http://www.rigorousintuition.ca/board2/viewtopic.php?p=529445#p529445On His Holiness’s public service
Can the man who cleaned up one tiny state do the same for another?
Oct 20th 2012
RENÉ BRÜLHART made his name as head of Liechtenstein’s financial-intelligence unit. Thanks to his diligence in rooting out financial crime over the past eight years, the tiny European principality, nestled between Switzerland and Austria, is no longer widely condemned as a haven for dirty money. This success, combined with his good looks, led one magazine to dub the 40-year-old Swiss lawyer the James Bond of the financial world.
His latest job might unnerve even 007: Mr Brülhart has been recruited to clean up the Vatican’s reputation. For years allegations of financial shenanigans have swirled around the Institute for Works of Religion, commonly known as the Vatican Bank. The bank is modest in size: as of last November it had just €6.3 billion ($8.3 billion) in assets, 33,400 accounts and 13 ATMs (for use by its own clients, which comprise religious organisations and individuals, Holy See lay employees and foreign countries’ embassies). But it also has features that make it alluring to money-launderers: an evaluation in July by Moneyval, the Council of Europe’s anti-money-laundering group, pointed to high volumes of cash transactions, global activities and limited information on many organisations operating in the Vatican.
In the latest scandal, its president, Ettore Gotti Tedeschi, was sacked in May. He and his former employer are now caught up in a money-laundering investigation led by Naples prosecutors. Mr Gotti Tedeschi has denied wrongdoing, saying the reason he was fired was that he got “too close to the truth” about the bank’s dealings. Only in December 2010 did Pope Benedict XVI issue a so-called Motu Proprio outlawing money-laundering and the financing of terrorism.
Mr Brülhart’s challenge is the same as it was in Liechtenstein: to get his client onto the all-important “white list” of territories that are deemed to comply with the standards on combating financial crime set by the OECD, a club of rich and emerging economies. First, he will need to build a financial-intelligence unit that can investigate suspicious money flows properly. The Vatican has a group that is supposed to do this but it has made little progress, not least because its people lack training.
Second, he will need to create a truly independent supervising authority for the Vatican Bank and the Administration of the Patrimony of the Apostolic See, which manages the Vatican’s property and securities holdings. A supervisor-of-sorts created by Benedict in 2010, the Financial Information Authority (FIA), lacks the legal powers and independence necessary to monitor and sanction these financial institutions, according to Moneyval. The FIA has no clear right to demand access to books for accounts or other information, for instance. Overall, the Vatican was compliant or largely compliant with only nine of Moneyval’s 16 core standards, proving deficient in areas such as customer due diligence and the reporting of suspicious transactions.
Mr Brülhart has the right pedigree to help. During his time transforming Liechtenstein’s bad-boy image, he was involved in the return of assets owned by the regime of Saddam Hussein to the new Iraqi government, as well as in uncovering the Siemens bribery scandal. His efforts were recognised by his peers in 2010, when he was appointed deputy head of the Egmont Group, a network of national financial-intelligence agencies. His strong Catholic credentials should also help. He even studied canon law as a student in Fribourg. He is said to have the strong backing of Cardinal Tarcisio Bertone, the Vatican’s powerful secretary of state, who hired him.
But he faces unique challenges. The Holy See’s financial institutions are not straightforward commercial organisations, but “canonically recognised” public entities created to serve the church. It is hard to introduce the sort of rules that brought Liechtenstein’s banks to heel. And though he may have the support of the pope’s right-hand man, he is still an outsider trying to shake up the financial affairs of an ecclesiastical city-state that is notoriously resistant to change and external interference. He will need Bond-like cunning to complete his mission.
Now:
http://www.nytimes.com/2014/06/14/opini ... tican.html
Cleaning Up the Vatican
By PAUL VALLELY
JUNE 13, 2014
LONDON — It looked extremely dramatic when Pope Francis fired the entire board of the Vatican’s financial watchdog last week. But that was only the half of it. The seismic changes that are underway behind the scenes in Rome are even more radical than public appearances suggest. And they offer illuminating insights into the steely character of the man who likes to present himself to the world as a model of smiling humility.
