prelate, no one brought up to him the dossier that explained why, earlier in Ricca’s career, it had been so important to bring him back to Rome. A dossier that the Italian vaticanista Sandro Magister made reference to, and which contained accusations of homosexual behavior.

«Who wants to boycott Pope Francis?» This was the question raised after the publication of Ricca’s story. The Vatican’s problem is not whether specific reports and information are true or not. It is more important to understand who “leaked” the dossier outside the Sacred Walls. With an outgoing, «lame duck» Secretary of State and the appointment of his successor on stand by, it seems as if attacks on anyone’s reputation are fair game. It is a chaotic situation inside the Vatican.

This proves that the Curia’s poisonous environments did not dissipate with Pope Francis’ arrival.

The appointment of the advisory commission for the IOR might have made some believe that Pope Francis realized that it is impossible to reform the Curia without the Curia. Not so. The appointment of this most recent commission shows that the Pope has taken the path of outsourcing.

Benedict XVI started a plan bring order to the expenses and the activities of the pontifical administration. It was necessary to streamline the structures, as often there were unnecessary overlaps and redundancy of responsibilities.

First of all, Benedict XVI reformed the Prefecture for the Economic Affairs of the Holy See, the Vatican «ministry of economy».  Benedict’s reform made the Prefecture look like a modern ministry of finance, with the power to control and project expenses. This way, Benedict XVI worked towards making the Vatican a modern State, and at the same time to strengthen its structures.

In fact, external consultants are not new. Every Vatican dicastery appoints consultants, i.e. experts called to serve the Holy See in some specific field.  However, not until now had consultants been so clearly a part of an outsourcing strategy.

Pope Francis does not favor appointing “ad hoc” consultants for specific issues.   Instead, he prefers to address some problems by presenting them to experts outside the Vatican. An approach that has been accepted in Vatican City State, to the detriment of the Holy See.

The Vatican administration must pay salaries and keep its finances in the black. In order to meet its obligations, Vatican City State has accepted donations. Including very large donations. Donations, however, invite outsiders’ intromission, since the donors may attempt to exert control over everything. They are ultimately buying the Vatican, one piece at a time.

The Knights of Columbus, for example, have been making generous donations to the Administration of the Patrimony of the Apostolic See (APSA). These donations have served to pay the salary of one of the top consultants at the Vatican, for the past two years. Obviously, before hiring the job holder, the Knights of Columbus were consulted.

Even in the financial area, a lot has been traditionally outsourced. Since the Calvi and Marcinkus era, many things have changed. The IOR is now controlled by a “board of laymen,” the council of superintendency. Ettore Gotti Tedeschi was once named president of this council. But Tedeschi was not a Vatican man. He treated the Vatican more like a multinational company than a sovereign state with funds at the Pope’s disposal. Tedeschi eventually received a no confidence vote from the board he presided.

How was his successor chosen? The IOR’s Superintendency Council decided to contract the services of a specialized agency, a “head hunter”. It was an external agency, which was well paid for its services. The agency identified Ernst von Freyberg for the position. Von Freyberg then hired his own, external, spokesperson, enabling him to manage relations with the press.

In a similar vein, Von Freyberg tasked an American company (the Promontory Financial Group) with auditing the IOR. Nothing wrong or unusual: auditors must be external. What is interesting is that later Antonio Montaresi was appointed the IOR’s chief risk officer. He comes from ranks of the Promontory Financial group. No questions Montaresi’s professional credentials. The issue is, had there been a possible conflict of interest?

In the meantime, Grupo Santander – Gotti Tedeschi had been for years the president of its Italian branch – proudly and loudly announced its re-arrival to the Vatican in the role of consultant to the Prefecture for the Economic Affairs of the Holy See.

Pope Francis wants a poor Church, and always maintains that «structures are important, but up to a certain point.» The problem is that, up until now, Francis is increasing Vatican bodies, and thus expenses. Furthermore, the advisory commission for financial activities can also call on outside experts itself, and will have its needs well covered.

This is how outsourcing in the Vatican is growing. And while the Vatican hires outside experts, inside the Sacred Walls there continues to be potentially disloyal butlers, and priests under the influence of the gay lobby. Will Francis truly succeed in cleaning up the Church? Or will the way he is proceeding favor the formation of new interest groups?

