The Lowdown Hub

Can the Vatican reform its finances?



The FT investigates the Holy See's finances and looks at how landmark proceedings linked to a controversial London property deal are seen as part of Pope Francis's reforms in the city-state


You can enable subtitles (captions) in the video player

Trial begins at the Vatican today of a Roman Catholic cardinal who used to be a close ally of Pope Francis.


The Vatican now says that it lost a huge amount of money. The Vatican is accusing some outside consultants, fund managers, of defrauding it. And they're also accusing some officials of having conspired with these outside consultants to make that happen.

The last time the Church tried a Cardinal for financial crimes was in the 1730s.


Whenever we asked for documentation it wasn't available. Now with hindsight I can say that maybe at that moment in time we had come across something we shouldn't have seen.

I was talking to a source who told me in the Vatican the important thing is not who you know, but it's what you know about who you know.


This is a story about the difficulty in reconciling an ancient institution with modern transparency and modern standards.

The future of the Church depends on the right decisions being taken. I think of all the people that go to church on a Sunday, and put in their little coin in the collection. Some of them are poor people. They're depriving themselves of something important.

Well, I think every Catholic who reads a story like this ends up caring, because in the end they want to know where their money is going. Catholics expect, and rightly so, the Church to hold itself to a much higher moral standard than a corporation, or an NGO, or even a government. They expect a higher level of accountability. And I think the Church is learning some very hard lessons about transparency right now.


People were stunned. This was one of the most important people in the entire Vatican being forced to step down in a way which has just not happened.


Cardinal Becciu has denied any wrongdoing. He says he welcomes the chance to defend himself and prove that these allegations which were made against him are false. Becciu says that there's a plot against him, that there are people conspiring to bring them down.


You have a fund manager called Raffaele Mincione, used to work at various investment banks. Set up a fund management company. That company was the company which these Vatican officials decided to give money to. I don't think we'd ever written about them before in the Financial Times. I sort of was, like, who are these guys?

The purchase of a building, per se, is not suspicious or weird, but the way this one was purchased was, well, very unusual.


This was a very strange transaction, because this building was bought for £129m in 2012. Flash forward to 2014, the value of the building the month before the Vatican buys its stake in the building through the fund, is hugely increased.

I don't think the way a lot of this business has been conducted with the Vatican would pass the smell test for any investment adviser in London. Certainly no one I know who works in Berkeley Square, and a few of these guys involved in this deal do, would say, oh, yeah, this looks like a normal deal.


If you're walking down the street in London past that building, and you were, like, oh, I wonder who owns that, and you went to the British Land Registry, it would be impossible to know that the Vatican owned that building. It's held through a Jersey company, which is then owned by another Jersey company, which then owned by another Jersey company, and then eventually, shares in that Jersey company were owned by a Luxembourg fund.


What happened in 2018, according to the Vatican, they decided we need to get out of this London property. We need to get out of this fund.

On the back of their £200m investment, they ended up paying around £350m for this building. So it doesn't appear to have been a great bit of business. And the way they decided to convey ownership of the building was to bring in another actor and another shell company in Luxembourg.


The person who arrives at the Vatican, who is introduced to them as the man who will come in and solve all of their problems, is an Italian businessman living in London called Gianluigi Torzi. Gianluigi Torzi is not the typical profile of Vatican troubleshooter. He had been flagged on an anti-money laundering database.


This very hastily arranged contract between Torzi, Mincione's fund, and the Holy See, the Secretary of State of the Holy See, and it's signed by Alberto Perlasca, who is the number two to Becciu. And that's how the property is transferred back into the Vatican. They've effectively signed over full control of a building worth hundreds of millions to a man they just met.


The Vatican now allege it was a fraud, that basically this was a scam perpetrated against the Vatican, which ended up with them having to pay off Torzi to sort of get him to give the building back. Both Raffaele Mincione and Gianluigi Torzi deny any wrongdoing. They say they acted entirely properly, correctly, in accordance with the wishes of the Vatican.


The key question in all of this is, how much did any of the people actually, giving certain amounts of authority to this deal, how much did they really understand about what was going on? I mean, anyone who's been to the Vatican will instantly be able to see how small it actually is. This is the last absolute monarchy in Europe. It's a tiny place with a very, very small number of citizens, around 1,000. So the way the Vatican is structured is quite hard to understand.


You have the Pope who is absolute monarch, has supreme authority, and then you have various figures underneath the Pope. The case of the Secretary of State, who is the head of the Secretariat of State, that is the prime minister of the Pope. And so, below the Secretary of State you have a figure called the Substitute, and in that case, that was cardinal, then archbishop, but now Cardinal Becciu.


The Sostituto basically has daily contact with the Pope. He's the liaison between the Curia and the Holy Father. He is basically the de facto papal chief of staff. It's Becciu who would have been giving Pope Francis's daily briefings. It's Becciu who would have been the sort of first and last opinion on anything that the Pope heard.


So when you talk about the Secretary of State training its own and having its own in-house culture, Cardinal Becciu really is the most typical version of that. He trained to be a Vatican diplomat. He served in nunciatures in Africa, in different parts of the world. He then was called back to Rome. He worked his way up through the curial ranks to eventually become the number two in his own department, and arguably the number two in the entire Vatican. That he was, and I don't mean this necessarily disparagingly, but very much the company man.


I remember we invited him to our office one day to explain how his office worked, and he told us he had 40 people writing the speeches for the Pope in different languages. If you have that sort of responsibility and power it's very easy to direct a person in a particular direction.