The body known as Rome’s Financial Information Authority (F.I.A.) supervises everything from the Vatican Bank to the real estate of the Holy See, its staff salaries and even the Vatican pharmacy. Its five Italian members were due to serve until 2016 when Francis asked them to resign early — to be replaced by an international team of financial experts that includes Joseph Yuvaraj Pillay, the man who turned around the Singapore economy, and Juan Zarate, a former financial security adviser to President George W. Bush.
The drastic move came after months of infighting between the old guard and the F.I.A.’s director, René Brülhart, a Swiss anti-money-laundering expert, charged with cleaning up one of the world’s most secretive banks, which has assets worth more than $8 billion. A former head of Liechtenstein’s financial intelligence unit, he found his reforms continually frustrated by an old-boy network. He complained to the pope, who swept aside the obstacle in a single move.
But there was more to it than that, as anyone would have suspected who knew the modus operandi of Jorge Mario Bergoglio when he was archbishop of Buenos Aires before he became pope. There, too, he had faced a banking scandal in which his predecessor, Cardinal Antonio Quarracino, had become embroiled in underwriting a multimillion dollar insurance deal for a family of prominent bankers who turned out to be paying all his credit card bills. When the bank went insolvent, bankers were jailed, and the Catholic Church was asked to repay huge sums it did not have, Cardinal Bergoglio called in the international accountants Arthur Andersen, closed the church bank and transferred its assets to commercial banks.
He acted swiftly, decisively and transparently — on several levels at once. And that is what he has been doing for the past year with the opaque finances of the Vatican and its scandal-mired bank.
He certainly needs to do so. The bank has had a highly dubious history since the 1980s when it was implicated in the collapse of Italy’s largest private bank, the Banco Ambrosiano, whose chairman, Roberto Calvi, was found hanging from Blackfriars Bridge in London, an incident that was widely seen as a murder disguised as suicide. A warrant was issued for the arrest of the president of the Vatican Bank, Archbishop Paul Marcinkus, alleging he was an accessory to fraudulent bankruptcy, but he was never put on trial.
The bank’s checkered history has continued until recent times. In a 2012 report, the Council of Europe’s monetary authority failed the Vatican Bank on seven of its 16 core anti-money-laundering regulations. Other banks distanced themselves from it to such an extent that in 2013 Deutsche Bank closed down the Vatican’s 80 cash machines and credit card payment services. Impropriety clung to the institution like a bad smell.
Quite rightly Pope Francis made reform of the Vatican Bank one of his first priorities. Within days of becoming pope he stripped the bank’s five supervisory cardinals of their $42,000 annual stipend. In a sermon at a Mass for bank staff he pointedly described their organization as “necessary up to a certain point.” He demanded tighter accounting, better reporting practices and enhanced internal controls. Ten months later, unhappy with progress, he dismissed all but one of the five cardinals in January. He also replaced the F.I.A.’s president with an archbishop with a track record of reform within the Vatican bureaucracy.
Shrewdly, as before, he has brought in outsiders. The U.S. regulatory and compliance consultants of Promontory Financial Group are combing through the bank’s 19,000 accounts. They have found poor cash-flow checks, inadequate documentation, ignorance on due diligence and a system of proxies that clouds who really controls many accounts. When the clerics in charge were asked how they answered to the regulator, they replied: “We answer to God.” Now they answer to Mr. Brülhart. Some 1,600 accounts have been closed so far.
He has hired other external advisers. Ernst & Young is scrutinizing Vatican property holdings. KPMG is bringing its accountancy systems up to international standards. McKinsey is reforming its media operations, which include TV, radio and a newspaper. Deloitte is advising on management.
But Francis wanted to address the issue at a deeper level too. Does the Catholic Church need its own bank at all? He set up a committee, which included the Harvard law professor Mary Ann Glendon, to ask more fundamental questions. It was given powers, in a letter of authority handwritten by Francis, to summon any documents and data it deemed necessary and told to report directly to the pope, bypassing the Curia, the Vatican bureaucracy.