The announcement of the publication of the balance sheet is the first important decision taken by Ernst von Freyberg, the new president of the IOR Council of Superintendence. Von Freyberg took over on February 18, after a nine-month search for a successor to Ettore Gotti Tedeschi as president of the IOR’s Council, a.k.a. «board of laymen». Von Freyberg has worked with the IOR employees on putting together a balance sheet during these first three months of his presidency. In this period, there has been a change in Popes. However, the Vatican’s agenda on financial issues is still that inaugurated under Benedict XVI’s pontificate. It is a «transparency program» which addresses all Vatican finances, which have been – rightly or wrongly – pervaded by a myth of opacity and lack of international cooperation.

In the Vatican corridors, this myth is called «a misperception». Vatican officials also state that little credit is given to the Vatican for its actions to bring up to international standards the Vatican’s financial system.

Part of this path toward financial transparency was publicly explained by Paolo Cipriani, the IOR’s general manager. In June of last year, featuring an «open doors policy», he met at the Torrione Nicolò V (the IOR headquarters) with ambassadors accredited to the Holy See and a group of journalists. The aim was to correct any possible misperception regarding the Institute’s work.

The meeting took place at a difficult time, on the heels of the IOR’s board of layman adopting a no confidence motion on its president, Ettore Gotti Tedeschi.  Several weeks after, the plenary assembly of MONEYVAL (the Council of Europe committee that evaluates the financial transparency of its member States) was scheduled to evaluate the Holy See’s adherence to anti money laundering international standards.

The debate was particularly polarized around the Vatican anti-money laundering law, which the Holy See substantially and vigorously amended following the first on site visit of MONEYVAL evaluators.  The Vatican adopted a new law on January 25, 2012.

Notwithstanding that the revision of the law had been controversial within the Vatican itself, the MONEYVAL report issued on July, 2012 praised the revision. MONEYVAL noted that the new law «introduced a significant number of necessary and welcome changes.» The same report emphasized that «further important issues still need addressing in order to demonstrate that a fully effective regime has been instituted in practice. » Overall, MONEYVAL evaluators gave high marks to several IOR procedures. Browsing the Report’s Executive Summary, one finds out that the IOR security standards surpass those required by Vatican law (Executive Summary, 39); and that the Vatican legislation on secrecy is considered overall compliant with international standards (paragraph 50). The report also praised the high level of Vatican engagement in international cooperation.

The report also left several issues open. For the past twelve months, the Holy See has been working on a general reform of its financial management and control procedures. The reform is also broader than required by international standards. This is evident in a preview of a Holy See report to MONEYVAL, which volunteers a lot of information about the Vatican’s progress on the implementation of a wide range of anti money laundering recommendations. The Holy See/Vatican City State progress report will be presented in December. By then, a general reform of Vatican finances should have come into effect. Probably, this reform will start in June.

The IOR’ publishing of its balance sheet is thus a part of the Holy See’s long term commitment to transparency. Already, since 1990, an international and independent auditing company (Deloitte in recent years) certifies the Institute’s balance sheet. It is then approved by the Council of Superintendence. The board of laymen must present the balance sheet to the IOR Oversight Cardinals’ Commission by April 30. The cardinals present the balance sheet to the Pope, who then decides, within thirty days, how to allocate the dividend to religious works.

Some data: the IOR has more than 6  billion euro in assets, 33 thousand individual accounts and 25 thousand group-accounts (that is, aggregates of all the accounts of a single religious congregation); 60-65 percent of the IOR’s financial activities are in euros and the rest in dollars; and 5 per cent of the funds are invested in highly-rated investments, which are very secure but do not yield high profits.

In the mean time, the Vatican Authority for Financial Information (AIF) continues to follow a path towards full adherence to international standards. On May 7, it signed a Memorandum of Understanding with its U.S. counterpart, FinCEN (Financial Crimes Enforcement Network). It is the fourth Memorandum of Understanding (MOU) signed by the AIF with fellow Financial Information Units (FIUs). The other MOUs are with the FIUs of Belgium, Spain, and Slovenia.

The news of the memorandum signed with FinCEN is particularly important, considering that in March of 2012, the U.S. Department of State had ranked the Vatican as a “not reliable” State regarding financial transparency.

Next step will be the presentation of the Annual Report of the Authority for Financial Information. René Bruelhart, AIF director, will perhaps do so within this week (on Wednesday).

