Tuesday, February 21, 2012

Vatican: The new law on transparency is here

“What is the first and foremost institution interested in applying international standards for transparency, putting the Vatican onto the ‘white list’ of upstanding states? It’s the IOR... and why is that? Because the IOR absolutely needs that inclusion to conduct its financial transactions.”

The monsignor, a longtime bishop of the Roman Curia, well-versed in affairs concerning the Institute for Religious Works (the so-called “Vatican Bank”) urges us to look to the substance. 

“And the substance is,” he explains, “the decree of 25 January: the new law on transparency which was approved, updating the preceding law and making the Vatican comply with international anti-money laundering rules.” 

La Stampa was able to review the law, which is already in force but has not yet been made public.

Vatican Law 127 on anti-money laundering was drafted at the end of 2010 and entered into force in April of last year. 

Drafted in haste to implement the 2009 EU Monetary Convention (mostly a difficult time for the IOR, which had €23 million “frozen” by Italian magistrates because they were not in compliance with the anti-money laundering laws), this first legislation has been subjected to a significant makeover in recent weeks. 

On 25 January, Decree No. 159 was approved and signed by the President of the Vatican Governorate (newly appointed cardinal Joseph Bertello), and the amendments entered into force immediately.

There are many changes from the old law. First, it introduces the “administrative liability of legal persons” for crimes of money laundering (Art. 42 bis), absent in the previous law, with the introduction of fines ranging from €20,000 to €2 million. It also increased administrative fines - up to €250,000 for natural persons and up to €1 million for legal persons.

Also clarified and strengthened is the “coercive” nature of the provisions of the AFI, the internal Authority headed by Cardinal Attilio Nicora. 

In this regard, it introduces a rule, absent in the previous law, requiring the registration of all legal persons with the Governorate, thereby establishing continuous control over who is the legal representative of any entity and over the nature and purpose of the entities operating in the Vatican territory. 

It also introduces greater precision in criminal laws related to money laundering and terrorist financing, such as precautionary measures before conviction and confiscation for money laundering.

Also more precisely defined are rules for the confidentiality of data and a statement of the principle of the primacy of prevention and the combatting of money laundering and terrorist financing. 

The right to privacy - which is also part of canon law - is preserved, but takes a subordinate position when there is a suspicious transaction. Such standards were not present in the old law. 

Thus, it establishes the responsibilities of the various authorities, starting with the AFI, which has power of supervision and oversight. These powers explicitly include the authority to conduct inspections, as well as the powers of a “Financial Intelligence Unit” and the power of sanction.

The new law establishes some fundamental principles, such as the general principle of transparency and integrity of the economic, financial, and professional sectors (Art. 1 bis) and the principle of a risk-based approach (Art. 28 bis). 

Protocols of understanding between the AFI and similar agencies in other countries are now mandatory. It recognizes the role of other bodies in the Vatican legal system, such as the Gendarmerie and the courts, which was nearly absent in the old law. 

Finally, the operational independence of the AFI is explicitly recognized, with powers of control over every single financial transaction of the dicasteries of the Roman Curia and all the dependent organizations of the Holy See, including the IOR, the Governorate, and the Secretary of State itself, insofar as they perform activities that fall under the anti-money laundering law.

The changes to the previous law contained in the emergency decree of 25 January can be connected to the work conducted in the Vatican last November by a group of legal experts from MoneyVal, the Council of Europe body which focuses on the anti-money laundering procedures in force in different countries. 

With the new law, the Vatican conforms to international standards, that is, to the 49 “FATF Recommendations” (Financial Action Task Force of the International Monetary Fund) which all upstanding States must follow.

The decree of 25 January came to completion after discussions, internal debates, and various drafts. There were those who considered the old law - written by Marcello Condemi - to be sufficient in itself, and those who instead felt it necessary to adapt to international standards. 

It was pointed out that AFI inspections must be regulated by the Pontifical Commission for the Vatican City State. 

But the power related to the implementing regulations, including binding power, remains in the hands of the AFI - not to mention that the new law explicitly introduces the power of inspection, not present in the previous regulation.

The role of the Secretary of State is increased compared to the old law, and the Gendarmerie and APSA are cited: while the 2010 law did not indicate the subjects, but rather the activities that fall under the law, the new Decree lists those different subjects. This is actually the distribution of anti-money laundering duties, to be shared among several institutions, bringing the Vatican legal system in line with international standards. 

But this does not mean that the AFI is placed under the “control” of the Secretariat of State, which plays the “political” role of protector - for example, approving agreements on transparency between the AFI and similar bodies of other States. 

The Authority of Financial Information continues to maintain absolute autonomy in collecting and analyzing information on suspicious transactions.

Article 1 bis of the new decree reads: “In order to protect the integrity and transparency of the economic, financial, and professional sectors, the following are prohibited in the State: a) the opening or keeping of accounts, deposits, savings passbooks or similar reports that are anonymous or encrypted or payable to fictitious or imaginary names; b) the opening or holding of accounts corresponding with shell banks ...” 

The intention to definitively put an end to practices that were common in the past is evident. On this subject, Father Lombardi said: “We have published new rules. The channels of international control relations are open... Those who try to discourage the Pope and his collaborators in this effort are mistaken and deluded.”

Finally, with regard to the issue of the retroactivity of the anti-money laundering law, the fact that it is not considered retroactive does not mean that it is not possible to cooperate with the judicial authorities of other countries for past incidents. 

The Vatican judiciary shall conduct investigations, having the ability to examine without limitation everything regarding past events.