Daily News - Vatican Financial Transparency Laws Crack Down on Tax Fraud (ContributorNetwork) Daily Business News
While the rest of the world is still waiting for the Vatican to totally exorcise any and all suspected remnants of sexual abuse from its priestly ranks, on Friday, it took a step to cut down on the financial fraud that rocked its highest offices last year after Italian prosecutors seized 23 million euros that the Vatican bank allegedly tried to transfer without making the proper disclosures. The seizure served to underline concerns about the Vatican bank's ability to keep its customers free from regulators' and authorities' increasing scrutiny internationally.
On Dec. 30, the Vatican released two apostolic letters from Pope Benedict XVI, that established the Financial Information Authority. This institution was charged at the time with preventing and countering "illegal activities in the area of monetary and financial dealings." TheWall Street Journal reported the Holy See's most recent measure expands that charge to give the Financial Information Authority the ability to investigate Vatican offices and personnel suspected of committing financial crimes ranging from insider trading to financing terrorist activities. The measure also requires visitors to the tiny state to declare cash holdings of more than 10,000 euros, or approximately $14,000. Vatican City's gendarmes will at like customs police in other countries, searching those suspected of attempting to smuggle funds through the Vatican's borders.
Although the Vatican's latest measures are a step toward reducing what have previously been called relaxed financial conditions, their failure to address the need for procedures for Vatican officials to report material financial transactions, such as large transfers between banks, like the one that triggered the minor scandal last year, to the Financial Information Authority, likely mean that the watchdog's ability to detect and deter fraudulent financial behavior within the Vatican's banks will be limited.
The Catholic News Agency has reported that besides actually improving financial conditions within the Vatican, the Holy See also hopes that the Financial Information Authority will improve the Vatican's overall standing in the international financial community, and allow it to appear to have enough integrity to make the various "white lists" of different countries that are considered to be in compliance with anti-terrorism and anti-tax evasion treaties. Although the mere existence of the Financial Information Authority flies in the face of the Vatican's history of secrecy, from a financial standpoint, as it, like all other agencies and personnel in the Vatican, answer to a single person, Pope Benedict XVI, it is questionable whether or not it is truly effective.
In a post-Enron world, the one truth that everyone who has studied the immense fraud agrees upon is that separation of duties, as well as effective internal controls are essential to detecting and deterring fraud. Corporations today have staffs of internal auditors who sift through transactions, similar to the way that the Financial Information Authority should be, but likely will not be. As a result, it remains to be seen whether this is a successful plan to detect and deter financial fraud in the Vatican, or just an expensive papal public relations scheme.
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