Some maintain that Benedict XVI’s pontificate has in effect come to an end, and that everything is to be put on hold. Benedict XVI does not think so. There is no need to accelerate the handling of daily affairs, but they do not come to a halt either. Everything must go on, at normal speed. Appointments for different positions are made as usual, with no exceptions. No matter if there are controversies, if every appointment is exploited and used as an excuse to feed resentments and stir feuds, or to attack the Church. The Church must go on, beyond all of this.

So, this last week, during the Lent Spiritual Retreat, two appointments were published. Scandalous, some cried out. In fact, these appointments had been decided a long time ago. The first appointment is that of the new president of the Religious Works Institute (IOR) Council of Superintendence. Ernst von Freyberg, of the Order of Malta, is a business lawyer with remarkable experience in finance. Meanwhile, nearly all of the IOR Cardinal Commission members will stay on.  The second appointment is that of Ettore Balestrero, currently the Vatican’s «Vice Minister for Foreign Affairs», as apostolic nuncio to Colombia, in order to strengthen the Church in Latin America.

The IOR – a sort of Vatican trust fund – had been nine months without a president.  Since the Council of Superintendence voted to pass a no confidence motion on the former president, Ettore Gotti Tedeschi, the IOR «board of laymen»  had been headed by its vice president, Rolando Schmitz. The latter recommended to use Spencer & Stuart – a specialized «headhunter» agency – to look for candidates for a new president. Since July, specialists from this Frankfurter agency had been visiting the Vatican to gather information about the role of IOR president of the board, and the ideal profile of the next office holder. Spencer & Stuart first identified about 40 candidates, then selected six who were personally interviewed by the Council of Superintendence.  There were three finalists, who were interviewed by both the board of laymen and the board of cardinals.

Finally, the German Ernst von Freyberg was chosen. His managerial experience was not his only qualification. Yet, it is worth noting that he is cofounder and managing director of Dc Advisory Partners.  Formerly he had been an analyst at Three Cities Research, and president of Blohm+Voss, a naval industry. Von Freyberg was also chosen for his catholic credentials. He is an active member of the Order of Malta, a promoter of pilgrimages to Lourdes, and a nobleman. His appointment seemingly signals a return to an ancient practice: the Vatican puts its trust once again on a highly qualified personality from a Catholic and noble family, whose loyalty to the institution is independent from, and goes beyond, job-related contractual obligations.

The mandate of the IOR Cardinal Commission for Oversight, and of the new board, will expire in 2017. Card. Tarcisio Bertone is still the president of the Commission, since he is Secretary of State (he will be replaced when a new Secretary of State is appointed).  The appointments of cardinals Scherer (Brazilian), Toppo, (Indian), and Tauran (French) have been confirmed. Card. Nicora, on the other hand, has left the commission because he was also president of the Authority for Financial Information, which could have lead to a conflict of interest. Nicora had joined the board as the then president of the APSA (the Vatican «central bank»).  He is replaced by his successor as APSA President, Card. Domenico Calcagno.

Choosing a new IOR president was a process which began a long time ago, before Benedict XVI announced his decision to resign from the Petrine ministry. So was the process leading to the appointment of Ettore Balestrero, Undersecretary for Relations with States, as apostolic nuncio to Colombia.

During the past few years, Balestrero has worked to advance the Holy See’s path toward full financial transparency: he led the Holy See delegation at the plenary assembly of MONEYVAL – the body of the Council of Europe that evaluates the adherence of its member states to international standards – and he briefed journalists about the findings of the MONEYVAL report. Ettore Balestrero’s work went beyond, certainly: working as Undersecretary for Relations with States, he worked on the negotiations with the state of Israel and opened up Vietnam – where soon there will be a Holy See resident representative. Before that, he had worked in Korea and the Netherlands, and at the Vatican Secretariat of State, where his portfolio included relations with the Organization for Security and Cooperation in Europe (OSCE). His main interests have always been peace, integral disarmament and religious freedom: he was among the organizers of the first conference ever held on intolerance and discrimination against Christians. While at the Secretariat of State, he also participated in the meeting organized by the Pontifical Council for Justice and Peace with non-institutional military chaplains. In that occasion, the Colombian military chaplain was present. Was it a sign of what the future held?

