Vatican says "misunderstanding" behind bank probe

(September 24, 2010) A "misunderstanding" between banks was the cause for the Vatican Bank being investigated by Italian authorities on suspicion of money laundering, the Vatican said on Thursday. The Vatican also said its bank, known as the Institute for Religious Works (IOR), was committed to "complete transparency" and it was working to secure inclusion in the "White List" of states which comply with international standards of banking. It outlined its defence in a letter sent to the Financial Times and distributed by its press office to journalists in Rome in a defence of the image of the Holy See and that of its bank. "The current problem was caused by a misunderstanding – now being examined - between the IOR and the bank which received the transfer order," Vatican spokesman Father Federico Lombardi said in the letter. On Tuesday, Rome magistrates put the IOR's top two officials, President Ettore Gotti Tedeschi and Director General Paolo Cipriani, under investigation and froze a sum of €23 million that IOR recently transferred into its own accounts into two banks in Italy. The transfers were deemed suspicious by Italy’s financial police and blocked. “The nature and aims of the transactions under investigation could have been clarified with great simplicity, being cash transactions the beneficiary of which is the Institute itself, on accounts it holds at other credit institutions,” Fr. Lombardi said lamenting that magistrates had opened the probe and made it public. Fr. Lombardi said the Vatican wanted to "avoid the spread of inaccurate information and to ensure that no damage is caused to the activities of the Institute and the good name of its managers". The IOR primarily manages funds for the Vatican and religious institutions around the world, such as charity organisations, religious orders of priests and nuns, and Catholic hospitals, and hence is not a bank in the strict sense. The Holy See’s spokesman further said that while the IOR was "beyond the jurisdiction and surveillance" of the Bank of Italy because it is located in a sovereign state, it was committed to the norms of the European Union and Organisation for Economic Cooperation and Development (OECD) aimed at combating terrorism and money laundering.