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The Swiss James Bond
The flap over Gotti Tedeschi’s dismissal was temporarily pushed off the front pages on July 18 when Moneyval released its long-anticipated 241-page Mutual Evaluation Report: Anti–Money Laundering and Combating the Financing of Terrorism—The Holy See (Including Vatican City State).1 For the first time in history the public had an inside look at the Vatican Bank. There were just over 33,000 accounts and some $8.3 billion in assets.2 It was not even a midsized bank by U.S. standards.
The European observers complimented the church for having “come a long way in a very short period of time” and also for putting into place the “building blocks” for solid financial transparency and regulations. But tempering that was the news the Vatican was not compliant on half of Moneyval’s forty-five recommendations. And when it came to the sixteen “key and core recommendations,” on which the Vatican had to achieve a passing mark on every one to qualify for the OECD white list, it failed seven.3
The single most important matter was that the Vatican’s all-important watchdog group, the Financial Intelligence Authority (AIF), got a failing grade. Moneyval cited the AIF’s failure to define a clear mission as well as its lack of meaningful independence. The Vatican’s three-year-old supervisory and oversight division was at best stuck in neutral. And Moneyval highlighted a continuing problem at the Vatican Bank: a huge number of cash transactions with few effective controls to determine the source of the money, especially when the funds were from one of the church’s third-world outposts. The rules at the IOR regarding wire transfers, the reporting of suspicious transactions, and the criteria for customer due diligence were all judged deficient. The managers at the bank also needed to be selected by stricter criteria and better supervised.4
There was some bad news for one of the most powerful cardinals, APSA chief Attilio Nicora. Moneyval concluded that his dual role as the chief of AIF and as a director of the IOR’s supervisory commission was a “serious conflict of interests” and “therefore strongly recommended that the same person not hold [both] positions.”5 (Nicora stayed on AIF’s seven-person board of directors and relinquished his Vatican Bank position.)
The EU inspectors also discovered something odd: 10 percent of the cardinals holding accounts at the Vatican Bank were deceased (236 accounts, but only 213 living cardinals).
Most Vaticanologists and financial observers thought that the Vatican had done about as well as could have been expected. It fell in the middle of Moneyval’s rankings for all its member countries, and was compliant in just under half of all the EU’s recommendations. The same day as Moneyval released its report, the Vatican said it intended to use the recommendations so that the city-state could become “a reliable partner in the international community.”6 Toward that goal, Moneyval and the Vatican agreed to an updated evaluation the following year.
• • •
In July, Paolo Gabriele was released from his tiny Vatican City cell. He had been held for sixty days on charges of illegally possessing confidential Papal documents. In August, after having denied any role, Gabriele reversed himself and admitted being Nuzzi’s whistleblower.7 He was now adamant that he acted alone. By the end of that month, the butler’s attorney asked to leave the case. His client would not heed any legal advice. At the end of September a rare event got under way in Vatican City: a criminal trial (Italy’s police deal with the Vatican’s common petty crimes such as pickpockets or ripping off tourists).I
In a critical decision on the eve of the trial, the three judges ruled that none of the evidence gathered by Benedict’s Vatileaks investigative commission of three cardinals would be admitted into evidence. That killed any chance of answering the questions about whether Gabriele had help, and if so, how much and by whom. If it could not get to the entire truth, it seemed the church would be quite satisfied with simply convicting Benedict’s butler.
