Vatican passes key financial test

Associated Press

VATICAN CITY — 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.