January 14, 2013

Bank's credit card block takes Vatican by surprise

It's cash only at the Vatican Museums – a big source of revenue in the city-state – after Italy's central bank raises concerns about insufficient money-laundering safeguards.

By NICOLE WINFIELD/The Associated Press

VATICAN CITY — A senior Vatican official says he is "truly surprised" that the Bank of Italy ordered credit card payments suspended in the tiny city-state and insists the Vatican has taken adequate measures to fight money laundering.

click image to enlarge

People queue to enter the Vatican Museums at the Vatican earlier this month. It's "cash only" now for tourists at the Vatican wanting to pay for museum tickets, souvenirs and other services after Italy's central bank decided to block electronic payments, including credit cards, at the tiny city-state.

2013 File Photo/The Associated Press

The Vatican has been cash-only since Jan. 1 after Italy's central bank compelled Deutsche Bank Italia to stop providing electronic payment services to the Holy See. That has meant visitors to the Vatican Museums – they numbered 5 million last year – and the Vatican post office have had to pay cash for tickets and any other transactions.

It's an inconvenience that, if left unchanged for long, could eventually affect the Vatican's bottom line, given the critical role museum revenues play in the Vatican City State's finances. For example, in 2011 museum revenues amounted to $121.9 million, helping the Vatican city-state post a budget surplus of $28.9 million.

The Bank of Italy said in a statement last week it had no choice but to order the block because the Vatican has no banking regulatory framework or EU-recognized alternative for anti-money-laundering purposes. The bank said it realized, during a routine search, that Deutsche Bank had never obtained authorization to install the so-called POS (point-of-sales) machines in the Vatican and that "any other European supervisory authority would have behaved in the same way, in compliance with community law."

Rene Bruelhart, the new director of the Vatican's financial watchdog agency, said in comments published Sunday that he was "truly surprised" by the decision given that the Vatican had passed a key European financial transparency test last year. "No other country in the world has adopted similar measures," he said.

"The reality is that, considering the particular nature of the Vatican City State, adequate measures have been adopted for vigilance, prevention and fighting money laundering and financing terrorism," he told Corriere della Sera in an interview that the Vatican press office disseminated and translated.

In truth, the Council of Europe's Moneyval committee found some serious problems in the Vatican's anti-money laundering efforts. The Vatican passed the test on the first try and Moneyval said it had made great progress in a short amount of time. But the Holy See received poor or failing grades for its financial watchdog agency and its bank, long the source of some of the Vatican's more storied scandals.

Specifically, Moneyval said, the role, authority and independence of Bruelhart's Financial Intelligence Authority was unclear and the Vatican bank's rules for customer due diligence, wire transfers and suspicious transaction reporting were insufficient.

Bruelhart was brought in to help push through the next round of reforms and regulations to comply with Moneyval's recommendations. He had been head of Liechtenstein's financial intelligence unit — the national agency that analyzes information about suspect financial transactions and in 2010 was named head of the Egmont Group, the informal group of about 130 countries' financial units aimed at sharing information.

On Dec. 14, the Vatican approved the latest tweak to its financial regulations, giving Bruelhart's agency greater independence from the Vatican's secretariat of state to enter into financial sharing agreements with other countries. In addition, Bruelhart said the Vatican has begun the process of entering the Egmont Group.

The Bank of Italy has been on something of a campaign for several years to crack down on the Vatican bank, formally known as the Institute for Religious Works, over which it has no regulatory control given the Vatican is a sovereign state. But Bankitalia does have regulatory control over the Italian and international banks that operate in Italy and do business with the IOR, and has used those relationships to strangle the IOR as it enforces its anti-money laundering norms.

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