The Vatileaks trial, covered by a pool of journalists, was around-the-clock news. It was the lead story internationally when Gabriele took the stand and complained about mistreatment in jail (his cell was too small and the lights were kept on to disrupt his sleep, causing a “psychological depression”).9 Spectators leaned forward to hear the soft-spoken butler admit to copying documents in the Pope’s private apartment, but contended he did not understand why it was a crime. He loved Benedict, he said, “as a son would.” The theme of Gabriele’s testimony was that he alone was involved and that he had not meant any harm. “My intention was to find someone trustworthy with whom to share my state of mind and my perplexity regarding a situation that was unbearable,” he testified, “not only for me but for many inside the Vatican.”10
When he was found guilty, the judges sentenced him to thirty months, but reduced it to eighteen months since they agreed he had no bad intent. Reporters peppered the Vatican press office with questions about whether Benedict might pardon his former butler. It was too soon to discuss, said Lombardi. Although the judges had ordered Gabriele to serve his time under house arrest, after a week he was returned to the Vatican’s unused jail. (In November, Lombardi announced that the Pope had indeed pardoned Gabriele and he would be released in time to rejoin his family for Christmas. The church kept him on its payroll, putting him at the Vatican-owned Bambino Gesù Hospital, on the condition that he refrain from talking to the press.)
Gabriele’s trial was a sideshow to some real progress at the Vatican regarding its finances and the IOR. The same day that Gabriele’s trial had gotten under way, September 30, the Vatican had hired René Brülhart to run the AIF (acting chief Francesco De Pasquale stayed on as a board member).
Brülhart was a forty-year-old Swiss anti-money-laundering expert who for eight years had directed Liechtenstein’s Financial Intelligence Unit.11 His good looks and his penchant for high-styled bespoke suits led one magazine to dub him the James Bond of the financial world. But he had the substance to go along with the slick style, credited with having cleaned up tiny Liechtenstein. When Brülhart had arrived there it had a reputation every bit as notorious a tax and money laundering haven as the Vatican. He confronted not just a banking system steeped in secrecy and resistant to change, but he also helped root out the aftereffects of an enormous 2006 Siemens bribery scandal that had infected the small principality with a culture of corruption. Among his many accomplishments in Liechtenstein he won accolades for finding assets owned by Saddam Hussein’s former government and returning them to Iraq’s newly elected leaders.12
His colleagues were so impressed that in 2010 he got a two-year appointment as the deputy chief of the Egmont Group, a storied network of national financial-intelligence agencies that share information to better fight the financing of terrorism and combat money laundering.
When he had finished in Liechtenstein, that country had moved from the OECD’s black to white list, indicating its compliance with the same EU regulations that the church had now promised to satisfy.13 Hiring Brülhart was a strong signal that the city-state was finally getting serious about cleaning up its financial house.
The Vatican liked that Brülhart had solid Catholic credentials, although unlike Gotti Tedeschi and many previous laymen who had served in the Vatican’s financial divisions, he was not an Opus Dei member.14 As a student in Fribourg he had briefly studied canon law. Brülhart made it clear when he was approached for the job that while he was Catholic, that did not mean he would give the church any leeway when it came to his enforcement role at AIF. And he insisted he be given the full power to succeed. “If not, I would not accept. And if I arrived and it were not so, I would leave. I got the assurance I needed before saying yes. I came as a free man.”15
Before agreeing to the posting, Brülhart told Bertone that he would set out to build a financial-intelligence unit that could investigate all suspicious money moving through the Vatican. Although he had not yet spent a day at AIF, he had no doubt from checking its roster that while its employees might have the desire to do a good job, they lacked essential training. He kne
w also from the Moneyval report that AIF did not have the express right to demand access to books and ledgers or other important data. Molding it into the independent arm it was intended to be, free of interference from anyone in the Vatican, was another perquisite to coming on board. “To create something where there is nothing,” he said, “that was the challenge I liked.”16
Bertone, who had to sign off on hiring him, agreed to Brülhart’s conditions.17 During his first week on the job, he began assembling a crisis management team so AIF could better monitor accounts and track the bank’s flow of money.18 “When I started, I got a full understanding of where the vulnerabilities were,” he told the author. “What did we have to do to mitigate the bank’s exposures, which mostly involve cash? Some of it was merely raising the awareness of their legal obligations and giving them the tools to take protective actions to help the bank.”19
