Financial watchdog tells Vatican to improve judicial action on crime

Vatican City, Jun 9, 2021 / 10:00 am

Moneyval, the Council of Europe’s anti-money laundering watchdog, published its report on the Vatican’s compliance with international financial standards on Wednesday.

The long-awaited progress report noted improvements to the Vatican’s regulations to fight money laundering but raised concerns about judicial authorities’ ability to prosecute financial crimes in a timely and effective manner and to assess risk.

The 274-page report was published following an on-site inspection of the Vatican at the beginning of October 2020.

The two-week visit was the next phase in a regular multi-year evaluation by Moneyval and took place with the Vatican under the spotlight following a series of financial scandals.

The Moneyval report made particular mention of the Vatican investigation into the Secretariat of State’s purchase of a London investment property, which, it said, revealed “several anomalies and criminal offenses, including speculative investments inconsistent with institutional purposes, conflicts of interest and misappropriation of funds” by some members of the Secretariat of State.

It said that suspects were expected to be brought to trial this summer.

The report gave a mixed review on Vatican compliance with international financial recommendations.

Based on the inspection of an assessment team, the report concluded that the Holy See and Vatican City State were compliant with three recommendations, largely compliant with 19, partially compliant with 14, and non-compliant with nine. The institution was rated as compliant or largely compliant with half of the 16 “Core and Key Recommendations.”

A June 9 press release from the Vatican said that “the Holy See welcomes the Moneyval Report published today and the invitation to continue on the path already undertaken.”

“While noting the efficacy of the measures adopted by all the authorities involved in the fight against money laundering and the financing of terrorism, the Holy See renews its commitment to continue working towards full compliance with the best international parameters and, to that end, it will consider carefully the recommendations contained in the Report,” it stated.

Among the recommendations was that the Vatican should hire more prosecutors with experience prosecuting financial crimes and that the new prosecutors ought to work exclusively for the Holy See and Vatican City State, to avoid conflicts of interest.

The report noted that some Vatican judges and prosecutors currently also have responsibilities in other legal jurisdictions.

The report is likely making reference to Vatican assistant prosecutor Alessandro Diddi, who was a defense attorney in a recently decided high-profile mafia case in Rome. Giuseppe Pignatone, president of the Vatican court since 2019, had led the investigation on the “Mafia Capitale” case while he was Rome’s lead prosecutor.

Moneyval expressed doubt about the Vatican tribunal’s ability to resolve multiple complex financial cases at the same time and in a timely manner.

The report noted that financial criminal investigations have only led to two convictions for self-laundering -- one in 2018 and another in 2019. (There was a third conviction in January 2021, after the conclusion of the inspection.)

At the same time, the report suggested that the sanctions in these two convictions were “not proportionate and dissuasive.”

The watchdog recommended that the Vatican work to strengthen the expertise of financial investigators as well as introducing new procedures to help prosecutors stay on track during the process of investigating, prosecuting, and indicting financial crimes.

Moneyval also recommended establishing “a comprehensive procedure for petitioning the Holy Father when requesting consent to pursue a criminal prosecution against cardinals and bishops” to streamline the step, which is required by Church law.

In April, Pope Francis amended part of a law issued last year regulating Vatican City’s judicial system, now allowing the court of first instance to rule on criminal trials of bishops and cardinals.

The report also cautioned that Vatican authorities might not be properly assessing the level of risk of fraud from mid-level and senior figures, or “insiders,” in the Vatican.

The report said that Moneyval disagreed with Vatican authorities’ assessment of a low risk for abuse of office for personal benefit and related money laundering by Vatican insiders, terming the risks “important.”

It added that cases that received wide coverage in the media had “raised a red flag for potential abuse” of the Holy See and Vatican City State’s systems by personnel.

Moneyval said that though these cases had led to positive actions since 2014, they were not addressed with the General Risk Assessment, “which raises some concerns as to the degree to which these matters are formally recognized and acknowledged by all authorities.”

An October 2019 raid by Vatican gendarmes on the offices of the Vatican’s financial intelligence unit, conducted in connection with the London property scandal, was also flagged in the report for having potentially compromised confidential information.

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The report noted that during the search, a number of devices and documents were seized which contained information the office had received from five European financial intelligence units.

The Vatican prosecutor’s office notified the European entities three days later about the raid and said that the information seized would be used for judicial and prosecutorial purposes.

The Egmont Group, through which 164 financial intelligence authorities share information and coordinate their work, suspended the Vatican just over a month later, but reinstated it in January 2020.

In its report, Moneyval said that from its discussions with Vatican authorities, “it is unclear” whether judicial authorities had carried out “any risk assessment” in relation to the potential international consequences for the Vatican’s financial intelligence unit arising from such a search and seizure.

The report gave a positive evaluation of recent changes to the Holy See and Vatican City State’s financial laws and to the strengthening of the Supervisory and Financial Information Authority (ASIF).

In an interview with Vatican News June 9, ASIF president Carmelo Barbagallo said that the Moneyval evaluation “went well.”

He noted that the Vatican received an evaluation of “substantial” and “moderate” effectiveness in implementing the international recommendations -- placing it among the highest of the 100 jurisdictions rated in the last round of evaluations.

“The recommendations expressed by the Moneyval report with regard to the Vatican jurisdiction are an encouragement to do even better, to always keep the quality of the human resources high and to strengthen the activities of all the authorities involved in the fight against money laundering and terrorism financing,” Barbagallo said.

He added: “They are suggestions that help the Vatican to contribute to the realization, in conditions of maximum transparency and financial fairness, of the ultimate goal of the Church’s mission.”