Pope Francis gives watchdogs more authority over Vatican bank

Pope Francis on Thursday strengthened monitoring of the Vatican bank to prevent money laundering or the financing of terrorism as part of his campaign to clean it up after decades of scandal.

Issuing a "Motu Proprio" – a decree at his own initiative – Francis said the Vatican's internal watchdog, the Financial Information Authority (FIA), would have increased powers of supervision over the bank and other Holy See departments involved in financial activities.

The move will lead to closer monitoring of the Institute for Works of Religion (IOR) – the formal name of the Vatican bank – and responds to a recommendation from the European anti-money laundering committee Moneyval last year.

The Vatican is trying to meet international standards on fighting crimes such as money laundering, funding of terrorism and proliferation of weapons of mass destruction. Moneyval said in a July 2012 report that the Vatican still had some way to go.

It said FIA's powers should include reviewing policies, procedures, accounts and records and that it should have the right to enter Vatican premises and demand access to information.

Francis's decree broadens the application of relevant Vatican laws to the departments of the Roman Curia, or central administration, and to other institutions dependent on the Holy See as well as non-profit organizations based in Vatican City.

It also establishes a "Financial Security Committee" to coordinate efforts to prevent laundering, terrorism financing and the proliferation of weapons, the Vatican said.

Pope Francis has made cleaning up the Vatican administration one of his central goals since his election in March. He has brought in international experts to advise him on economic affairs, improve transparency and enforce accounting principles.

He has also set up a special commission of inquiry to reform the IOR. In July the pope said the bank must become "honest and transparent".

The Vatican's financial dealings are again under scrutiny after the arrest of a senior Catholic priest at the center of a money smuggling case. Italian prosecutors are investigating two former IOR top executives on suspicion of repeatedly breaking Italian money laundering laws.

In 2010, Rome magistrates froze 23 million euros ($30.6 million) held by the IOR in an Italian bank. The Vatican said its bank was merely transferring funds between its own accounts in Italy and Germany. The funds were released in 2011 but the money laundering investigation continues.

Last month the FIA signed a memorandum of understanding with Italian authorities over the exchange of financial and bank information as part of efforts to combat money laundering in line with international standards.

(Editing by Barry Moody/Mark Heinrich)