Athens Review, Athens, Texas

Breaking News

Community News Network

July 10, 2014

Why does the Vatican need a bank?

WASHINGTON — The Vatican Bank's history reads more like Dan Brown than the financial pages, but its worst -- and weirdest -- days may be behind it. After a year of reorganization and reform that saw a 97 percent drop in profits, the Holy See installed a new set of overseers that includes a man who made his reputation closing down North Korea's illicit bank accounts.

But what is the Vatican Bank and why do the Catholic Church and its 1.2 billion adherents need their own financial institution? Officially dubbed the Institute for Works of Religion (IOR) and founded in 1942, the bank's history has been defined by scandal, secrecy and non-compliance with the West's standard anti-fraud measures. In fact, calling the IOR a bank may be stretching the term. It doesn't issue checkbooks or make loans, there are strict criteria and background checks for clients, and some of its clients-only ATMs have a Latin option.

In reality, the IOR acts more like a discrete "off-shore" institution for holding funds than it does a typical bank -- in fact, in 2012 officials eschewed the "bank" title. Carlo Marroni of Il Sole 24 Ore, an Italian financial daily, has written that the bank mostly invests its nearly 8 billion euros in currency and bond markets -- and lots and lots of gold. When the bank's reported profit dropped by more than 80 million euros (about $109 million) from 2012 to 2013, 16.4 million of that reduction was "tied to writedowns and fluctuations in the value of the IOR's gold reserves."

Pope Francis has made reforming the bank one of his top priorities, and the bank is in now in full clean-up mode. When logging on to the IOR website, visitors are greeted with a message that reads like an admission of guilt and apology. "The IOR is engaged in a process of comprehensive reform, to foster the most rigorous professional and compliance standards," the letter says. "We are conducting an extensive evaluation of all our clients' accounts, with the aim of closing down those relationships that are not in line with the IOR's mission."

Along with naming French businessman Jean-Baptise de Franssu as the bank's new head, the Vatican announced this week that it shuttered some 2,000 of its 19,000 accounts. Well-compensated compliance consultants have been combing through the bank's accounts to clean up inadequate documentation and demystify who controls the accounts.

The IOR was most notoriously linked to criminal activity in 1982 through its ties with the Banco Ambrosiano scandal. Endorsed by the Vatican, Banco Ambrosiano, an Italian bank, collapsed under $1.2 billion in unsecured loans, and the body of its chairman, once known as "God's Banker," was found hanging from a bridge in London. The New York Times wrote at the time "unverifiable reports that organized-crime figures and a recently discovered, anti-Government secret Masonic lodge are somehow involved." The Vatican never admitted wrongdoing, but two years later paid the bank's account holders $240 million.

After subsequent scandals and under pressure from its partner institutions to comply with efforts to combat money laundering, IOR began trying to reform itself in the mid-2000s. After appointing a new director in December 2009 with hopes of getting a stamp of approval from the Financial Action Task Force, a global body that sets standards for combating money laundering, the bank signed on with European Union anti-laundering rules, promising to comply by the end of 2010.

Before that could happen, the Italian government in September 2010 froze nearly 23 million euros in IOR assets in connection to a money-laundering investigation. Court documents alleged the Vatican Bank acted "with the aim of hiding the ownership, destination, and origin of the capital." In response, then-Pope Benedict created the Financial Information Authority (FIA) within the Vatican to oversee compliance and agreed to follow FATF standards to deter laundering. Like the Ambrosiano case, the Vatican denied wrongdoing and avoided criminal charges, but the allegations remain an oft-cited scar against the bank's credibility.

The IOR's headaches of late have been one after the other. The U.S. State Department in 2012 named the Vatican a nation "of concern" for money laundering. The bank refused to explain to J.P. Morgan why over the course over 18 months 1.8 billion euros entered and left one account. One of the reformers brought in to lead the bank left fearing for his life, telling Reuters, "I have paid the price for transparency." It was found in July 2012 to have failed to meet seven of 16 anti-laundering recommendations by an FATF committee. The five members who make up the FIA and supervise the Vatican's financial dealings were supposed to serve until 2016, but resigned early at Pope Francis' request and have been replaced with outside experts, including Juan Zarate, who is best known for helping he second Bush administration develop a slew of innovative ways to apply sanctions to rogue states and terror groups. Cleaning up the Vatican's bank may, surprisingly, prove to be nearly as challenging.

