22 Sep 2010

Vatican Bank under investigation

9:01 am on 22 September 2010

The head of the Vatican Bank is under investigation as part of a money-laundering inquiry.

Prosecutors have seized 23 million euros ($US30 million) from the bank's accounts with another smaller institution.

The inquiry was launched after two suspicious transactions were reported to tax police in Rome.

The Vatican said it was "perplexed and astonished" and expressed full confidence in Mr Tedeschi.

The Vatican Bank, known officially as the Institute for Religious Works, was created during World War II to administer accounts held by religious orders, cardinals, bishops and priests.

The BBC reports magistrates in Rome are looking into claims that IOR president Gotti Tedeschi and chief executive Paolo Cipriani violated laws that require banks to disclose information on financial operations.

Suspicious transactions

The Bank of Italy's financial intelligence unit tipped off Italy's tax police last week, after two suspicious transactions were reported between the Vatican Bank and two different Italian banks.

Tax police seized 23 million euros that the Vatican Bank had tried to transfer from a small Italian bank called Credito Artigianato.

The BBC reports some 20 million euros was destined for JP Morgan in Frankfurt, with the remainder going to another Italian bank, Banca del Fucino.

Reports say the Vatican Bank had failed to inform the financial authorities where the money had come from.

Mr Gotti Tedeschi, who is an expert on financial ethics, has been in charge of the bank for a year. He was formerly head of Spanish bank Santander's Italian operations.

Banco Ambrosiano

The Vatican Bank was previously mired in scandal in 1982 when its governor Archbishop Paul Marcinkus was indicted over his involvement with the collapse of what was then Italy's largest private bank, Banco Ambrosiano.

Two top executives at Ambrosiano, one of them its chairman, Roberto Calvi, were later murdered.

Calvi, known as 'God's Banker' because of his close ties to the Vatican, was found hanged under Blackfriars Bridge in London.