The scourge of money-laundering seems almost unending. In recent years it has engulfed numerous international institutions. For the past several years, even the Vatican has had to face this issue. The Church’s bank, known formally as the Institute for Religious Works (IOR) had been roundly criticized by Italian prosecutors for both its failure to carry out appropriate due diligence over its customers and its inability to track suspicious transactions. Indeed in an article in the Financial Times it was reported that the Vatican’s early efforts to fight this problem were criticized by the European Union Moneyval, its anti-money laundering monitoring body.
Those criticisms and the elevation of Pope Francis to the Papacy have led to some dramatic changes in the way the IOR does business. In late 2012, René Bruelhart joined the Vatican to help bring the IOR into modern day banking practices around anti-money laundering. As reported in the FT, “The experience of Mr. Bruelhart is testament to the Holy See’s rocky transition from pariah state to having a bona fide place in the international financial system under Pope Francis.”
Bruelhart has overseen three main initiatives, which according to him is to bring a “step-by-step approach to reveal risks and vulnerabilities.” The first initiative was in the basic area of know-your-customer. The IOR had to put policies and procedures in place to know not only who was depositing money into the bank ,but also who was sending money out of the bank, and to where. Second was in the area of cash, since “the heavy use of cash within its walls is ostensibly as a result of donations, but is a red flag for money laundering risk.”
Third and perhaps the most controversial has been the creation of a “genuinely independent regulator reporting in effect to Pope Francis, as head of the Holy See.” To accomplish this prong, Pope Francis had to sack the five members of the oversight board and allow non-Italian technical experts to be brought in as replacements. To demonstrate what these changes have meant, the oversight board has “has queried 355 suspicious transactions since Mr. Bruelhart’s arrival, compared with only one previously in the Vatican’s history.”
Bruelhart spoke for many compliance practitioners in AML and anti-corruption when he said, “Where we have change, not everyone is going to be happy. This is normal. We are doing this to build a system and get people on board. We are not doing this to make people happy. We are doing this to make a difference.”