VATICAN CITY — The Vatican’s bank, long marred by scandals, has been overhauled over the past decade to ward off tax evaders and money launderers. Now he must convince legitimate clients, inside and outside the Vatican, that he has something to offer them.
This month, the bank reached the final milestone in its long march to respectability, when the European anti-money laundering watchdog Moneyval gave it a broadly favorable rating, far from its first rating. review in 2012. Moneyval said “all the necessary elements are in place” now to prevent money laundering at the bank.
In January, a former president of the bank and two associates were convicted by a Vatican court of embezzlement and money laundering in a scheme in which they manipulated sales of the bank’s real estate assets to their benefit.
Perhaps most revealing of the reformed nature of the Vatican bank is an incident in 2019, when its board alerted Pope Francis to what he saw as a suspicious loan request from the Secretary of State of the Vatican, regarding a costly real estate investment in London. The bank alert sparked an investigation that uncovered a major scandal involving others in the Vatican and beyond.
“We had to turn a ship which was very heavy; the ship could not turn easily, ”said Jean-Baptiste de Franssu, president of the Vatican bank since 2014, in an interview this month. “So we said, well, the second thing we have to address is the quality of our product.”
The bank gained notoriety in the early 1980s when it found itself embroiled in the collapse of Banco Ambrosiano, whose chairman, Roberto Calvi, was found hanged dead under London’s Blackfriars Bridge. He had previously invested with mafia-linked financier Michele Sindona, who, before his fall, was an advisor to Pope Paul VI and an associate of the Gambino criminal family of New York.
The Vatican bank admitted in 1984 to sharing “moral responsibility” for the Banco Ambrosiano affair and agreed to pay nearly $ 250 million to settle claims from creditors of the Italian bank.
The Vatican signed a tax treaty with Italy in 2015, ending the days when some customers used its bank to evade Italian taxes.
Since the reform, however, the Vatican bank has struggled to maintain its business. It holds around 5 billion euros, or the equivalent of 6 billion dollars, of customer assets, a decrease of about 15% since 2014. The bank, officially known by its Italian initials IOR, meaning Institute of Works of Religion, closed 800 accounts held by non-ecclesiastical persons or entities between 2013 and 2015 because they did not conform to its mission. The bank accepts deposits from Vatican offices and employees and other assets “intended for religious or charitable purposes”. Half of its activity comes from Catholic religious orders.
A key selling point for Catholic customers: the bank’s profits belong to the Pope. The bank’s net profit for 2020 was € 36.4m, up from € 38m in 2019, but Mr de Franssu said it was realistic to aim for up to € 80m per year. The bank gave the Pope € 27.3million of its revenue from 2020, a much-needed contribution after a year the pandemic hit Vatican revenue from commercial real estate, donations and museums in the Vatican.
However, many business has been lost due to deficiencies in the bank’s products and services, Mr. de Franssu said. While customers are reluctant to publicly criticize the Pope’s Bank, they complain about poor customer service and cumbersome transaction processes, even the bank’s ATM cards, which only work in Vatican City machines.
Looking at the issue from a client’s point of view, Mr. de Franssu said, “I am a client, no one comes to talk to me, no one sends me information about my wallet. When I finally get information on my portfolio, I look at the result, it seems average to me.
In the coming months, the bank will offer online banking services for the first time, facilitating transactions and allowing investor clients to monitor their portfolios.
“We are not going to do everything that all the competitors do, because we are tiny,” Mr. de Franssu said, noting that the bank has just over 100 employees.
The IOR has reduced the number of investment options it offers to 14, from around 50, with varying levels of risk. Its ethical investment policy, based on Catholic social doctrine, excludes participations in companies whose main activity is the manufacture of contraceptives, alcohol, tobacco, firearms, pornography or energies. fossils.
The bank also serves religious institutions where the reach of Western financial institutions is limited by political tensions, such as Cuba and Iran. Mr de Franssu said the bank was transparent about this with the United States and other governments which have imposed sanctions on the countries in question.
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The bank no longer lends, but pools cash deposits to invest in securities and real estate, although it makes exceptions to help needy religious institutions.
He received a loan application in March 2019, from the Vatican Secretariat of State, requesting a loan of 150 million euros to refinance an investment in a large building in the upscale Chelsea district of London. Unable to obtain the documents deemed necessary for the due diligence of the complex agreement, the bank’s board of directors expressed its concerns to Pope Francis, who appealed to the Vatican auditor general.
The ensuing investigation led to the dismissal of several Vatican employees, and Vatican prosecutors charged an intermediary with extortion, embezzlement, fraud and money laundering. In 2018, the Vatican spent the equivalent of more than $ 400 million on a property that had been sold six years earlier for half that amount, Vatican prosecutors told a London court last year. .
In response to these revelations, Pope Francis ordered the Secretariat of State, which once managed hundreds of millions of dollars in assets using outside banks, to transfer all of its assets to the Vatican Treasury. How much, if any, of these assets will be managed by the IOR is not yet clear.
The bank hopes to do more business in the Vatican, although the wealthier offices, including the Missionaries’ Office and the Vatican City government, which hold hundreds of millions of securities and real estate, have traditionally kept control of their assets and resisted attempts to centralize the management of investments.
“I hope that the quality of the work that has been done at the IOR will mean that naturally people will be inclined to work with the IOR,” said Mr. de Franssu.
Write to Francis X. Rocca at [email protected]
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