Vatican says "misunderstanding" behind bank probe

A "misunderstanding" between banks was the cause for the Vatican Bank being investigated by Italian authorities on suspicion of money laundering, the Vatican said on Thursday.

The Vatican also said its bank, known as the Institute for Religious Works (IOR), was committed to "complete transparency" and it was working to secure inclusion in the "White List" of states which comply with international standards of banking.

It outlined its defence in a letter sent to the Financial Times and distributed by its press office to journalists in Rome in a defence of the image of the Holy See and that of its bank.

"The current problem was caused by a misunderstanding -- now being examined -- between the IOR and the bank which received the transfer order," spokesperson Father Federico Lombardi said in the letter.

On Tuesday, Rome magistrates put the IOR's top two officials, president Ettore Gotti Tedeschi and director general Paolo Cipriani, under investigation and froze 23 million euros ($30.21 million) of its funds in Italy.

Two recent transfers from an IOR account in an Italian bank were deemed suspicious by financial police and blocked. One was a transfer of 20 million euros to a German branch of a US bank, and the other of 3 million euros to an Italian bank.

Lombardi's letter betrayed the Vatican's deep irritation that magistrates had opened the probe and made it public.

"The nature and aims of the transactions under investigation could have been clarified with great simplicity," he said.                                                                                   

The Vatican has maintained that there was no wrongdoing involved because it was merely transferring its own money between its own accounts.

Lombardi said the Vatican wanted to "avoid the spread of inaccurate information and to ensure that no damage is caused to the activities of the Institute and the good name of its managers".

The IOR primarily manages funds for the Vatican and religious institutions around the world, such as charity organisations, religious orders of priests and nuns, and Catholic hospitals.

He said that while the IOR was "beyond the jurisdiction and surveillance" of the Bank of Italy because it is located in a sovereign state, it was committed to the norms of the European Union and Organisation for Economic Cooperation and Development (OECD) aimed at combating terrorism and money laundering.

Still, Lombardi's letter pointed to a sense of urgency in the Vatican after news of the probe put its bank on the front pages of newspapers worldwide, with echoes of past scandals.

The IOR was involved in the fraudulent bankruptcy of Banco Ambrosiano, then Italy's largest private bank, whose president Roberto Calvi was found hanged under London's Blackfriars Bridge in 1982. Several investigations failed to determine whether Calvi, known as God's Banker, had killed himself or been murdered.

The Vatican denied any responsibility for the collapse of Banco Ambrosiano, in which it held a small stake, but made a "goodwill payment" of $250 million to Ambrosiano creditors.

The IOR's president, Gotti Tedeschi, 65, has been at the helm of the bank for a year and is a close adviser to Italian economy minister Giulio Tremonti.

A devout Catholic who has taught financial ethics at the Catholic University of Milan, he also heads an Italian unit of the Spanish Banco Santander, according to its website, and serves on the board of several major Italian banks.