February 1

Vatican bank reverses course on closing accounts

The bank now blames a ‘technical error’ and says widows and pensioners are being kept on as clients.

By Nicole Winfield
The Associated Press

VATICAN CITY — Dozens and perhaps hundreds of widows and Vatican pensioners recently came in for a rude surprise: The Vatican bank told them they had to close their accounts or risk losing access to their money – all in the name of Pope Francis’ reform efforts.

click image to enlarge

Photo shows the offices of the Vatican bank IOR. The bank told dozens and perhaps hundreds of widows and Vatican pensioners that they had to close their accounts.

The Associated Press

The bank now says it was all a “technical error” and that the widows and pensioners are being kept on as clients. That reversal came despite the bank’s highly publicized plan to close so-called “lay accounts” as it tries to mend relations with Italian authorities who have suspected that Italians were using the bank as a tax haven.

It’s all come as a big embarrassment for an institution that is trying to fend off accusations of mismanagement and corruption.

“In some cases old ladies got nasty letters,” said Max Hohenberg, spokesman for the Institute for Religious Works – or IOR. “The fact that a few dozen people were categorized in the wrong way and hence got a letter which was incorrect is a mistake which we have apologized for.”

Bank President Ernst Von Freyberg penned a terse letter to these clients Sept. 19, telling them to come to the bank before Nov. 30 to transfer their money out because they no longer fit the criteria of account-holders set by the board. He warned somewhat ominously that if they didn’t meet the deadline, their money would become subject to the “internal dispositions” of the bank. He didn’t say what those “internal dispositions” were.

But somehow some former Vatican employees and their widows got caught up in the sweep, apparently because of the way their accounts were classified by the bank internally. Their accounts have now been reclassified after they pleaded their cases to the bank.

The bank’s board issued new guidelines for who could have an account in July as part of efforts to end decades of scandal that had tarnished the Holy See’s reputation – and were in part responsible for bringing the reform-minded Francis into the papacy.

The new criteria for determining account holders was also aimed at responding to recommendations by European experts who have been evaluating the Holy See’s anti-money laundering efforts. In its 2012 inaugural evaluation, the Council of Europe’s Moneyval committee urged the Vatican bank to put into law regulations about who can and cannot hold an account since the existing norms were vague.

The issue has been of particular interest in Italy, where regulators have long suspected that the IOR was being used by well-connected Italian civilians to avoid paying taxes. The institute, which has just one office inside a tower in the sovereign Vatican City State, is considered a foreign bank by Italian standards and as such not subject to Italian regulatory control.

In truth, many lay Italian citizens held legitimate accounts there because they worked for the Vatican: art historians from the famous Vatican Museums, gendarmes who protect the pope, as well as administrators, legal and financial experts working in the Holy See bureaucracy.

When they retired, these former employees could receive their Vatican pensions into these accounts and benefit from the IOR’s investment services. Whether they or their widows informed the Italian taxman of the existence of the accounts or paid taxes to Italy on any interest income earned is another matter.

Vatican retirees who live in Italy must declare the existence of a foreign bank account on their Italian tax returns, even if the Vatican pension itself is exempt, noted Benedetto Santacroce, a tax lawyer and expert in international taxation. He said any interest earned on that pension is taxable income as far as the Italian taxman is concerned.

(Continued on page 2)

Were you interviewed for this story? If so, please fill out our accuracy form

Send question/comment to the editors




Further Discussion

Here at PressHerald.com we value our readers and are committed to growing our community by encouraging you to add to the discussion. To ensure conscientious dialogue we have implemented a strict no-bullying policy. To participate, you must follow our Terms of Use.

Questions about the article? Add them below and we’ll try to answer them or do a follow-up post as soon as we can. Technical problems? Email them to us with an exact description of the problem. Make sure to include:
  • Type of computer or mobile device your are using
  • Exact operating system and browser you are viewing the site on (TIP: You can easily determine your operating system here.)