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EXCLUSIVE-Vatican, Italy near deal on bank information exchange-sources

Source: Thu, 25 Jul 2013 14:30 GMT
Author: Reuters
An exterior view of the tower of the Institute for Works of Religion (IOR) in Vatican City in 2011 REUTERS/Stringer
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By Lisa Jucca and Massimiliano Di Giorgio

ROME, July 25 (Reuters) - Italy and the Vatican are about to reach a deal allowing for the first time regular exchange of financial information between the two states to combat money laundering, several sources with direct knowledge of the situation told Reuters.

The Vatican is pushing to reform its bank, the Institute for Works of Religion (IOR), whose reputation has been tarnished by three decades of scandals. Such a pact would mark a first significant step towards normalising banking relations with Italy.

The deal will take the form of a memorandum of understanding between the Vatican's Financial Information Authority (AIF) and its Italian equivalent, the Financial Intelligence Unit (UIF).

The Vatican has already signed similar pacts with other jurisdictions, notably the United States, but the deal with Italy would be significant due to the large number of Vatican transactions going through the country.

Pope Francis has made cleaning up the Holy See a goal of his papacy. However, two of the sources, who declined to be named, said the Vatican must prove its willingness to cooperate with Italian authorities before the Bank of Italy can lift a de facto ban on transactions between the IOR and Italian-based banks.

Italian banks stopped dealing with the IOR in 2010 after the central bank told them they had to enforce strict anti-money laundering criteria if they wanted to continue doing transactions with the IOR.

Three of the sources said talks were at an advanced stage and that an agreement could be reached "within days", barring last-minute hurdles. A fourth said the draft accord was already ready and waiting to be signed.

The Vatican's financial dealings are again under scrutiny after the arrest of a senior Catholic priest who is at the centre of a money smuggling case. Italian prosecutors are investigating two former IOR top executives on suspicion of repeatedly breaking Italian money laundering laws. (Full Story) (Full Story)

FASTER ACCESS

The agreement would set the framework for sharing information on transactions regarded as suspicious. Administrative cooperation between the two states would allow faster access to sensitive bank data than making an international request for cross-border judicial cooperation.

According to the draft deal, information exchange could span several years, allowing deeper examination of suspicious cases. The two authorities could pass on details of transactions to magistrates if they found evidence of financial crime.

"We would welcome any step that improves cooperation between both jurisdictions," an IOR spokesman told Reuters.

A report by European watchdog Moneyval a year ago said the Vatican had failed to meet some critical financial transparency standards.

In an unprecedented move, the IOR has hired experts to comb through its 18,900 accounts with the hope of identifying suspicious transactions. A report on the IOR accounts of the arrested cleric, seen by Reuters, is ready and covers events going back 10 years. Moneyval is due to assess progress made by the Holy See to combat money laundering later this year.

The IOR's stated purpose is to provide financial services for religious orders of priests and nuns, Holy See officials and Vatican employees. Italian investigators say the priest arrested last month used his influence at the Vatican to provide private, illegal financial services for rich friends. His lawyer said they had no evidence to support their suspicions.

A full normalisation of banking relations between Italy and the Vatican would require the Holy See to score better marks with Moneyval and a decree, signed by the Italian ministry of finance, one of the sources told Reuters.

The AIF and the Bank of Italy declined to comment.

(editing by David Stamp)

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