FATF AML Deficiency List
US Dept of State Money Laundering assessmentNon - Compliance with FATF MER Recommendations
The Vatican City is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in The Vatican City was undertaken in 2017. According to that Evaluation, The Vatican City was deemed Compliant for 3 and Largely Compliant for 19 of the FATF 40 + 9 Recommendations.
Follow Up Report - December 2017
The Financial Information Authority seems on a desk based review to be working efficiently, both as an FIU and as a supervisor of the one financial entity in the HS/VCS. This is despite the fact that the AIF staff is still not entirely up to strength. Existing vacancies need to be filled.
The continuing number of SARs from the IOR following the conclusion of the remediation process appears to indicate that suspicious activity reporting is well embedded in practice in the HS/VCS.
The AIF and the Promoter/VCS Tribunal have been quite active in response to international cooperation requests. The AIF seems to be proactive in requesting international cooperation in its work both on SARs and on supervision. The Promoter has made 5 MLA requests in cases where ML is being investigated, the answers to which apparently were timely and of assistance, but have not as yet resulted in ML proceedings in the HS/VCS.
The results on the law enforcement/prosecutorial/judicial side two years after the last review remain modest. No domestic investigation into SARs has generated a case of ML before the HS/VCS court. While considerable amounts of money continue to be frozen, no criminal case has yet produced a confiscation order. As no ML case has yet been brought to court, it is difficult on a desk-based review to establish clearly how proactively ML investigations in the HS/VCS have been followed up when there are other offences capable of prosecution within HS/VCS, or where offender(s) are prosecuted/convicted of predicate offences in a foreign jurisdiction. 2 investigations into ML have been suspended for some years pending the outcome of foreign proceedings for predicate offences. There may well be sound operational reasons for these decisions. It is simply noted, however, that a conviction for a domestic or foreign predicate crime is not a condition precedent for taking forward ML cases where other evidence can be adduced to show that the property is the proceeds of crime.
The new Economic/Financial Crimes Unit and the Office of the Promoter of Justice are encouraged to examine the progress of all outstanding investigations in financial crime cases based on SARs (particularly those where assets have remained frozen or seized for some years). It is advised that they assure themselves that the domestic ML aspects of these cases are being proactively followed up with a view to ML criminal proceedings being brought expeditiously in the HS/VCS in appropriate cases. This will be very important in the context of the next MONEYVAL onsite assessment of the HS/VCS, which focuses largely on effectiveness.
The overall effectiveness of the HS/VCS’s engagement with AML/CFT issues ultimately depends on the results that are achieved in the courts in cases arising from HS/VCS SARs and ML related investigations. As at the last assessment, ML cases still need to be brought before the court and tested by the Tribunal. Where other financial crime indictments are heard before the Tribunal, the Promoter should continue to monitor the results in the cases that he has brought, and actively consider challenging decisions or sentences of the Tribunal where he has concerns about the outcomes. Such challenges would also serve to underline the HS/VCS’s determination that financial crime (including ML) should be prosecuted effectively.
US Department of State Money Laundering assessment (INCSR)
The Vatican City was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
The Holy See is an atypical government, being simultaneously the supreme government body of the Catholic Church and a sovereign entity under international law. It operates from Vatican City State, a 0.44 square kilometer (0.17 square mile) territory created to provide a territorial basis for the Holy See. The Institute for Works of Religion (IOR) performs functions similar to those of a bank, so the IOR is commonly referred to as the “Vatican Bank.” However, unlike a normal bank, the IOR does not loan money, its accounts do not collect interest, and the IOR does not make a profit for shareholders or owners. Rather, the IOR acts as a clearinghouse for Vatican accounts, moving funds from Catholic Church sources to Catholic Church destinations. Approximately 15,000 customers have accounts in the IOR; most of the clients are religious orders, Vatican employees, and clergy, including bishops.
There is virtually no market for illicit or smuggled goods in Vatican City, and there are no indications that trade or drug-based money laundering occurs in the jurisdiction. There are no indications of any ties to terrorism financing activity. The population of Vatican City, around 800, consists almost entirely of clergy (Holy See officials), the Swiss Guard, and members of religious orders.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index N/A
World Governance Indicator – Control of Corruption 74
The Holy See is supported financially by a variety of sources, including investments, real estate income, and donations from Catholic individuals, dioceses, and institutions; these help fund the Roman Curia (Vatican bureaucracy), diplomatic missions, and media outlets. Moreover, an annual collection taken up in dioceses and from direct donations go to a non-budgetary fund, known as Peter's Pence, which is used directly by the pope for charity, disaster relief, and aid to churches in developing nations. Donations increased between 2010 and 2011.
The separate Vatican City State budget includes the Vatican museums and post office and is supported financially by the sale of stamps, coins, medals, and tourist mementos; by fees for admission to museums; and by publication sales. Its revenues increased between 2010 and 2011 because of expanded opening hours and a growing number of visitors. However, the Holy See has not escaped the financial difficulties engulfing other European countries; in 2012, it started a spending review to determine where to cut costs to reverse its 2011 budget deficit of $20 million. The Holy See generated a modest surplus in 2012 before recording a $32 million deficit in 2013, driven primarily by the decreasing value of gold. Most public expenditures go to wages and other personnel costs; the incomes and living standards of lay workers are comparable to those of counterparts who work in the city of Rome. In February 2014, Pope FRANCIS created the Secretariat of the Economy to oversee financial and administrative operations of the Holy See, part of a broader campaign to reform the Holy See’s finances.
printing; production of coins, medals, postage stamps; mosaics, staff uniforms; worldwide banking and financial activities
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