Vatican passes Moneyval evaluation
on 9 out of 16 key criteria
July 18, 2012
The following statement was delivered by Mons. Ettore Balestrero, Vatican Under-Secretary for Relations with States, regarding the Moneyval latest evaluation of measures undertaken by the Holy See to meet international standards of transparency in its financial operations. The original text is in English.
As the Head of Delegation of the Holy See to the Plenary Session of Moneyval that discussed and adopted the Holy See’s First Mutual Evaluation Report on July 4, 2012, I welcome you to this briefing, which aims to present the key findings of the Report and to share with you also some insights as to where the Holy See has been and where it is going.
The goal: Making moral commitments concrete
For the Holy See, this process is first and foremost a moral rather than a technical commitment. As Pope Benedict XVI stated in his 30 December, 2010 Motu Proprio, just as the rest of the international community equips itself with the tools necessary to fight these evils, it is right and good that the Holy See share in these efforts, adopting such tools "as its own" and thereby also "carrying out the mission of the Holy See."
As the Secretariat of State clarified in requesting this evaluation, the Holy See recognizes that moral commitments must be accompanied by the technical compliance and effective implementation of the international standards necessary to fight money laundering and the financing of terrorism. Compliance and effective implementation are indeed what render moral commitments concrete.
Our jurisdiction
Vatican City State has a very small territory, with a small population, a very low level of domestic crime, and no market economy. It is not a financial centre and its financial activities are meant to support its works of charity and of religion.
However the Holy See enjoys a recognized moral voice and in this sense is deeply connected not only with its immediate neighbors, but with all countries of the world.
Moreover, the Holy See, as primarily responsible for the universal mission of the Church, has a special ability – even duty – to guide and orient Catholic religious organizations throughout the world. While those organizations exist within their own civil jurisdictions and are bound to follow the laws of those jurisdictions for AML/CFT issues, it is important that the Holy See use its moral authority to raise maximum awareness about the far too frequent transnational crime of money laundering and the financing of terrorism.
Beginning along the path
and first accomplishments
Now, let’s see where we are coming from. The last nineteen months have been months of work and learning.
Before starting this process, we already had a good number of requirements in place. Above all, there has always been a clear determination to fight money laundering and terrorist financing, as well as a legal system that already had several of the elements necessary to tackle ML/FT problems.
At the end of 2010, we passed an AML/CFT law and requested evaluation in February 2011 by MONEYVAL. Our law came into force on April 1, 2011. Our Financial Intelligence Authority was operational by June. In November 2011, we received our first MONEYVAL onsite visit. The team of our evaluators was widely considered to be perhaps the strongest team MONEYVAL had ever assembled.
It included the President, the Secretary and an Administrator of MONEYVAL, the President of the Egmont Group of Financial Intelligence Units, two senior financial experts, and a Professor of International Law. We take both the praise and criticism contained in the report with seriousness.
Revision of the first AML/CFT legislation
Based on the preliminary remarks of the evaluators in November, it became apparent that the first version of the law, while representing an important effort at proper legislation, contained gaps and other difficulties that needed to be addressed in order to move forward.
All jurisdictions that receive an on-site visit are given two months time to introduce changes in their legislation, that will be included in the evaluation report. Within this timeframe, on January 25, 2012 a new law was introduced that provided for more effective cooperation among the Vatican Authorities involved in the prevention and countering of money laundering and the financing of terrorism. The new law stressed the importance of their mutual connections and the need to better allocate their respective competences in order to establish a stronger and more sustainable system AML/CFT system.
The present AML/CFT system
Now I would like to draw your attention to some of the more important elements of the current AML/CFT Regime:
- The establishment of a risk-based approach to AML/CFT work, particularly in regard to the identification of suspicious transactions;
- Enhanced emphasis on international cooperation, including full exchange of information with foreign counterparts. And I stress that this includes exchange of information including information prior to April 1, 2011;
- Laws relating to financial institution secrecy are consistent with the international standards;
- The criminal law is significantly improved, by providing a comprehensive definition of money laundering, and an array of predicate crimes in line with the international standards, as well as the criminalization of the financing of terrorism;
- The power of the courts to prosecute money laundering, financing of terrorism, and its predicate crimes, as well as to freeze and confiscate the proceeds of ML/FT activity has been strengthened;
- The sanctions for failure to fulfill AML/CFT requirements are enhanced and made applicable to legal persons;
- Entering into a Memorandum of Understanding (MOU) is a requirement for the exchange of financial information with financial intelligence units from other states. We pledge this to be an effective and reliable tool for exchanging information on the basis of reciprocity with those jurisdictions that are also committed to fight money laundering and the financing of terrorism;
- The power of the AML/FT supervisor to perform an inspection of any financial institution is made explicit and the law provides for the creation of a specific and detailed regulation upon the basis of which that inspection could be conducted.
