Watchdog couldn’t stop the London deal

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The Vatican City Court meets in July 2021. Credit: Independent Photo Agency Srl / Alamy Stock Photo

The former director of the Vatican’s Financial Information Authority told judges on Wednesday that the agency does not have the power to review the financial transactions of the Secretariat of State.

Tommaso Di Ruzza, who helped lead the AIF (later renamed the Financial Supervisory and Reporting Authority) until 2019, appeared in Vatican City Court on April 27 to answer questions about the secretariat real estate deal in London in 2018, which sparked a two-year criminal investigation. leading to trial.

He told judges on Wednesday he was aware of the transaction, which saw the Secretariat of State pay a total of 350 million euros for the building at 60 Sloane Ave., which was eventually sold with a loss of more than 100 million.

But, he said, the AIF was not monitoring the Secretariat of State, nor was it aware of payments to Vatican broker Gianluigi Torzi – who is accused of extorting money from the secretariat. – only after the signing of the agreement at the end of 2018.

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By March 2019, Di Ruzza told the court, the AIF had opened its own investigation into the deal and officials were in communication with financial authorities in several other countries.

But, he said, it was clear to him that Vatican figures, including Archbishop Sostituto Edgar Peña Parra, Cardinal Secretary of State Pietro Parolin and Pope Francis, were determined to acquire direct ownership of the building and to end Torzi’s effective control over the property. through its holding company Gutt SA.

Di Ruzza’s responses to the judges were often consistent with those of former AIF president René Brülhart, who appeared in court earlier this month and also stressed that the authority of the AIF does not s did not extend to the business of the secretariat.

Like Brülhart, Di Ruzza faces charges of abuse of power at trial. When indictments were filed against 10 people in July last year, the former AIF director was also charged with embezzlement, but that charge was dropped earlier this year after prosecutors have agreed to reopen their investigation into several of the defendants.

Di Ruzza and Brülhart maintain that they violated no law and scrupulously observed the obligations of their office.

In October 2019, Vatican law enforcement raided the offices of the AIF, as well as those of the Secretariat of State, seizing financial records, documents and computers. Following these raids, Di Ruzza was furloughed for several months, before the Vatican later confirmed that he had left his position permanently.

The abuse of power charges against both Di Ruzza and Brülhart relate to their failure to intervene in the deal, which saw several Vatican officials and investment advisers charged with money laundering, embezzlement and other financial crimes.

Di Ruzza said the agreement itself, coming from the Secretary of State, was beyond his agency’s jurisdiction.

The AIF, which works in cooperation with Moneyval, the European Commission’s anti-money laundering watchdog, originally supervised the Vatican’s two dedicated financial institutions, the IOR, which operates as a depository and loan, and the APSA, the sovereign wealth of the Holy See. manager.

Following the recommendations of the Vatican inspection by Moneyval in 2012, APSA agreed to cease certain business activities, such as granting loans to for-profit companies. As a result of this commitment, in 2015 APSA was exempted from Moneyval and AIF oversight, although it continued to fund commercial ventures for the Secretary of State.

Since then, the AIF alone has been responsible for overseeing the IOR.

In 2019, the Secretary of State, through both Cardinal Parolin and Archbishop Peña Parra, pressured the bank’s management to grant a loan of 150 million euros for refinance the mortgage on the London property which the Secretariat acquired with the building.

The bank’s management repeatedly rejected the loan request, calling the terms of the proposal “opaque”. When the AIF did not intervene, the IOR leadership eventually went directly to Vatican prosecutors who obtained search warrants and authorization to investigate the case directly from Pope Francis.

The court had previously heard that Peña Parra had ordered a retaliatory investigation against bank executives when the loan request was rejected, contracting with Italian intelligence agents and outside security consultants.

Asked in court on Wednesday to explain why he had not flagged the loan request as worrying, Di Ruzza replied: “Who should I have denounced, the sostituto?

The agency’s former director also told judges the London deal appeared to offer no grounds for investigation as part of the AIF’s primary mission to combat “money laundering or the financing of terrorism”.

Following a 2020 Moneyval inspection, the European agency last year published a report on the health of Vatican financial institutions that specifically highlighted the lack of priority given by Vatican watchdogs to the threat of misconduct. internal finance of civil servants.

While praising efforts to eliminate the risk of money laundering and terrorist financing by external actors through Vatican institutions, Moneyval found that “[Vatican] Authorities have indicated that they consider the risk of abuse of power for personal or other gain by insiders and related money laundering to be low.

“However, the assessment team disagrees with this conclusion and is of the view that the risks presented by insiders are significant,” and specifically pointed to “the potential abuse of the state system of the Holy See/Vatican City by mid-level and higher level personalities (insiders).”

The trial is due to resume on May 5, when Cardinal Angelo Becciu returns to court for the first time since Pope Francis waived the application of state secrecy to the cardinal’s work, clearing the way for judges to ask about a series of allegations regarding possible financial misconduct.

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