Although the Vatican highlights achievements mentioned in the Financial Information Authority’s new annual report, one expert critic takes a considerably bleaker view.

Are Vatican finances being monitored more effectively than they were five years ago?

For the Holy See, the official answer is a qualified yes: monitoring systems designed to root out financial crime are “effective” and there is a “clear commitment” to transparency in reporting, but improvements still need to be made when it comes to prosecutions.

Rene Bruelhart, a Swiss lawyer who heads the Financial Information Authority, told reporters Friday that its annual report for 2017 shows significant progress towards consolidating a “robust reporting system.”

The Authority is a monitoring body designed to prevent and combat money laundering, financing of terrorism and other financial crimes. Established under Benedict XVI in 2010, it works with the Vatican’s Secretariat for the Economy and the Council for the Economy — both organisations set up by Pope Francis — to build relationships with other states and crack down on suspicious financial activity within the Vatican.

The document released Friday indicates a number of achievements, Bruelhart pointed out. For example, the Authority revealed that significant funds had been diverted from the Vatican's Bambino Gesù Children's hospital to renovate Cardinal Tarcisio Bertone's apartment in Rome, leading to convictions of both the hospital’s former president and treasurer.

The report also reveals that cases of suspicious activity have fallen, although out of eight cases sent to the Vatican’s Promoter of Justice, only one led to any punitive action (the freezing of an account after a questionable cross-border transaction was discovered).

More significantly, since 2015, the Authority has presented 54 cases to the Promoter of Justice, but these resulted in only one prosecution and one conviction — an area of weakness identified by Moneyval, the Council of Europe’s anti-money laundering body.

Bruelhart said it will take time to develop systems and that it is up to the Promoter of Justice to determine how to deal with such cases, but the chain of activities that has taken place “has moved in the right direction.”

“There is a very good dialogue with the office of the Promoter of Justice,” he said, adding that “it's about building a dialogue together.”

Bruelhart pointed out other signs of progress: increased transparency and accountability concerning donations, as well as with “high risk states” that are without proper monitoring systems. In addition, he hailed the signing of further cross-border agreements with other nations, bringing the number to 57, aimed at helping to prevent money laundering and tax evasion, and ensuring that the Vatican Bank, officially known as the Institute for Works of Religion (IOR), does not become a tax haven.

The regulator made a two-month on-site inspection of the IOR and said no significant shortcomings were found.

The Authority, established by Benedict XVI in 2010, works with the Vatican’s Secretariat for the Economy and the Council for the Economy — both organisations set up by Pope Francis — to build relationships with other states and crack down on suspicious financial activity within the Vatican.

On financial reform of the Vatican in general, Bruelhart insisted “a lot has been done in a very, very short time,” but added that such reform “also takes a little bit of time.”

Sometimes, he said, one has to “take a step back” to fully appreciate progress made, and at other times it’s possible to get ahead of oneself. “It’s a process, but there is life in this process,” he said.

Regression or Progression?

But an expert source, speaking to the Register on condition of anonymity, derided the Vatican’s talk of progress in financial monitoring, and the state of finance reform in general. In response to Bruelhart’s comments, the source said:

“Dozens of cases of financial crimes were uncovered in the early years of this pontificate thanks to investigations by both external entities and internal organs, many of which directly involving prelates in positions of power. But the Office of the Promoter of Justice strangely continues to be highly selective in choosing which ones to process (very few so far), and which ones to ignore (the bulk of them). The accusation that the Vatican justice system continues to show leniency toward committers of financial crimes, and zero tolerance toward those that reveal the crimes, continues to warrant respect.”

Turning to the Administration of the Patrimony of the Holy See (APSA) which handles the Vatican’s assets and has long considered to be a haven of corruption greater than the Institute for Religious Works (Vatican Bank), Bruelhart noted in today’s press conference that since the end of 2015, the Authority has ceased to monitor the body. APSA, he said, then became “exclusively an institutional body regarding this kind of work” — in other words, it was able to monitor itself, a situation critics say is unlikely to result in any effective reform.

The expert source said:

“While APSA was under the Authority’s vigilance pre-2015, the Authority delivered various cases to the Promoter of Justice for handling, but nothing seems to have come from their work, including the discovery of ciphered accounts, held by APSA with Swiss banks, for the benefit of Italian citizens and residents. The Authority ought to be concerned about those cases going unpunished, even if APSA is no longer under their direct control.”

On the need for patience and time for these monitoring systems to work, the source said:

“How long does it take to build a system for a country the size of the Vatican City State? And in the meantime, all the multiyear wrongdoing goes unpunished along with the wrongdoers that remain solidly in their positions of power.”

And regarding whether real progress has been made on financial reform in general, the source replied:

“The only progress has been in the direction of the destruction, not the building, of these organisms of vigilance and control. Although no one wants to admit it, effectively we are witnessing the total reversal of the reforms process of 5 years ago. The Authority’s scope has been downsized and its direction no longer independent in that it now reports to the Secretariat of State which could easily tell the Authority what to see and what not to see, if it so desired. The Council for the Economy’s weight has diminished over these 5 years proportionately to the regain of power, authority, and functions on the part of ‘old guard’ structures, and persons that appear to be influencing the Holy Father’s decisions to a greater extent than does the Council. The Secretariat for the Economy has all but been gutted by a series of deleterious motu proprio proclamations, written by ‘old guard’ figures, and has experienced continuous problems of lack of cooperation on the part of APSA. The Office of the Auditor General [another monitoring body set up by Pope Francis] has been all but annihilated [both the Auditor General and his deputy were roughly dismissed last year, and evidence strongly suggests it was because they were close to uncovering too much sensitive information]. It is rumored that work is in progress to rewrite the statutes of the Secretariat for the Economy as well as the Office of the Auditor General to crimp their activities and limit their investigative reach.’”

Bruelhart rejected such a negative view of the reform, putting it down to a “certain perception” and highlighting the creation of these safeguarding institutions. “If this has been perceived as no progress on the financial side, OK that’s a judgement,” said Bruelhart, but added: “I don’t really share this view.”

For an overview of how financial reforms have fared over the past five years, see here.