In addition, the Holy See, acting also on behalf of Vatican City State, has ratified the following Conventions:
- the Vienna Convention against Illicit Traffic on Narcotic Drugs and Psychotropic Substances (1988).
- the New York Convention for the Suppression of the Financing of Terrorism (1999).
- the Palermo Convention against Transnational Organized Crime (2000).
These Conventions are immediately applicable in our legal system, without any further need to implement legislation regarding extradition and cooperation.
In addition, the area of international cooperation was carefully assessed. The findings of the evaluators were that the current system of the Holy See and of Vatican City State is largely compliant with the international standards.
Areas re where evaluators noted a need for improvement
We are aware that, like other jurisdictions, some areas of the Vatican’s systems to fight money laundering and the financing of terrorism still need to improve. After the new law was adopted in January, we addressed many of these issues in the course of our continuing exchanges with the evaluators. Other issues will be addressed expeditiously and giving proof of effectiveness.
For example:
- There are some concerns expressed in the report regarding the use of an MOU to establish the basis for international cooperation between financial intelligence units;
We feel that the adoption of this requirement, which is in line with international standards, represents the right approach for the Vatican, which, as a smaller jurisdiction, wishes to interact on fair and fully reciprocal terms with other countries. Indeed, this is a common choice made by many jurisdictions, including New Zealand, Canada, Australia and others; nor is this choice disfavored by such noted FATF members as the United States;
- The Pontifical Commission is mandated by the law to provide for a regulation permitting the AML/CFT Supervisor to perform on-sight inspections. The evaluators note that until such a regulation becomes law, the supervisors inspection powers are not yet defined. We agree. That regulation, which is already being drafted, will reflect our seriousness of purpose;
- The report notes that the original structure of a Financial Intelligence Authority, which combines the financial intelligence unit function and the regulatory functions of a Supervisor, appears to create difficulties. This structure of the FIA, which concentrated all AML intelligence and supervision was inherited from the first version of the law. It was retained in the second version of the law. The evaluators have expressed certain skepticism as to its "workability" . We are grateful for this observation which we take seriously;
- The report notes that conflicts of interest may arise due to the same person working at the same time in a Supervisor and in one of the supervised entities.
Steps taken after passing the new law
After adoption of the present law, the Holy See has continued to improve its anti-money- laundering system. Above all, the Holy See and the Vatican Authorities have moved from shorter-term solutions to the creation of long term, sustainable and effective solutions; and will continue to do.
For example, after January 25, that is after the above mentioned period of two months following the first on-site visit:
- The Holy Sere established and implemented a terrorist list in line with the measures required by the United Nations Security Council;
- We have officially applied to join the Egmont Group, which is the internationally accredited group of Financial Intelligence Units formed to favor rapid and reciprocal exchanges of information;
- Through the execution of memoranda of understanding, we have expeditiously moved to insert our own financial intelligence authority into the international network of financial intelligence units;
- As mentioned, the Cardinal’ Commission for the Vatican City State is in the process of adopting an inspection regulation;
- We have initiated further revision of our criminal law, with a view to further modernize its provisions in light of the international standards;
- Shortly we will complete our risk assessment;
- We are considering ratification of other crime fighting conventions and new legislation regarding non-profit organizations.
CONCLUSION
Therefore the report released today is not an end, but a milestone in our continuing efforts.
In regards to the actual findings, simply stated we obviously wish to strengthen the overall system; in particular out of the 16 key and core recommendations of the international standards to fight ML/FT there are 7 areas where the Holy See must and will focus on.
In this light, the report released today is not the end, but is rather an important passage of our continuing efforts to marry moral commitments to technical excellence.
We have taken a definitive step to lay the foundations to a structure – a house if you will – that is to a robust and sustainable system to combat money laundering and the financing of terrorism. Now it is our wish to fully construct a building that effectively shows the Holy See’s and Vatican City State’s desire to be a reliable partner in the international community.
With pride in what we have accomplished, tempered by recognition of what we must still do, I now welcome your questions.
Vatican passes key financial
transparency test but fails
seven key criteria
by NICOLE WINFIELD
VATICAN CITY, July 18 (AP) — The Vatican has passed a key European financial transparency test, but received poor grades for the effectiveness of its new financial watchdog agency and the ability of its bank to track suspicious transactions.
The Council of Europe report released Wednesday marked a milestone in the Holy See's efforts to shed
its reputation as a shady tax haven long mired in secrecy and scandal and move onto the so-called "white list" of countries that share financial information.
The report showed the Vatican had received compliant or largely compliant grades on nine of the 16 "key and core" internationally recognized recommendations to fight money laundering and terrorist financing.
