Vatican financial reform fights money laundering and terrorism

By Sergio Centofanti

The Holy See Press Office published on Saturday the Decree of the President of the Governorate, Cardinal Giuseppe Bertello, with which amendments were made to Law XVIII of 8 October 2013 on transparency, supervision and financial information.

The changes are part of the reform process requested by Pope Francis in order to make the management of Vatican economic resources more and more accurate and transparent.

This was discussed with Carmelo Barbagallo, President of the Financial Information Authority (FIA), the competent institution of the Holy See and Vatican City State in the fight against money laundering and terrorist financing.

Q: Dr. Barbagallo, can you tell us what is the purpose of these changes, and why it was necessary to make them?

Before entering into the merits of your question, I would like to say a few words about the importance of Law XVIII introduced in 2013. This legislation constitutes the stance of the Holy See and Vatican City State in the prevention and combating of money laundering and terrorist financing. It is a text in continuous and progressive evolution, which takes into account the Community sources of reference on the subject - which the Holy See has undertaken to transpose with the Monetary Convention between the European Union and Vatican City State of 2009 - and the characteristics of its jurisdiction. It makes it possible to constantly align the Vatican's legislation with the best international standards. This work would not have been possible without the active participation of all interested parties: the Secretariat of State, the Governorate of Vatican City State, the Secretariat for the Economy, as well as the Financial Information Authority. I, therefore, take this opportunity to thank everyone.

In reference to your question, with the changes now introduced, the Fifth Directive of the European Union on the prevention and fight against money laundering and terrorist financing has been transposed and some of the rules referring to the Fourth Directive have been improved. I would also like to emphasize how the opportunity has been taken to transfer into this law the important progress made in recent years to make the supervisory activity more and more effective, first of all through an intensification of the mechanisms of collaboration between the different Authorities involved.

Q: This is, therefore, a new step by the Vatican in the direction of transparency and increasingly intense supervision of activities of a financial nature....

Yes. The latest amendments to Law XVIII are part of an overall strategy aimed at making the management of Vatican finances increasingly transparent, within a framework of intensive and coordinated checks. It is a path that has been accelerated since 2010, with the creation of the Financial Information Authority, and which finds its most recent and significant expression in the Motu Proprio of June 1 and the Ordinance of August 19, 2020, concerning respectively, the procedures for the award of public contracts and the obligation to report suspicious activities by Voluntary Organizations and Legal Persons.

Consistent with this path, Law XVIII has further strengthened the defense mechanisms and controls of entities that, in the performance of their noble purposes, are in various ways affected by financial flows (non-profit organizations, legal persons, voluntary organizations, public authorities).

Pope to Moneyval: Preventing merchants from speculating on humanity

Q: The Pope reiterated something last Thursday when he received the experts of Moneyval: that measures are needed to protect a "clean finance" to prevent merchants from "speculating in that sacred temple that is humanity"...

It is a fundamental duty of every system to protect and defend the dignity of every person. In this context, prudent management and effective control are not only legal but also moral duties.

This is even more true when it is the flow of money that is subject to supervision: Movements that may be at the service of a just cause, but may sometimes derive from illegal activities to be "cleaned up" or directed to sow terror. The awareness of potential threats and vulnerabilities, the effectiveness of controls, the transparency of financial choices also help to avoid risks that could affect the missionary and charitable activities of the Catholic Church.

For my part, I am convinced that the changes made to this Law, as well as all the regulations enacted in recent years, can demonstrate, both internally and to external observers, the firm commitment to a matter in which the Church takes an uncompromising position.