Pope Benedict, Vatican Influence and Financial Transparency

Is financial transparency the new measure of influence in Vatican City?

By Melissa Goertzen, Staff Writer

Pope Benedict XVI in a 2006 photo. (Sergey Kozhukhov/Wikimedia Commons)

Financial mismanagement is nothing new to the Vatican. The pope-ruled monarchy has been accused of it for years — especially in January 2012 during the Vatileaks scandal, when leaked documents from the Vatican exposed alleged corruption.

The successor of Pope Benedict XVI — whoever he might be — is unlikely to have easy days ahead.

On Monday, the 78-year-old — citing ill health — stunned the world by becoming the first pope to resign in more than half a millennium.

“I am no longer able to carry out the Petrine ministry with the strength which it demands,” he said yesterday at St. Peter’s Basilica, Vatican City, in his first public appearance since abdication.

Speculation is rife on Benedict’s successor. Irish bookie firms are accepting bets. If you put two euros on Quebec-born Cardinal Marc Ouellette, you’ll get five euros if he becomes pope. And currently, that’s the lowest odds among the cardinals, meaning that Ouellette — in the minds of the speculators, at least — has the highest chance of becoming pope.

By Easter, the cardinals will elect their new leader. Will he be the first Canadian — and also first non-European — pope?

Soon after that question is answered, the Vatican might just have to answer another one: “(Does the Vatican) pay income tax? Why is the Vatican still like a fortress? What are they hiding?”

That was a question that appeared on CBC’s message board early last year during the Vatileaks scandal. In many online discussions, participants expressed frustration at the Vatican’s apparent financial secrecy.

Despite the world’s 1.2 billion Catholics, the Vatican’s influence is not what it used to be. More are asking questions, but yet it has given few answers. As the Catholic Church prepares for a new pope, it is interesting to consider how financial transparency (or its lack thereof) will affect the Vatican’s influence.

A Brief Survey of Financial Management from 1969 to Present

Over the past 45 years, a few moments of publicity provided brief glimpses behind the veil of secrecy around the Holy See’s financial administration.

The majority of financial scrutiny centres on the Institution for Works of Religion, also known as the Vatican Bank.  Research published in The Economist revealed that “the bank is modest in size: as of November (2011), it had just $8.3 billion in assets, 33,400 accounts and 13 ATMs.” However, its structure and activities make it an alluring site for mismanagement due to “high volumes of cash transactions, global activities and limited information on many organisations operating in the Vatican.”

In June 1969, it was discovered that the Vatican had quietly sold the majority of its shares in Italy’s largest real estate and construction company, Società Generale Immobiliare (SGI), whose assets at the time were estimated at $175 million.  SGI has owned most of the pastoral land surrounding Rome since the 1800s and deals in major international contracts, including the Watergate Complex in Washington D.C.

The Vatican was SGI’s largest single shareholder, and its stock holdings were believed to exceed $20 million.The sale was discovered after the Holy See lost a battle against the Italian Government regarding their exemption from taxes on dividend earnings. Although the Vatican refused to comment, it was widely accepted that SGI shares were sold off to avoid an estimated $2 million in taxes each year.

In 1982, the Vatican was caught in a money laundering scandal following a debt investigation at the Italian bank Banco Ambrosiano, which ultimately resulted in the latter’s bankruptcy.  It was discovered that the Italian bank had funnelled hundreds of millions of dollars through the Vatican Bank, a shareholder.  In the end, the Vatican paid more than $200 million to creditors as restitution.

Over the past three years, Italian authorities have again been summoned to investigate allegations of money laundering and financial mismanagement by the Vatican Bank, which were brought to public attention by the Vatileaks scandal, among other high-profile events. After many blows to the Vatican’s reputation, Benedict created the Financial Information Authority (FIA) to supervise financial transactions and money circulation within the state.

Also, in an unprecedented act, Benedict led the Vatican through its first inspection for financial transparency by an independent secular body.  The investigation was carried out by Moneyval, the Council of Europe’s anti-money-laundering agency.  Despite these efforts, in 2012, the Vatican failed seven out of the 16 areas outlined by Moneyval.

Following that, the Vatican made another unprecedented move and hired the renowned Swiss lawyer Rene Brülhart to take over the leadership of the FIA.  The Vatican scholar John L. Allen Jr. says that “the Brülhart hire was a way of telling financial experts and regulators that the Vatican is serious about getting its act together, since he’s a known for quantity in that world. It’s also a way of ‘de-Italianizing’ the financial operations of the Vatican by bringing in leadership with a more cosmopolitan formation and outlook.”

Financial Reform through Transparency

Observers have argued that the continued history of financial mismanagement and scandal under Benedict signals a downward trend in administration.  The Vatican analyst Marco Politi says that “Vatileaks are a sign of deep crisis within the government of the pope.”

But Allen says that Benedict succeeded in establishing the groundwork for financial transparency, which could ultimately lead to significant future reforms in financial structures.  “The fact that the Vatican was willing to undergo (an investigation from Moneyval) at all was a watershed,” he says. “Never before has the Vatican opened its financial and legal systems to this sort of external, independent review with the results made public.”

The Future of Financial Transparency within the Vatican

The Vatican’s decision to employ external consultants seems to indicate that transparency is mandatory in the 21^st century.  The Internet has created an environment where information can be easily, widely and instantly disseminated.  Hiding behind the papal curtain is becoming increasingly difficult.

Benedict’s attempts at transparency were deemed by many to be significant in preserving — or at least not eroding — Vatican influence. But his sudden resignation leaves much of his work at loose ends. It remains to be seen how his successor will carry on. The Vatican’s future influence looms but uncertain.

In the words of Benedict: “Continue to pray for (the current pope), for the church, and for the future pope. The lord will guide us.”