That committee issued its report last month — and explains the timing of the F.I.A. house-cleaning. And that was not all. Two of the bank’s most longstanding senior officials were eased into early retirement. And a new business manager from Australia, Danny Casey, was brought in to force fiscal transparency and discipline across all Vatican departments. He will be the right-hand man of Cardinal George Pell, former archbishop of Sydney, a traditionalist but also a vocal critic of the dysfunction of the Curia under the last papacy. Cardinal Pell is head of the new Secretariat of the Economy created by Francis in February to bring financial discipline to the Vatican, where each department has been acting as an individual center of power.
At one point Francis seemed set on closing the Vatican Bank, which was founded more than 70 years ago. In the 1970s, the Vatican used it to finance covert anti-Communist missions in central America. In the 1980s, Pope John Paul II used it to channel money to the Polish Solidarity movement. Now, Francis appears to have been convinced that the bank is still needed because so many bishops, priests and religious orders work in countries without secure banking systems.
But the pope is adamant it must become transparent and accountable. He is considering setting up a Vatican central bank to more closely control transfers of money abroad. That would remove the possibility that the $3 billion the bank transfers each year could be used for money-laundering — though other measures will be needed to combat the abuse of accounts for Italian tax evasion.
The scandal clinging to Vatican finances taints an institution that Francis famously said he wants, above all, to be “a poor church, for the poor.” There are many in the Vatican, wedded to a more elitist view of the church, who are unhappy at this. So far they have been unsure how to resist a pope who operates outside the old Curia channels and acts with admirable unpredictability.
What helps Francis, oddly enough, is that the scandal is far from over. One of the Vatican’s most senior accountants, Msgr. Nunzio Scarano, who worked for 22 years in the Administration of the Patrimony of the Apostolic See, the department in charge of paying Vatican salaries and managing its property and financial portfolios, is currently under arrest, awaiting trial on corruption and money laundering charges.
Nicknamed “Monsignor Cinquecento” after the 500-euro bills he routinely flashed in public, Monsignor Scarano owned luxury properties and expensive works of art. He has been accused by Italian magistrates of having transferred millions out of the Vatican Bank and smuggling it to Switzerland to help rich friends avoid taxes. The director of the Vatican Bank and his deputy, who were named in Italian court documents, have resigned. The court case will undoubtedly bring more explosive and embarrassing revelations.
On it goes. Even the previous pope’s right-hand man, Cardinal Tarcisio Bertone, is under investigation for using his influence to steer almost $20 million in Vatican Bank loans — money that was eventually lost — to a film company run by a friend. “It’s something that’s under study,” Pope Francis has told reporters. “It’s not clear. Maybe it could be true, but at this time nothing is definitive.”
One thing, however, is definite. Pope Francis knows that he has to get a grip on the Vatican’s chaotic finances. He has only just begun.
Paul Vallely is a visiting professor in public ethics at the University of Chester and the author of “Pope Francis: Untying the Knots.”
Juan Zarate
Juan Zarate
Deputy Assistant to the President and
Deputy National Security Advisor for Combating Terrorism
Juan Zarate Juan Carlos Zarate serves as the Deputy Assistant to the President and Deputy National Security Advisor for Combating Terrorism. In his current role, Mr. Zarate is responsible for developing and overseeing the effective implementation of the U.S. government’s counterterrorism strategy.
Prior to joining the NSC, Mr. Zarate served as the Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes where he led Treasury’s domestic and international efforts to attack terrorist financing, build comprehensive anti-money laundering systems, and expand the use of Treasury powers to advance national security interests. Mr. Zarate also led the U.S. government’s global efforts to hunt Saddam Hussein’s assets, resulting in the return of over $3 billion of Iraqi assets from the U.S. and around the world.
Prior to working at the Department of the Treasury, Mr. Zarate served as a prosecutor in the Department of Justice’s Terrorism and Violent Crime Section, where he worked on terrorism cases, such as the USS Cole investigation.
So I assume that Brülhart and Zarate likely know each other?
