The murdered man's 37-year-old son had just two questions: 'Tell me what you can do and how much will it cost?' It was the autumn of 1991 and New York investigator Jeff Katz had flown to the US city to meet the dead man's son, Carlo Calvi. It turned out that Katz could do quite a lot.

Roberto Calvi, known as God's banker because of his close ties to the Vatican, was found hanging from Blackfriars Bridge, central London, with a length of orange rope woven into a lover's knot around his neck. He was weighed down by bricks and found with £15,000 in cash in his pockets.

Calvi's death, in June 1982, was the moment the Italian underworld went overground in London. 'If you're going to take this case on it'll be like dancing in the mouth of wolves,' a secret service agent told Katz in Rome.

Katz was bitten. 'It was a fascinating case,' he said in London last week. 'It involved the mafia, the Vatican, P2 [a powerful masonic group]. It had 90 per cent of my time for two years so I was really stuck into it.' The painstaking work, carried out by the New York investigator and 30 others in the early 1990s, is now leading tantalisingly closer to the arrest of key figures in Britain and the recovery of tens of millions of pounds in what was one of the 20th century's most intriguing murders and financial scandals. The affair saw Italy's biggest private bank collapse with debts of $1.4 billion in 1982.

The City of London police working on the case today describe a mosaic of vicious mafia dons, and assets traced all over the world.

But it seems there are plenty of people who still do not want the secrets which supposedly died with Calvi 21 years ago to come to light. The Italian detective leading the investigation, Luca Tescaroli, recently received a hand-delivered letter containing black powder and two 12-volt batteries with a note saying: 'This is an ultimatum. Stop.'

But it is too late now. Evidence has come to light which is leading the investigation to four UK suspects who helped bring about Calvi's downfall. Three months after Calvi's death, a small-time drug dealer, Sergio Vaccari, was stabbed in the face, neck and chest more than 15 times. At the time the City of London police saw no link with Calvi. But Vaccari had possession of masonic papers. And Katz tracked down Vaccari's former landlord, who, he learned, had demanded that his tenant left his flat. Vaccari agreed on condition that the landlord found him another home. The landlord presented two options, one of which Vaccari picked. A while later Vaccari wanted details from the landlord of the other place; that flat was in Chelsea Cloisters, the place Calvi stayed in just before he died.

'From there we began to make other linkages between Vaccari and the Calvi entourage,' said Katz.

The new City of London investigation, led by Detective Superintendent Trevor Smith, drew on a detailed reconstruction of the last hours of Calvi's life. The reconstruction, devised by Katz and a forensic expert, Angela Gallop, established conclusively that Calvi was murdered. The scaffolding that Calvi was hung from, was assembled again, and a man of Calvis's height and weight climbed along it. Pressure from such weight would have left rust on Calvi's shoes, but forensic research found no rust stuck to his footwear.

It was decided that Calvi could not have committed suicide, as was first suggested by the City of London police after an investigation that lasted no more than a week. It has long been suggested that it was a masonic influence that led the City police to issue this conclusion, a claim denied by the police.

For Carlo it was not just a case of proving that his father was murdered. A suicide verdict would have meant that the son could not have got access to the $10m life insurance payout. A second inquest produced an open verdict, which still did not satisfy the insurers. When subsequent forensic work did satisfy them that Calvi had not died by his own hand, his bank's creditors - owed $1.4bn - were waiting. Touche Ross, the liquidator, took a significant slice.

Calvi was a haunted man as he entered his final days. As chairman of Banco Ambrosiano, he was in charge of an organisation that laundered money made largely from the heroin trade for the mafia. He knew the dark financial secrets of the Vatican. Letters of comfort to offshore companies which he created were signed by Archbishop Marcinkus, a Chicago-born prelate and key Vatican insider who has never faced an interview or charges.

But more ominously Calvi had intimate knowledge of regular payments made by large Italian companies to political parties. He should have known: the payments went through his bank.

Calvi was on the point of going to prison for violating exchange controls. It was Michele Sindona, once Calvi's mentor, who ratted on him. Calvi had one chance to avert humiliation. Tell the world what he knew. It was this which led to his death, Katz believes.

'There was a point at which he threatened that if the Vatican and other people who he had been working with did not get him off the hook for the four years in jail for currency exchange violations, he was going to talk,' Katz argues. 'It would have landed the heads of all the major corporations in jail and it would have ended up probably with the indictment of political leaders.'

No mafia killing in London could happen unless it were ordered by Francesco di Carlo. He was one of the first of the Cosa Nostra to realise the need to 'clean' criminal profits through the financial system. Now serving 25 years for heroin trafficking, in 1967 he had met Queen Elizabeth in Italy.

For many years it was assumed that the Calvi mystery would fade into the mists of time. But the City of London police have now established a link between di Carlo and Sergio Vaccari. And the mists are clearing.

Banking scandal

It was one of the biggest and most intriguing financial scandals of the last century.

Weeks after Roberto Calvi's murder in June 1982, the Italian bank he chaired, Banco Ambrosiano, went under with a then staggering $1.4 billion debt.

Mafia, Freemasons and the Vatican are implicated in a tale of drug trafficking, money laundering and tortuous financing spanning the world.

Many believe the death of Pope John Paul I in 1978, just 33 days after his election, happened because he wanted to break the murky links between what was then Italy's largest private bank and the Vatican.

The scandal touched financial institutions around the world and the Italian political elite.

Calvi's bank built its empire in close association with the Vatican bank, the Institute for Religious Works. This was headed by Archbishop Paul Marcinkus from Chicago. While the Vatican never accepted culpability in the collapse of Ambrosiano, it stumped up $250m to creditors. Some believe Marcinkus may yet face trial now a court case in Italy is progressing.

One of the most influential figures in the Calvi story was Licio Gelli, now 84. He was Grand Master of the P2 masonic lodge of which Silvio Berlusconi was once a member. Gelli was sentenced to 12 years for fraud in connection with the collapse of Calvi's bank and is under house arrest.

Calvi's mentor Michele Sindona was friends with former US President Richard Nixon. Sindona died in prison in 1986 poisoned by coffee laced with cyanide.