Certainly this background was taken into account when Balestrero was chosen to be apostolic nuncio in Colombia. The challenges he will face are those outlined by Benedict XVI in 2012. The Pope met Colombian bishops during their ad limina visit, and asked them to strengthen catechesis and relations with other Christian confessions. But he also underlined that bishops should not forget those «compelled to emigrate from their homeland» or those «harmed in their fundamental rights» or «forced to abandon their homes or families under the threat of the obscure hand of terror or of criminality», or still «those who have fallen in the nefarious networks of trade in arms and drugs. » The Catholic Church looks at Colombia with much interest: it has 102 bishops and a lively Church, so much so that there was talk of a papal apostolic visit. This project did not come to fruition with Benedict XVI, but may very well happen with his successor.

Balestrero’s appointment had been announced together with that of the new apostolic nuncio to El Salvador (Msgr. Leòn Kalenga) and that of the apostolic nuncio to Liberia (Miroslaw Adamczyk), the latter on his very first postings as “Pope’s ambassadors”. All of these appointments come at the end of a cursus honorum of about 15 years. Balestrero’s appointment, ultimately, has a precise goal: to strengthen the Church in Latin America. That is why Balestrero’s predecessor in the Secretariat of State, Pietro Parolin, was assigned apostolic nuncio to Venezuela, and its former head of protocol, Fortunatus Nwachukwu, was appointed Papal nuncio to Nicaragua.

After the no confidence vote. The words of Gotti Tedeschi

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

IOR transparency

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

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

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

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

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

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

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

The 24 May board of Superintendence

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

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

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

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

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

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

What will follow

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

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

Holy See financial transparency. Risks and procedures.

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

White list

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

The meetings with the evaluators.

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

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

Financial transparency is never ending

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

MONEYVAL on site visits to the Vatican

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

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

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

This is why the Pope steers clear from polemics. Only at the previous general audience, Benedict XVI used the occasion to take a stand against the attacks to his closest collaborators.  At the end of the audience he renewed his trust in them with a precise and straightforward declaration, underlining keywords with his own voice. The latest attacks have been increasingly vague on the Vatileaks issue and the arrest of the butler Paolo Gabriele, and ever more focused on the Works’ Institute (IOR) issue and on the ousting of its former president Gotti Tedeschi.  Tedeschi has been spinning the controversy with his innuendoes, his responses to the magistrates of Rome questioning him as part of an ill-defined investigation, and with the IOR files seized by the Italian public prosecutor of Naples. The Pope responded to all of these  developments, controversies and media attention with a catechesis on a general audience.  As part of the cycle of the catechesis on prayer, the audience was dedicated to prayer in the life of the apostle Paul. The Pope recalls: «Defending the legitimacy of his apostolate, Paul looks up, above all, to his profound closeness to the Lord in prayer, marked by moments of ecstasy, visions and revelations (cf. 2 Cor 12:1ff.). Yet he speaks too of a trial which the Lord sent him lest he become conceited: a mysterious thorn in the flesh (v. 7). Paul therefore willingly boasts of his weakness, in order that the power of Christ might dwell in him (v. 10). Through this experience of mystical prayer, Paul realized that God’s Kingdom comes about not by our own efforts but by the power of God’s grace shining through our poor earthen vessels (cf. 2 Cor 4:7)».

The message of the Pope is that it is not man’s perfection that makes the Church. It is on the contrary the weakness of man that characterizes it. If the Church is still here, it is not because of the men and women that are part of it, but by the grace of God. The call to simply follow the gospel points to a fundamental change coming about under Benedict XVI. The Pope chose his collaborators on the basis of personal knowledge and trust. But their role, the responsibility they are charged with, the «image» they project as Papal collaborators, must not overshadow that of the Church as a whole. In the past, everybody knew Cardinal Angelo Sodano, Secretary of State, while the work of Vatican diplomacy was less known. Now, the Secretary of State, Cardinal Bertone, is receiving a lot of attention, because of  the internal resistance to him and his new course. Yet, Vatican diplomacy is more important than the Secretary of State. At an international level, the Holy See has proposed a World Authority with universal competence. During the Preparatory Commission for a new ATT (Arms Trade Treaty), the Holy See proposed to broaden the ATT to small arms and light weapons, going beyond the seven categories in the U.N. register of arms. The Holy See also supported denying patents to inventions that would damage human beings. Equally important is the Holy See position paper for the Preparatory Commission of the U.N. conference on the environment, Rio+20, where it calls for «a new model of development» and underlined that sustainable development is part of comprehensive human development – one of the key words of the “change of dictionary” for the United Nations, described by Silvano Maria Tomasi, Papal nuncio to the Geneva office of  the United Nations.