But seven other areas were found lacking, particularly concerning its anti-terror finance measures and the Vatican's financial oversight agency, created amid much fanfare in 2010 to try to respond to international demands for greater fiscal transparency.
The report found that the agency had yet to conduct any inspections, and that its role, authority and independence needed clarification. It said its ability to share financial information with other governments was hobbled by the Vatican's insistence that it enter first into bilateral agreements.
The Holy See put the requirement for in place largely because it fears Italy would make unreasonable demands for financial information from the Vatican bank, where Vatican officials, dioceses and members of religious congregations hold accounts. The Holy See wanted to make sure that if it gave such information to Italy, a reciprocity agreement would compel Italy to share similar information with the Holy See.
The so-called Moneyval committee praised the Holy See for making so much progress in a short amount of time to come into compliance with the norms, and the Vatican scored compliant or largely compliant grades overall in 49 percent of the criteria.
Moneyval's executive secretary, John Ringguth, said the uniqueness of the Holy See as a state stood out to evaluators. It is the seat of the Roman Catholic Church and a state with financial institutions but without a private sector.
"One of the first things that we had to get our head around was the law of 1929, which basically creates a public monopoly system in the Vatican City State and Holy See," he said in a phone interview.
Overall he said the Vatican fared well in its first round evaluation, noting that it comes out "somewhere in the middle" of Moneyval member states in terms of rankings; some of those states, however, have had years to come into compliance whereas the Vatican only began the evaluation process last year.
Monsignor Ettore Balestrero, the Vatican undersecretary of state, said the Vatican welcomed the findings and recommendations.
"We take both the praise and criticism contained in the report with seriousness," he told reporters.
The report said more work needs to be done. In particular, it said the Vatican bank, long the subject of rumor and scandal, should be independently supervised and should make rules about who is actually eligible to keep accounts there.
Currently, the bank is supervised by five cardinals, headed by the Vatican secretary of state.
It said the bank's customer due diligence measures were lacking in some areas, particularly concerning high-risk transactions. And it found fault with the Vatican's procedures to report suspicious financial transactions.
The Vatican submitted itself to the Moneyval evaluation process more than two years ago after it signed onto the 2009 EU Monetary Convention. Since then, it has written and rewritten a law criminalizing money laundering, created the financial watchdog agency and ratified three anti-crime U.N. treaties, among other measures.
Each of those moves is required by the Financial Action Task Force, the Paris-based policymaking body that helps countries develop anti-money laundering and anti-terror financing legislation. The Council of Europe's Moneyval committee rated whether the Vatican was compliant, largely compliant, partially compliant or noncompliant in each of the task force's recommendations.
Sixteen of the original 49 recommendations are considered "key and core," with a score of eight or more passing grades sparing the Vatican from a more intensive review and evaluation process in the future.
By scraping by with a 9-7 report card, the Vatican is solidly in the company of other countries that have been working for years, and gone through numerous rounds of Moneyval evaluations, to come into compliance with the FATF norms.
One area singled out for improvement was in putting into operation U.N. anti-terrorism conventions, which require the Vatican keep a list of terror suspects and show how it can freeze and confiscate terrorist assets. The Vatican scored partially compliant and noncompliant, respectively.
Balestrero noted that after the reporting deadline passed, the Vatican established the terror list.
Pope Benedict XVI himself has said he wanted the Vatican's finances to follow international principles, saying peace in the world today is threatened by terrorism and an improper use of the global financial system.
The Vatican's Moneyval evaluation process has been the source of enormous attention and speculation in Italy, given that it corresponded with the eruption of the scandal over leaked Vatican documentation that alleged corruption in the Holy See's finances as well as infighting over whether the Vatican's efforts to comply with the anti-money laundering norms were on the right track.
As the process neared its end, the Vatican bank — known as the Institute for Religious Works — threw another wrench into the mix by firing its president who had been brought in by the Pope's No. 2 specifically to usher in a new era of financial transparency at the Holy See.
The bank's board accused him of actually being an obstacle to transparency and of failing to do his job. {It was never specified how exactly he was an obstacle to such transparency, considering that he was one of the principal collaborators in drafting the original law of December 31, 2010, and that he cooperated promptly with Italian authorities in their investigation of a suspected money-laundering transaction worth 23 million euros which was explained by IOR as its own fund transfer from an Italian bank to a German bank for the purchase of German bonds...BTW, if Gotti Tedeschio had been an 'obstacle' to transparency in any significant way, the Moneyval inepectors would have cited it one way or the other. Has anyone among the Vaticanistas read through the 240-page report yet to find out?]
[Modificato da TERESA BENEDETTA 18/07/2012 19:42]