February 16, 2020

What is behind the acquittal of two former Vatican officials?

By Andrea Gagliarducci
The headquarters of the Institute for Religious Works, the so-called Vatican bank - credit ACI Stampa
The headquarters of the Institute for Religious Works, the so-called Vatican bank - credit ACI Stampa

An Italian appeal court gave its verdict in a criminal case against two former officials of the Holy See’s Institute for the Works of Religion — often mistakenly styled the “Vatican Bank” — earlier this month: Not guilty.

The IOR’s ormer director and vice-director  respectively , Paolo Cipriani and Massimo Tulli, were acquitted of money laundering, because “the fact does not subsist” — that’s technical Italian legalese that means there was not crime.

The media generally ignored the verdict, but it is an important one. First, it clears Cipriani and Tulli . Second, it shows that the Holy See worked well in terms of anti-money laundering proceedings.

The trial began in 2010, after the Italian prosecutor ordered the preventive seizure of a €23 million transfer by the IOR  between two of its accounts in the so-called “correspondent banks.” – that are, banks of different countries that use accounts of correspondence to settle the accounts.

According to the prosecutor, the IOR did not provide one of the recipients of the transfer, the Credito Artigiano, the information required for due diligence, specifically: the identification of the account’s owner and the source of the funds.

The Italian anti-money laundering law at the time considered the IOR an entity coming from a non-European jurisdiction, and so “not equivalent” to the Italian anti-money laundering system.

In 2011, the Holy See issued its first Vatican anti-money laundering law, n. 127. Following promulgation of  the law, the Italian prosecutor withdrew the  hold on the €23 million transfer. The reason for lifting the hold was that Italian law says such freezes are to be lifted “when conditions of applicability are missing, also because of supervening facts,” i.e. events that transpire after a judgment becomes final, or developments that occur subsequent to judgment. . That is what appears to have happened here.

However, the adoption of a general law could not on its own be enough to meet the due diligence requirements. Why, then, the decision to  lift the freeze? Could it be considered a message to the Vatican authorities?

In the meantime, the Holy See had initiated a reform of its anti-money laundering system. This led to the replacement of Law 127, following some perplexities raised by the Council of Europe’s financial monitor, Moneyval.

The enactment of a revised anti-money laundering law in Jan. 2012 signalled the transition from a first phase marked by the need to provide concrete solutions to bilateral problems between Italy and the Holy See, to a second phase characterized by the establishment of a long term framework with international recognition.

The issuance of another new law (n. 18) in 2013, and the strengthening of the Financial Intelligence Authority, were both part of this new phase.

The message given by the developments in theVatican’s anti-money laundering laws is clear: The Holy See issued new norms based on commitments undertaken in the international arena, rather than under the impetus of bilateral issues. After the reforms, the IOR is overseen by the Financial Intelligence Authority, which is a Vatican body.

In 2013, the Holy See’s Financial Intelligence Authority and the Italian Unit for Financial Information signed a memorandum of understanding. In 2014, the money seized in 2010 was repatriated.

When the funds were repatriated, the IOR underscored that “the repatriation of funds came into effect also because the Holy See in 2013 introduced a sound anti-money laundering system.”

Despite the repatriation of the funds, the trial against Cipriani and Tulli went forward. Italian prosecutor looked at  155 operations collected under  seven different charges.

Beyond the infamous €23 million, the  prosecutor’s investigation focused on several money transfers: €220,000  transferred by a certain Giacomo Ottonelllo; €100,000 moved by Giuseppina Mantese; €120,000 transferred by the Little Apostoles of Charity; €66,133 transferred by Antonio D’Ortenzio; €70,000 by former IOR director Lelio Scaletti, recently deceased; €100,000 by Lucia Fatello; €250,000 from the Jesuit-run magazine La Civiltà Cattolica.

In 2017, the two IOR top officials, Cipriani and Tulli, were found guilty on three of nine counts at the first instance trial. They were acquitted on six of nine counts. News reports at the time, however, focused on the novelty of the situation: for the first time, two senior officials of the so-called Vatican bank had been sentenced because of a violation of the anti-money laundering law.

It is worth mentioning that the three counts on which Cipriani and Tulli were convicted were minor charges regarding technical issues.

The appeal court confirmed the acquittals and prescribed the other, minor, technical charges. This means, effectively, that Cipriani and Tulli have been cleared of all charges.

It is noteworthy that a good part of the transfer under scrutiny dealt with a religious congregation, a magazine owned by a religious congregation (Jesuits), and a former Vatican official.

While the trial went on, Cipriani and Tulli had resigned and faced a “Kafka-esque” process, since in the meantime, everything had been cleared, and the funds were repatriated.

While all that was happening, , a new season of Vatican finances began. External consultants characterized this new season.

There are many pending issues, though. Could the problem of the funds be solved before? Did the Credito Artigiano act transparently, or was the bank anyhow conditioned by the historical context of the years 2009 – 2010, that is, intense pressure from Italy? And on what grounds, precisely, were the transfers frozen in the first place, since all the IOR account holders were  ecclesiastical subjects? It is also food for thought that the “zero tolerance” policy  against so-called lay account holders would be instituted only after 2013.

The appeal verdict clarified that there was no reason for freezing the transfers. In addition to that, the not guilty verdict also shows that the Vatican financial system worked well even before the anti-money laundering law.

Issued in 2012, the first  Moneyval report on the Holy See and Vatican City State , stressed that “the internal procedures established by the IOR went, to some extent, beyond the requirements set out by the Law before the amendments and additions introduced in January 2012.”

The verdict finally clarifies a complex situation involving  relations between the IOR and the Italian banks. The relations normalized when the Vatican Financial Information Authority signed Memoranda of Understanding with the Italian Unit for Financial Information and the Bank of Italy.

The theme of bilateral relations between the Vatican and the Italian Republic can open a broader discussion. The memoranda of understanding they reached signaled the international credibility of the Holy See. Italy signed the memoranda because the Holy See had garnered credit. The Holy See developed institutional, rather than preferential, relations with Italy.

The recent institutional crisis that led to the searches and seizures of documents in the Secretariat of State and the Vatican Financial Intelligence Authority jeopardized the Holy See’s international credibility.

Egmont Group, the group that gathers the unit for financial information from all over the world, unplugged the Vatican from its secure network of exchange of intelligence information. The Holy See could get back to the network only when the Vatican Financial Intelligence Authority signed an unusual memorandum with the Vatican tribunal, which could indicate that the system did not work correctly.Otherwise, why another protocol?

* Catholic News Agency columns are opinion and do not necessarily express the perspective of the agency.