Another example of the change of an era is in the profile of the personal secretary of the Pope.  Stanislao Dziwisz – now cardinal and archbishop of Cracow – was in a center stage role.  Georg Gaenswein has been under attack by the leaks, but he has always kept a low profile, fulfilling his duties with discretion.

Many – inside the Vatican – did not welcome this change to a new era.

It is the end of personalism, evident also in the no confidence vote by the “lay” board of the IOR to the president of the board Gotti Tedeschi. He did not get a no confidence vote because of the policy of transparency – that the Holy See is implementing with tenacity and commitment, adhering to international standards – but because the board did not considered him able to lead the institute. His media activism – this is one of the accusations levied against him – was missing when the IOR needed to be defended. The memo of the no confidence vote has been (almost institutionally) released. And the general manager of the IOR, Paolo Cipriani, talked about what the Institute has been doing in terms of transparency during the last years. The facts are public, and there is not much more to say.

The raid

The raid carried was about the investigation on Finmeccanica, an Italian industry specialized in products for defense – Gotti Tedeschi is not under investigation himself, but he could be in possession of papers of Finmeccanica that the CEO of Finmeccanica Fernando Orsi (they’re good friends) consigned him. Even if the investigation on Finmeccanica is not of any particular interest for those who cover the Vatican, it became newsworthy that – among the folders seized by the investigators to Gotti Tedeschi – there was a «memorandum »  that the former president of the I.O.R. was drafting to send to Mons. Georg Gaenswein, secretary of Benedict XVI, so it could be delivered directly to the Pope.

I.O.R. folders?

Gotti Tedeschi  was also reported to keep in his house 47 folders from the I.O.R. Some reports say that the folders would contain information about some I.O.R. accounts – especially of politician, as the ex I.O.R. president would have said -  but the Gotti Tedeschi’s lawyer Palazzo denied it. In the correspondence with some Curial officials, Gotti Tedeschi denounced a «plot» against him. Tedeschi described it as a «Judaic-Masonic »  plot . Tedeschi reportedly thought that : Marco Simeon (33 years old, foreign relations account manager and deputy to the relationship with the institutions of the Italian state television, Rai, and ad interim director of Rai Vaticano,which covers the Holy See) and the lawyer Michele Briamonte (from the office of Franzo Grande Stevens) were part of this plot. Within the Gotti Tedeschi’s sight was also Jeffrey Lena, the Holy See lawyer in the United States who recently has come to live in Rome to work on the reform of Vatican law n. 127 against money laundering, and who is now working along with Vatican officials to prepare the documentation for the July 4^thplenary assembly of MONEYVAL – the body of the Council of Europe that evaluates the adherence to the anti-money laundering norms of Council of Europe State members. MONEYVAL advisors will present their report about Holy See compliance to the plenary assembly.  There had been 3 meetings between MONEYVAL advisors and the Holy See – two on site visits of MONEYVAL advisors to the Vatican and a meeting in Strasbourg. All the work of the Holy See’s« financial branch » are in preparation for the 4^th of July meeting.

The efforts of the Holy See for financial transparency

The fact that the Holy See changed law n.127 just one year after its promulgation in order to make it adhere to international standards shows the Holy See’s specific and long term commitment to transparency. Yet, the reform had been particularly resisted by the «architects »  of the «old » law n. 127. Among these architects, Card. Attilio Nicora, president of the Authority of Financial Information, defined the new law as «a step back » . Ettore Gotti Tedeschi was also among the critics. He did not formally take part in the drafting of the old law. But he recommended  Marcello Condemi and Francesco De Pasquale as advisors, who were later appointed member and president, respectively, of the Authority for Financial Information.  They came from the Bank of Italy ranks and .defended wholeheartedly the law.

