The director of the embattled Vatican bank and his deputy resigned yesterday following the latest developments in a broadening finance scandal that has already landed one monsignor into prison.

The Vatican said Paolo Cipriani and his deputy, Massimo Tulli, stepped down “in the best interest of the institute and the Holy See”.

Mr Cipriani, along with the bank’s then-president, was placed under investigation by Rome prosecutors in 2010 for alleged violations of Italy’s anti-money-laundering regulations after financial police seized €23m from a Vatican account at a Rome bank. Neither has been charged and the money was eventually ordered released.

But the bank, known as the Institute for Religious Works, has remained under the glare of prosecutors amid fresh concerns it has been used as an offshore tax haven.

Last week, a Vatican accountant was arrested as part of Rome prosecutors’ broadening investigation into the IOR. Monsignor Nunzio Scarano is accused of corruption and slander in connection with a plot to smuggle €20m into Italy from Switzerland without reporting it to customs officials.

Mgr Scarano acknowledged under questioning that his behaviour was wrong but that he was only trying to help out friends, his lawyer said.

Belfast Telegraph