International

Vatican bank releases first-ever financial report

Secretive religious institution aims for financial transparency amid allegations of scandal

A view of the Institute for Religious Works, the Vatican bank, in Vatican City.
Reuters

The Vatican published its first financial report in its 125-year history Tuesday, amid allegations of money laundering and other financial scandals. The aim, insiders say, is to increase transparency at the secretive institution.

The Institute for Religious Works (IOR), the Vatican bank, rose more than four-fold in 2012 as net trading income rebounded from a loss in 2011, the report said. The IOR said it earned a net profit of $117.2 million in 2012, as compared with its 27.4 million net profit in 2011. More than $67.7 million of its 2012 profit was given to the pope for his charitable works.

The picture may not be so rosy for 2013, with rising interest rates cutting into profits and millions of dollars earmarked for the IOR's ongoing transparency process, which has involved hiring outside legal, financial and communications experts to revamp its procedures, review its client base and remake its image.

"Overall, we expect 2013 to be marked by the extraordinary expenses for the ongoing reform and remediation process, and the effects of rising interest rates,” bank president Ernst von Freyberg said in a statement.

Aside from earnings, the 100-page report published Tuesday provided some fascinating reading about the secretive institution. For example, last year the IOR held $55.9 million in gold, metals and precious coins, owned a real-estate company and was bequeathed two investment properties worth $2.5 million. It also made some $34.9 million in loans in 2012.

The Vatican has long insisted that the IOR isn't a bank, but a unique financial institution aimed at managing assets for religious or charitable works – a distinction that presumably helped it avoid typical banking regulations. Yet in the past year, the IOR has slowly revealed itself to work very much like a bank, making loans and providing asset-management services to its clients, earning some $16.5 million in fees and commissions for doing so in 2012.

Financial scandal

The Vatican is about to enter a second round of international scrutiny by the Council of Europe's Moneyval committee, which helps countries comply with international norms to fight money laundering and terrorist financing. The Vatican passed Moneyval's inaugural inspection last year, but evaluators gave the IOR and the Vatican's financial-oversight agency poor or failing grades for insufficient controls to ensure that its clients and assets were clean.

The Vatican’s annual report came as prosecutors in Rome continued to investigate a Vatican accountant, Monsignor Nunzio Scarano, who was arrested for his role in an alleged plot to bring $27 million into Italy from Switzerland without declaring it at customs.

The IOR's former top managers, Paolo Cipriani and Massimo Tulli, meanwhile, are under investigation by prosecutors for alleged violations of Italy's anti-money laundering norms. Rome financial police launched the investigation in 2010, seizing $30 million from a Vatican account at an Italian bank after determining that the IOR had not provided sufficient information about the transaction. The Vatican said the event was a misunderstanding, and the money was eventually ordered released.

Both Cipriani and Tulli resigned in July.

Around the same time, Pope Francis created a commission of inquiry into the IOR to examin every aspect of its operations and get to the bottom of the scandals that have bedeviled it. The commission has wide-ranging authority to obtain documents, data and information, even overriding traditional banking secrecy rules to get it.

The Vatican bank was founded in 1942 by Pope Pius XII. It runs the Vatican pension system and oversees about $8.5 billion in customer assets. Customers include religious orders; Vatican offices, embassies and employees; individual cardinals, bishops, priests and foreign embassies accredited to the Holy See.

Al Jazeera and The Associated Press

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