The old law n. 127 would «justify » Gotti Tedeschi’s decision – questionable, according to several observers – to declare before Italian magistrates about 23 million transferred by the IOR in 2010, although the magistrates did not make a proper international request. Gotti Tedeschi also convinced Paolo Cipriani, general manager of the I.O.R., to go and speak to the Italian magistrates. Cipriani was in favor of Holy See transparency, and at the same time he wanted to protect Holy See sovereignty. With the Guardia di Finanza (the Italian financial police) Cipriani holds informal relationships: anytime he is asked for information, he fulfill the request, except in the cases that would be detrimental to the sovereignty of the Holy See. The Guardia di Finanza once sent him a note to thank him for his quickness and precision in his answers.

A man rebuilding his image

So, there is a whole world in the Holy See that keeps on working, while outside the Vatican City State Ettore Gotti Tedeschi is on the spot. If, in the past, the former president of the I.O.R. was seen a strong defender of transparency, now Ettore Gotti Tedeschi is projecting his image of a person under attack, in order to get back to the previous image. In fact, his behavior has been censored by many inside the Vatican. The memorandum of the meeting of the board of Superitendance of the I.O.R. that voted the no confidence on Gotti Tedeschi listed nine accusations against the president of the I.O.R. Among these, one was of «erratic »  behavior. And Ettore Gotti Tedeschi seems to keep on his erratic behavior even now that he is out of the Vatican.

Vatican transparency

During his two years and a half as president of the board of Superintendence, Ettore Gotti Tedeschi collected a lot of information, and some of it is being leaked to the press. The media polemicizes the ciphered accounts of the I.O.R. But this should not be shocking:  the I.O.R. is not a bank. It is a “Pontifical body”, whose funds are at the disposal of the Pope. It is something more similar to a Trust than to a bank. I.O.R. accounts have always been given ciphered codes, rather than names, even if the accountes are not secret, and the information on them is complete. The «transparency operation »  began under Angelo Caloia, president of the body of Surveillance of the I.O.R. before Gotti Tedeschi. Since 2002, Caloia adopted the KYC policy, i.e. Know Your Customer. Each customer of the Institute was carefully analyzed. Obviously, since it is not a bank, I.O.R. cannot transfer money by itself. So it opens several bank accounts – especially in Deutsche Bank -  and there the money is transferred, and all the money movements can be traced. Since  the promulgation of the Vatican anti-money laundering law, each transfer must be justified and explained in a very precise manner, and that is why I.O.R. asks its customers to fill an appropriate form that some customers do not like. It is not even newswothy that in the I.O.R. there are the so called « lay » accounts, i.e. accounts that do not belong to cardinals or religious congregations, but to people outside of the Holy See. The opening of this kind of accounts is also covered in the anti-money laundering law. Paolo Cipriani – the I.O.R. general manager – said in an interview published on the Italian newspaper Il Corriere della Sera that there are no numbered accounts at the Vatican bank and the only Italians, apart from priests, monks and nuns, who banked with the IOR were lay employees or pensioners of the Holy See. Cipriani added that Gotti Tedeschi had been invited to inspect lists of accounts, but – Cipriani says – «he didn’t take things in hand. It was as if he were absent, even when he was present».

(false) Information

All of these (false) information is part of a strong press campaign. Gotti Tedeschi could not come to terms with receiving a no confidence vote by the board of I.O.R. and a press release that some observers defined « a declaration of war » . Several Italian media outlets proposed an external commission to evaluate how Ettore Gotti Tedeschi worked in the I.O.R. And his friends in finance and industry defended Ettore Gotti Tedeschi on the prominent Italian newspaper Il Corriere della Sera. After that, they tried to set up a sort of independent commission whose spokesperson would be Vito Gamberale, president of the Fund F2i, among whose members is Gotti Tedeschi.. Then, after the raid that brought to the seizure of his papers, and so also of the I.O.R. document, it seems that Gotti Tedeschi thought that he could trumpet his view through the Italian magistrate – the public prosecutor of Rome denied to have taken “Vatican” dossiers, but maybe the public prosecutor of Naples will do it; finally, it also seems that he may want to write a book, a Vatican best-seller that will forever save him from the accusation of being erratic.