Pope Francis, known as a reformer, he starts signalling the types of financial reforms that he's going to do by bringing in some key individuals. And one of those individuals is the auditor general, who is Libero Milone, who was a former Deloitte auditor. And he was brought in to check the books, to do a sort of forensic audit of all of the different complicated nooks and crannies in the Vatican.


I met the Pope for the first time a few days after my appointment, and he told me that he wanted to be constantly informed of what we're doing. So that we would maybe have a meeting every month or five weeks or so. But he also said one thing at every meeting I attended. He would say to me, Dr Milone, do you still feel independent today?


Now I ask myself the question, why did he ask me that question at that time?


If you have people coming in, outsiders, who are now acting with the authority of the Pope, and can say, you need to open up your books, you need to show me what you're doing here, like, what's this invoice? What did you spend this on? It sort of starts to ruffle some feathers.

We were working in an environment which had no financial culture, and that the people who have been managing most of the issues were clerics.


You had priests with no financial training moving hundreds of millions of euros around the world, investing in this, investing in that, handing over to different fund managers. And that is quite a strange situation. There are endowments across the world, vast endowments managing billions of dollars. And for the most part, including sovereign wealth funds, they have professional structures in place, and checks and accountability, to make sure that the money is being invested in the right way.


So they have a team of professionals who sit on a board, who make sure whenever they invest in anything it goes through a process, they sign off on it. They check the money is going to the right place, that they're not going to have any problems.


There was this move for a general audit of all curial finances that wanted to be brought in, and that was stopped. And it was stopped by Cardinal Angelo Becciu, who is now become a sort of protagonist in the current scandal. That he was the one who signed the memo cancelling this Vatican-wide audit, which he got the Pope to approve after the fact, but at the time it was issued it's not clear he had the legal authority to do this.


The Vatican's former chief auditor says he was forced to resign after investigating secret bank accounts. Libero Milone was hired by Pope Francis in 2015. He tells the Financial Times he was getting too close to information the Vatican wanted to be kept secret.

We were given a list of investments to the tune of several hundreds of millions. We asked for details. We were never given the details.

We were given some documents, just a piece of paper, an Excel printout showing several hundreds of millions of investment.


Because now, with hindsight, I can say that maybe at that moment in time we had come across something we shouldn't have seen.

We discovered two cases of bugs. The bug was put drilling the roof of the office of Libero, and putting down the bug.


We had asked the gendarmerie to investigate. But we sent the report in, we never got a response to the report. A verbal response was, well, the bug was in a wall connected to another apartment. We can't go into the other apartment. The other apartment still belonged to the Vatican, so I understood what the issue was.


Lots of people were sort of sat there thinking what happened here? Did he discover something he wasn't meant to discover? Did he upset powerful people? How could an initiative which began by the Vatican trying to say, look, we're modernising, we brought in someone from outside to look at what we're doing and make sure everything is completely in order, and then a couple of years later that person is forced to resign? Looked quite odd.

This office, controlled by Cardinal Becciu, was making quite a lot of different investments. I mean, it ended up investing in and financing 'Rocketman,' the Elton John film. 'Men in Black' sequel. You have the power of appointing people to key positions. You are also in charge of a vast amount of money. The power of that role comes from the fact that you're really the person who is running everything. The one which has really got the most attention is this London property, because that's where they say they lost so much money.


One of the interesting things to watch has been the progress of the Vatican's financial institutions through its inspections by Moneyval, the Council of Europe's anti-money laundering watchdog. Moneyval is, if you like, the guarantee that you can show to the rest of the world that you are a credible financial centre, that your banks, your way of doing business is something that other jurisdictions can have faith in.


In our view this domestic risk presented by individuals in middle to senior positions, who were, for whatever reason, able to act in a way outside of rules for their own personal benefit, we were concerned that that hadn't been sufficiently recognised as a risk by the authorities.


Broadly speaking, the way the financial structure of the Vatican works, you have the Vatican Bank, which is sort of quite famous around the world for things that have happened in the past. But that is very separate to APSA, which is the Vatican's institutional asset manager. So APSA sort of manages large portfolios of property around the world.


Then in the case of the Secretary of State, the part of the Vatican which Becciu was in charge of, that was managing what's called Peter's Pence, which is a sort of day in the year, where the faithful, the Catholic faith around the world, donate money to the Catholic Church.


The Church has a saying which is, ecclesia semper reformanda est, the Church is always reforming. I think it's reforming now, and that's not always a painless process.

It's really too early to tell if this trial marks a turning point or not.


I don't know that we can predict an outcome, but we can definitely expect those that there will be some kind of result, because you don't go to all of this trouble if you don't intend to see it through to the end. I think what the Vatican is dealing with now is an epochal change. One of the most interesting dynamics at work here under the Francis papacy is that he was elected as an outsider and was expected to bring an outsider's perspective. And I think to a great extent he's remained an outsider, even in his own Vatican.


The old way of doing things no longer works. And so this is a situation where the Vatican is adjusting, somewhat painfully, to a new reality, a new set of circumstances.

What goes on in Rome is known everywhere. The same global media environment which has changed the way governments operate everywhere is now changing the way the Vatican has to operate and think about itself.


The people who are optimistic say that this is the biggest step that's ever been taken, and that this is going to change the entire way business is done inside the Vatican. The pessimists say, this is a huge and still unreformed institution, where this is only one small part of a hugely complex situation, and that much, much more needs to be done.


November 11 2021 Produced and directed by Ben Marino; director of photography Andrea Capranico; editing by Joe Sinclair and Darren O'Mahoney; colorist Nevan Carey; sound mix by Jonny Allan; animations by Russell Birkett; executive producers Joe Sinclair and Josh de la Mare.


0 comments