The year 2013 got off to a bumpy start for the Vatican and Brülhart. On New Year’s Day, Italy’s central bank announced it was terminating all debit and credit card transactions inside the city-state. It was terrible news. Rome was still packed with holiday tourists and most of those who spent money at the Vatican’s shops and museums did so with credit and debit cards. Putting the Vatican on a cash-only diet would sharply cut revenue. Church officials thought it had to be a misunderstanding. They brusquely dismissed it as a technical problem that would be resolved within twenty-four hours.20
According to the Italians, a routine review in 2010 had disclosed that Deutsche Bank Italia—which provided the card services for Vatican City for the past fifteen years—had never obtained the required authorization from the Bank of Italy. When the Italians informed Deutsche Bank, it applied. But the Bank of Italy surprisingly rejected the application. An unidentified “close source” to the investigation told The New York Times, “The Bank of Italy did not approve Deutsche Bank’s request for a license because Italy does not see the Vatican as a fully compliant country under money-laundering norms.”21 An unidentified “senior banker” at a correspondent bank to the IOR told the Financial Times: “The message sent was simple: if you want to participate in the modern world, you have to adopt modern rules.”22
The city-state’s financial officials were blindsided by the Bank of Italy’s decision. And they were angry at what they considered Italy’s grandstanding. The crisis was Brülhart’s public debut. In an interview with Vatican Radio he said, “I am truly surprised. The reality is that, considering the particular nature of the Vatican City State, adequate measures have been adopted for vigilance, prevention, and fighting money laundering and financing terrorism.”23
What the AIF chief did not tell Vatican Radio was what he shared with the author months later in Rome (September 2013). He had discovered within twenty-four hours of the central bank’s decision “that someone in the Vatican knew two days before Christmas what might happen to the cash machines. They knew we might have no credit cards and did not tell anyone else.”24 Brülhart considered that failure to inform him a remarkable breach of duty.
He had gotten a bumpy introduction into the arcane world of Vatican finances. But he also recognized that while the Bank of Italy had taken disciplinary action against Deutsche Bank, it was the Vatican that suffered the consequences. “Italians think that the Vatican is part of Italy, that they have jurisdiction over the Vatican,” he concluded. “They must learn that it is a global institution.”25 His protective attitude about the Vatican’s sovereignty instantly endeared him to veteran Curialists.
Brülhart’s confidence was infectious. Others who worked inside the IOR and APSA told the author—in interviews conducted in Rome ten months after Brülhart had taken control of AIF—that his appearance had signified the start of a change in terms of the attitudes inside the Vatican’s money departments. Before his arrival, there was a feeling that Cardinal Attilio Nicora’s AIF was not always in sync with what secular organizations like Moneyval wanted. It was as if they spoke different languages. Another problem was that the Vatican’s strictly hierarchical order meant that directives from superiors were to be followed with absolute obedience. For divisions of the Curia that had existed for hundreds of years, that was not a problem, as everyone knew precisely to whom they had to report and follow. But AIF had been in existence for less than three years, and Bertone had made a significant effort to control it. Or at least to make certain that AIF did not do anything material when it came to the Vatican Bank without first obtaining his blessing. The Secretary of State’s interference with AIF was one of Moneyval’s biggest complaints. Many midlevel employees were enthusiastic that Brülhart—given his tough-as-nails credentials—was now in charge of the Vatican’s enforcement branch.
On January 25, Brülhart met with the Bank of Italy’s Director General, Fabrizio Saccomanni, and some Deutsche Bank Italia representatives, to resolve the credit card crisis. The closure had cost the Vatican sizable lost revenue. The talks were slow, the Bank of Italy being obstinate about lifting the ban. It was Brülhart’s first real test. And he soon passed it. Working with his small staff, he searched for a new company to replace Deutsche Bank as the Vatican’s credit and debit card processor. He realized that the only reason the Bank of Italy had any say was because the German owners of Deutsche Bank Italia were members of the European Community. Through his banking contacts, he located a new firm, Aduno, willing to do the work for the Vatican. It was a Swiss company, fully owned by Swiss banks. Brülhart knew that since Switzerland was not an EU member that meant the Bank of Italy was no longer able to give or withhold its approval.