 

1
Text Only
Community News Network
  • Wal-Mart to cut prices more aggressively in back-to-school push

    Wal-Mart Stores plans to cut prices more aggressively during this year's back-to-school season and will add inventory to its online store as the chain battles retailers for student spending.

    July 21, 2014

  • Hospitals let patients schedule ER visits

    Three times within a week, 34-year-old Michael Granillo went to the emergency room at Northridge Hospital Medical Center in Los Angeles because of intense back pain. Each time, Granillo, who didn't have insurance, stayed for less than an hour before leaving without being seen by a doctor.

    July 21, 2014

  • Starved Pennsylvania 7-year-old weighed only 25 pounds

    A 7-year-old Pennsylvania boy authorities described as being so underweight he looked like a human skeleton has been released from the hospital.

    July 21, 2014

  • Malaysians wonder 'Why us?' after second loss of airline jet

    It was all too familiar. Grieving families rushing to airport. The flashing television graphics of a plane's last radar appearance. The uncomfortable officials before a heavy thicket of microphones.
    For many Malaysians, the disappearance of Flight 370 in March has been a long trauma from which the nation has not yet recovered.

    July 18, 2014

  • A quarter of the world's most educated people live in the 100 largest cities

    College graduates are increasingly sorting themselves into high-cost, high-amenity cities such as Washington, New York, Boston and San Francisco, a phenomenon that threatens to segregate us across the country by education.

    July 18, 2014

  • Your chocolate addiction is only going to get more expensive

    For nearly two years, cocoa prices have been on the rise. Finally, that's affecting the price you pay for a bar of chocolate - and there's reason to believe it's only the beginning.

    July 18, 2014

  • Facebook tests button to let people shop from its website

    Members on desktop computers or mobile devices can click a "buy" button to make purchases through advertisements or other posts on the world's largest social network, the Menlo Park, California-based company said Thursday in a blog post.

    July 17, 2014

  • The terrible history of passenger planes getting shot out of the sky

    What is more clear is that, if initial reports are true, this would be the deadliest incident of a civilian passenger plane being shot down in modern memory. In some instances, the causes of the disaster are still shrouded in mystery. Here are some of the worst events.

    July 17, 2014

  • 130408_NT_BEA_good kids We're raising a generation of timid kids

    A week ago, a woman was charged with leaving her child in the car while she went into a store. Her 11-year-old child. This week, a woman was arrested for allowing her 9-year-old daughter to go to the park alone. Which raises just one question: America, what the heck is wrong with you?

    July 17, 2014 1 Photo

  • web_starbucks-cof_big_ce.jpg Starbucks sees more Apple-like stores after Colombia debut

    This week Starbucks opened its first location in Colombia — a 2,700-square-foot store with a heated patio, concrete columns, mirrors on the ceiling and walls of colorful plants.

    July 17, 2014 1 Photo

Biz Marquee
AP Video
Raw: Israel Bombs Multiple Targets in Gaza Veteran Creates Job During High Unemployment Raw: Cargo Craft Undocks From Space Station Widow: Jury Sent Big Tobacco a $23B Message New Orleans Plans to Recycle Cigarette Butts UN Security Council Calls for MH 17 Crash Probe Obama Bestows Medal of Honor on NH Veteran Texas Sending National Guard Troops to Border Hopkins to Pay $190M After Pelvic Exams Taped Foxx Cites Washington 'Circus Mirror' NASA Ceremony Honors Moon Walker Neil Armstrong Obama Voices Concern About Casualties in Mideast Diplomacy Intensifies Amid Mounting Gaza Toll AP Exclusive: American Beaten in Israel Speaks Obama Protects Gay, Transgender Workers Raw: Gaza Rescuers Search Rubble for Survivors Raw: International Team Inspects MH17 Bodies Raw: 25 Family Members Killed in Gaza Airstrike US Teen Beaten in Mideast Talks About Ordeal 'Weird Al' Is Wowed by Album's Success