New Vatican bank head vows zero tolerance with suspect accounts

VATICAN CITY (Reuters) - The Vatican bank is checking the account of every client including Holy See employees, its new chief said, in a campaign to root out any money-laundering at an institution prone to scandals for decades.

Ernst von Freyberg's predecessor was dismissed for poor management, and the Vatican's financial watchdog said last week it was investigating six possible attempts to use the Holy See to launder money in 2012.

In an interview published in Corriere della Sera on Friday, Freyberg said the Institute for Works and Religion - the bank's formal name - was reviewing each of 18,900 clients to verify their right to an account and bare any suspicious aspects.

The IOR was combing through about 1,000 accounts a month, he said, to pinpoint owners and who has signature authority.

"This is a system of zero tolerance: No suspect transactions, no improper clients and a willingness to contest anyone who is involved in improper activities, even if they are our own employees," he said.

The bank mainly handles funds for Vatican departments, Roman Catholic charities and orders of priests and nuns worldwide but has been used improperly by third parties in the past.

The Vatican is trying to meet international standards on fighting terrorism financing, money laundering and tax evasion, but the European anti-money laundering committee, Moneyval, said in July that the IOR still had some way to go.

The Vatican has pledged to make changes and will present a progress report on the Moneyval recommendations in December.

The IOR has hired the U.S.-based Promontory Financial Group as a regulatory consultant and the Vatican has signed a memo of understanding with FinCen, the U.S. agency that tracks suspicious financial transactions.

Freyberg said the bank made a profit of 86.6 million euros ($113 million) in 2012, up from an average of 69 million euros ($90.08 million) annually in the previous three years. This is believed to be the first time profit figures were given.

The bank's profits are used to help fund Church activities.

Freyberg was appointed in February to replaced Ettore Gotti Tedeschi, who was fired last May. Gotti Tedeschi said he was dismissed because he wanted more transparency but the bank's board, made up of international financial experts, said he had neglected basic management responsibilities.

His abrupt departure, along with the arrest of Pope Benedict's butler for stealing confidential papal documents, came during a leaks scandal that shook the Vatican last year and contributed to Benedict's decision to resign in March.

The Vatican bank's worst scandal was in 1982 when Roberto Calvi, known as "God's Banker" because of his links to the Vatican, was found hanging from London's Blackfriars Bridge.

(Editing by Mark Heinrich)