On February 12, six weeks after it started, the crisis was over.
“Pilgrims, as well as tourists,” announced the press office’s Lombardi, “who visit the church of St. Peter’s every day can now use the ordinary payment service, including paying for the Vatican museums.”
Everyone was impressed with Brülhart. Some cardinals stopped by that following week to introduce themselves. There was no better sign of acceptance inside the Curia.
For Brülhart, the standoff with the Bank of Italy had presented him with the opportunity to write his own script as to how others viewed him inside the church. As the lay chief of AIF, he could have easily been considered no better than the head of an internal affairs unit in a police department, someone with whom clerics and financial officials were obligated to deal, but for whom they had no trust or liking. Now they saw Brülhart’s AIF role differently. By having someone in charge of financial oversight who understood how to best navigate the labyrinthine rules of the European Union and neighboring Italy, the Vatican may have found someone who could help bring the institution into the modern era.
That goodwill meant he had the leeway to craft AIF into the oversight and regulatory department he wanted. It was an important moment for the Vatican since Benedict had yet to appoint anyone to replace Gotti Tedeschi. Paolo Cipriani, the director general, was considered by most observers as competent but unlikely to get the nod. Some had incorrectly thought the Vatican Bank’s vice president, Deutsche Bank’s Ronaldo Hermann Schmitz, might get named the previous Christmas.
Brülhart knew that while it was important to have a capable person running the IOR, if he managed to make AIF into a strong oversight group with tough enforcement powers, the Vatican Bank chief posting was not as critical as it was in the past. The financial reputation of the Vatican would no longer rest on the head of the bank. A Brülhart-styled AIF would have flagged Marcinkus’s deals with Sindona and Calvi, and the rogue IOR accounts of De Bonis and other clerics would have been cleaned up much earlier. Still, Brülhart told the author, the pick to run the Vatican Bank was one in which he had an opinion. “I wanted a cooperative and knowledgeable colleague,” he said.26 Someone with his Germanic mind-set would be quite good.
February marked nine months since Gotti Tedeschi’s dismissal. Two new names had come to the forefront, both cardinals, Leonardo Sandri, Prefect of the Congregation for Oriental Churches and former Sostituto of the Se
cretariat of State, and Domenico Calcagno, who had succeeded Nicora as the chief of APSA. Both were nearly seventy (Sandri a few months shy), and although they were considered capable, there was no consensus that either was an inspired choice. The debate had stalled.
On February 11, 2013, all of the conjecture about who might lead the Vatican Bank was subsumed in the total shock of Benedict’s historic announcement that he would be the first Pope in six hundred years to resign. His simple statement that he would leave the Papacy on February 28 belied how stunning was the news: “After having repeatedly examined my conscience before God, I have come to the certainty that my strengths, due to an advanced age, are no longer suited to an adequate exercise of the Petrine ministry. . . . In today’s world, subject to so many rapid changes and shaken by questions of deep relevance for the life of faith, in order to govern the barque of Saint Peter and proclaim the Gospel, both strength of mind and body are necessary, strength which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately fulfill the ministry entrusted to me.”27
As would be expected, the press coverage over the Pope’s historic resignation was split between speculating about why he stepped down and who might replace him. If anyone knew the answer to why, it was likely his personal secretary, Monsignor Georg Gänswein. But he was not talking. Everything else was guesswork. And there was plenty of that. A few theories took the lead as most popular if not necessarily most accurate. The power struggles exposed by Vatileaks had pained Benedict so much that he could not go on. No, it was the nonstop soap opera at the Vatican Bank that proved overwhelming. Not true, he was a defeated man since the church’s sex abuse scandal kept going on despite his defrocking of a record number of priests. One conspiracy had Brülhart forcing the resignation after giving Benedict an ultimatum over enforcing money laundering and terrorist financing laws (when asked about that by the author, Brülhart laughed and said no).28
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