Pope Francis has approved a reform proposal keeping the Vatican bank operative, ending a year of speculation over whether the Pontiff would close the institution that has embarrassed the Church for decades.
The bank’s stated purpose is to manage funds for Roman Catholic orders of priests and nuns, charitable institutions and Vatican employees and retirees. But it has been dogged by episodes of malpractice by people authorised to hold accounts there and murky dealings with Italian financial institutions.
“The IOR will continue to serve with prudence and provide specialised financial services to the Catholic Church worldwide,” the Vatican said yesterday in a statement announcing that Pope Francis had approved recommendations for the future of the bank, known as the Institute for Works of Religion (IOR).
Monsignor Nunzio Scarano, a former senior Vatican accountant who had close ties to the IOR, is currently on trial accused of plotting to smuggle millions of dollars into Italy from Switzerland as part of a scheme to help rich friends avoid taxes.
Scarano has also been indicted on separate charges of laundering millions of euros through the IOR. Paolo Cipriani and Massimo Tulli, the IOR’s director and deputy director, who resigned last July after Scarano’s arrest, have been ordered to stand trial on charges of violating anti-money laundering norms.
The most infamous scandal involving the IOR was in 1982, when it was caught up in the fraudulent bankruptcy of Italy’s Banco Ambrosiano, whose president Roberto Calvi was found hanged under a bridge in London.
In the past year the IOR, which won plaudits from Italian magistrates for cooperating with them on the Scarano investigations, has been undergoing a massive transformation under its president Ernst von Freyberg.
Under von Freyberg, who was one of the last people appointed by former pope Benedict before he resigned on February 28, 2013, the IOR has closed hundreds of accounts, instituted strict anti-money laundering regulations and launched several investigations into suspicious activities.
The IOR, whose origins date back to 1887, said in its own statement that the Pope’s decision to keep the bank open “represents a powerful endorsement of our very mission and of the hard work accomplished over the past 12 months”.
It said its detailed client screening process, which has been carried out together with the Promontory Financial Group, would be completed by early summer.
Von Freyberg succeeded Italian Ettore Gotti Tedeschi, who was ousted in May, 2012 by the board of the bank which accused him of being an ineffective and divisive manager.