More or less fanciful stories of how things went on come out from the same circles that spread misinformation about Gotti Tedeschi being under attack. And so we could read that Gotti Tedeschi had been fired because everybody in the Vatican opposed his transparency policy. Even that Gotti Tedeschi was victim of the American lobby of the Knights of Columbus.  The drafter of the memorandum of no confidence, Carl A. Anderson, was also among the first to speak up against Gotti Tedeschi in the Vatican.  A letter from Anderson criticizing the former president of the I.O.R. has been leaked to the press.  Anderson is the Supreme Knight of the Knights of Columbus. But fact, the Knights of Columbus are beyond suspicion. Their founder, Michael J. McGivney, is going to be beatified. They cooperate with the Holy See since the Benedict XV pontificate, they do not hesitate to send financial aid when requested, and they help poor. The wealth of the Knights of Columbus comes from a leading insurance society they manage, which has always gained Triple A financial ratings for its reliability.

Was there a war?

That the Knights of Columbus would like to take possession of the Holy See, getting rid of Opus Dei, is unsubstantiated. It was not only Carl A. Anderson statements and opinion that brought about the no confidence vote on Gotti Tedeschi. The four members of the board of Surveillance of the I.O.R., completely agree, and as the letters leaked to the Italian newspaper Il Fatto Quotidiano show.  Both Carl A. Anders and Rolando Schmitz – another member of the board – recommended the no confidence on Gotti Tedeschi. The letters were addressed to Cardinal Bertone, the “president” of the Commission of Cardinals that manages the I.O.R. Rolando Schmitz also wrote to Bertone that he would resign if an eventual no confidence vote of the board would not be confirmed by the commission of cardinals.

A press release

All of these rumors – coming out from circles very close to Gotti Tedeschi, and some say from Gotti Tedeschi himself – damage the reputation of the Holy See. This why the Holy See wanted to do away with the utter chatter with the Friday, 8^th of June press release underlining its « surprise and concern»  for the «recent events »  involvingEttoreGotti Tedeschi. The Holy See also says that it trusts that «the prerogatives acknowledged to the Holy See by the international legal order are being adequately considered and respected »  by the Italian judicial authorities.

The Holy See statement is a message to the Italian magistrates that are canvassing and studying the Gotti Tedeschi memorandum of its days as president of the I.O.R. In fact, the Italian public prosecutor denied to have taken documents about the I.O.R.: those papers had been found, seized and then sealed. But the investigators obviously glanced them. And the Holy See reminds all that those are documents from a sovereign country, seized to an ex president of a « body of State ».

Even if Gotti Tedeschi does not enjoy a “functional” immunity as president of the I.O.R. since the no confidence vote, those papers are from the time when he was in charge, and they are not part of the enquiry on Finmeccanica. The Holy See press release goes beyond, setting the record straight about what has been written during these days. First of all, «the Holy See confirms his full trust in the people whoworkat theInstitute for Religious Works with commitment and professionality»; and it is « examining with the maximum care»  the possible damage infringed upon the rights of the Institute and of its bodies. So, there is the possibility of a legal action. And this possibility upholds the « transparency line »  wanted by Benedict XVI: there is nothing to hide, and so there is nothing to deny. There is simply a desire to do away with any falsity.

What the Holy See is doing

The raid of the house and the office of Ettore Gotti Tedeschi gave rise to the rumors about the motives of the no confidence vote. Even in this case, it was the same I.O.R. to speak in a fair and strong manner – even too candidly for some internal observers. The Holy See confirms once again that the « no confidence vote on Ettore Gotti Tedeschi by the Board of Superintendence was rooted on objective reasons, concerning the governance of the Institute, and not determined by a presumed opposition to transparency, which the Holy See and the I.O.R. itself particularly care for».

So much care that it reworked the law n. 127 anti money-laundering not even one year after its promulgation. Holy See is working to fulfill the European request and to adhere to the international standars. For what concern the new law, MONEYVAL advisors focused on the new role of the Authority of Financial Information, that it is still crucial on the anti money-laundering law of the Holy See, but that it is now placed in a larger institutional settings that includes the State Secretariat, the Vatican City State Administration and the Gendarme Corps. The “presence” of the Secretariat of State among the bodies involved in trasparency – it deals with internal and international policy – does not seem to be evaluated negatively by te MONEYVAL advisors.  For what concerns the “controlled” body, the I.O.R. seems to be evaluate for great part adherent to the international standards. This would contrast the accusation of Gotti Tedeschi. Who told that he had been «fired because of his work for transparency». And whose story is taking attention away from the Holy See work.