* Probe launched after prelate arrested over smuggling
* Promises to "eradicate wrongdoing of clients"
By Philip Pullella
VATICAN CITY, July 4 A preliminary inquiry by
the Vatican bank after the arrest of a Vatican prelate on
suspicion of trying to smuggle huge sums of money into Italy
from Switzerland found "clear failings" at the institution, a
source close to the bank said on Thursday.
The board of the bank, formally known as the Institute for
Works of Religion (IOR), held a meeting on Thursday that also
addressed the shock resignation of its two top managers on
Monday. The meeting had not been made public.
At the meeting Ernst von Freyberg, the bank's German
president, told the other four board members of the preliminary
results of an internal investigation.
It discovered "clear failings that should serve as stark
reminder of the urgency of improving the IOR's processes,"
Freyberg told the board, the senior source told Reuters.
The Vatican was rocked last Friday by the arrest of
Monsignor Nunzio Scarano, who is accused of plotting with two
other people to smuggle 20 million euros ($25.8 million) into
Italy from Switzerland for rich friends in southern Italy.
Scarano, 61, who worked as a senior accountant in the
Vatican's financial administration and had close and regular
contacts with the Vatican bank, was arrested along with an
Italian secret service agent and a financial intermediary.
Scarano is accused of money laundering in a separate
investigation in the southern city of Salerno, his hometown.
According to the source, Freyberg told the board that the
bank would continue to improve internal procedures and review
every account. "We will systematically identify and eradicate
wrongdoing by clients of our institute," Freyberg said.
Apart from Freyberg, the board is made up of another German,
an Italian, an American and a Spaniard. All are non-clerics and
are either businessmen or bankers.
Three days after the arrest of Scarano, IOR director Paolo
Cipriani and deputy-director Massimo Tulli resigned. Both are
under investigation by Rome magistrates, the third inquiry in
Rome regarding suspected money laundering at the IOR.
Freyberg, who became president of the bank this year, has
also assumed the role of bank director until a permanent
replacement is appointed.
The bank has also established a new position of chief risk
officer who will be charged with improving compliance with
financial regulations at a bank which has long been a byword for
secrecy and lack of transparency.
Last week, two days before the arrests, Pope Francis set up
a commission of inquiry into the Vatican bank, which has been
hit by a number of scandals in past decades..
The European anti-money laundering committee, Moneyval, said
in a July report that the IOR still had to enact more reforms in
order to meet international standards against money laundering.
(Editing by Mark Heinrich)