God's bankers no strangers to scandal through the decades
THE Vatican Bank is one of Europe's best known but least understood financial institutions, and it is no stranger to scandal.
This week Italian prosecutors decided to drop a negligence inquiry into the bank's former president, but investigations roll on; two of his juniors are now implicated in a money-laundering scandal.
Under the microscope are the bank's director general Paolo Cipriani and its deputy director Massimo Tulli, who both resigned last week. The allegations cast yet more global scrutiny on the secretive 70-year-old institution.
The Vatican Bank is known formally as the Institute for the Works of Religion and was established in 1942 by Pope Pius XII. It is used by Vatican agencies, church organisations, bishops and religious orders around the world.
It has an investment portfolio and offers currency exchange services and savings accounts to its members.
It is a private institution located inside Vatican City, run by a professional bank chief executive who reports to a committee of cardinals and, ultimately, to the Pope.
There are no branches outside Vatican City and the bank operates as an offshore institution – outside EU banking rules.
There are no shareholder meetings, or votes, but a supervisory council was established in 1989 as part of a reorganisation following a previous Italian banking scandal.
There was controversy in 2010 when Italian investigators froze millions of euro in Italian banks as part of an investigation into money laundering – the Vatican bank was also implicated.
Two transfers from a Vatican Bank account were deemed suspicious and blocked. One concerned a €20m payment to a German branch of a US bank and another was a €3m transfer to an Italian bank. The bank said it did nothing wrong and was just transferring the funds between its own accounts.
The money was released in June 2011 but the allegations were seen as a setback to the Vatican's bid to be included in the "white list" of states which comply with international standards against tax fraud and money-laundering.
In 1982 the bank was implicated in the collapse of what was then Italy's largest private bank, Banco Ambrosiano, which had more than $1bn in bad debts.
As part of investigations, its then-governor Archbishop Paul Marcinkus was indicted. The fallout from the scandal took a darker turn when Banco Ambrosiano's chairman Roberto Calvi, known as God's banker, was found hanged under Blackfriars Bridge in London.
It was never determined whether he had in fact killed himself or was murdered.
European anti-money laundering committee Moneyval said last year that there was still a way to go before it had sufficient controls against money laundering.