Vatican cracks down on financial crimes

VATICAN CITY - The Vatican yesterday created a financial watchdog agency and issued new laws to fight money laundering and terrorist financing in a major effort to shed its image as a tax haven that for years has been mired in secrecy and scandal.

The decrees, which go into effect April 1, were passed as the Vatican's own bank remains implicated in a money-laundering investigation that resulted in $31 million being seized and its top two officials placed under investigation.

The bank, formally known as the Institute for Religious Works, or IOR, is one of several Vatican offices that are covered by the new financial transparency rules, which were adopted primarily to comply with European Union norms. The Vatican City state's governing administration, the department that controls the pope's vast real estate holdings - even the Holy See's pharmacy, museum and TV station - are covered as well.

The bank was created to manage assets placed in its care that are destined for the pope's religious or charitable works. But it also manages ATMs inside Vatican City and the pension system for the Vatican's thousands of employees. The bank is not open to the public and its list of account holders is secret.

Pope Benedict XVI, who wrote an entire encyclical on the need for greater morality in finance, said he was issuing the decrees because he wanted the Vatican to join other countries that have cracked down on legal loopholes that have allowed criminals to exploit the financial sector. - AP