Last week, Pope Francis instructed that all financial and liquid assets held by entities tied to the Holy See, Holy See employees, and other Catholic Church entities from religious orders to the Holy See Secretariat of State itself be transfered to the Institute for Works of Religion (IOR), or as it is better known, the Vatican Bank.
The Vatican Bank is a financial institute located in the Vatican City State to provide services to the Holy See, Catholic religious orders, clergy, employees of the Holy See and the Vatican City State, and others. In 2021, it was recorded that the Vatican Bank held accounts for 14,519 clients and it looked after 5.6 Billion US Dollars. It also had a net profit of 19 million US Dollars.
The IOR is not to be confused with a private bank as there are no shareholders or owners, but in reality, it acts as the Vatican's commercial bank and is led by its own statute, governed by an appointed group of five cardinals (Commission of Cardinals) who elect their own prelate (Prelate of IOR). This Prelate represents the cardinals at the Board of Superintendence meetings, which consists of six lay Catholics who are all financial experts that oversee and run the investments and manage the assets, with a President selected from among them. Then, there is the Directorate which is accountable to the Board of Superintendence and oversees operational activities
Despite the obvious rumors to come out of this move, the most likely reasons for concentrating all of these assets into the IOR is not so that the Pope can have more power, rather it is to ensure that all investments and assets are appropriate.
Earlier this year, the infamous Vatican scandal with the London Apartment building that set the Church back more than 150 million US Dollars and included spies, wire tapping, and all sorts of shenanigans more in line with a TV show or movie has brought a renewed focus on Church finances.
While many in the case apart of this deal clearly stated that with time, the money would have been made back, the bigger worry is that not once, but three times this investment deal was corrupted by outside asset managers who took advantage of the lack of an asset specialist in the Holy See's camp, as the Secretariat of State of the Holy See was the entity investing.
First, the Holy See got duped into attempting a deal in Angola to invest in Falcon Oil, but would eventually see no guarantees. Plus, Pope Francis's Laudato Si' made investing in oil precarious. But this deal had started during Pope Benedict XVI's reign originally so the contradiction and precariousness was not there at the beginning.
Then, the Secretariat of State went into the London Apartment deal, but their lead financial adviser would sell his shares and a new person took over in 2018. This made the deal even more complicated.
Finally, the deal became very bad when the financial advisor who took over decided to sell all the shares, but the voting shares to the Holy See Secretariat of State, which made the Secretariat of State have no power over the building plans or the investment directions. The Secretariat of State no longer possessed the voting power, despite having almost all the shares, all non-voting.
These facts eventually led to the gigantic loss of money the Holy See accumulated and therefore has led to resignations, criminal trials, and even Vatican Gendarmerie raids!
Therefore, Pope Francis wishes to keep assets attributed to the Holy See within the Holy See-Vatican City-Catholic Church apparatus.
At first, many expected this centralization to be put into the Vatican City's and Holy See's Central Bank and effective sovereign wealth fund, the Administration of the Patrimony of the Apostolic See (APSA).
However, the APSA is not supervised by Vatican City auditors or international agencies.
Plus, the APSA is not supposed to hold individual people’s wealth anymore and when it did, it was only for the top brass.
Therefore, had last week's decree stated that assets need to be put into the APSA, it would have suggested that Pope Francis wished to centralize all assets into an organization with no oversight, allowing for the effective complete control of the assets by central authorities.
The IOR, on the other hand, is regulated by the Holy See's and Vatican City's Supervisory and Financial Information Authority (ASIF), which is part of the international financial intelligence community, such as the Edgemont Group of Financial Intelligence that includes financial overseeing agencies from all over the world such as the Financial Crimes Enforcement Network (FinCEN) in the USA and the Suspicious Transaction Reporting Office (STRO) in Singapore. These entities share financial intelligence to fight money laundering and terrorist financing and works with the UN and other international organizations. The ASIF is also part of the Council of Europe's MONEYVAL.
The ASIF is overseen by lay Catholics who are experts in the field of anti-money laundering and anti-terrorist financing, such as American Juan Carlos Zarate, a former member of past US President George W. Bush's anti-terrorism strategies in finances. He was part of an operation that returned wealth of 3 Billion US Dollars back to Iraq that former Iraqi President, Sadam Hussain, had illegally exported out of his country.
One of the key pillars of the ASIF, the Edgemont Group, MONEYVAL, and other similar and affiliated organizations are to create autonomous and independently ran financial intelligence units so that way these groups can investigate even the political leaders in their own countries, and not be used to fight political opponents of these very leaders.
Hence, this is why the ASIF is run by mostly lay Catholics. And, this is why many believe last week's decree really is to clean up Church finances by depending on more trusted and loyal experts while using lay overseers to stop potential financial crimes.
Lastly, there is one more key player in Vatican money and that is the aforementioned Holy See Secretariat of State. The Secretariat of State traditionally acts like a third bank for the Holy See and Vatican City apparatus due to the amount of money it controls for our foreign missions like the apostolic nuncios (diplomats) and apostolic nunciatures (embassies), as well as how it helps fund the governance of the Vatican City. But, after it lost so much money in the London Apartment deal, Pope Francis made the Secretariat of State place its assets in the APSA, and now wants these transferred to the IOR.
These moves signal greater lay oversight of the Catholic Church, which is very good to fight crime in the Catholic Church, and to keep our collective wealth in our Church. And, these moves take away more financial powers from the top brass, further displaying a suppression of centralized power, rather than an increase of it.
Financial experts who are very good Catholics and expert financial analysts and bankers will now be managing the assets for the various entities that are central to our global missions via the IOR, and via the ASIF, Catholic expert anti-financial crime experts will be overseeing these transactions to make sure Catholic entities with accounts in the IOR are not having their money stolen or spent illegally, which happens quite frequently otherwise.
Pope Francis's approach to create an apparatus of lay oversight expanded to the judicial system last year, and is part of his policy to put checks and balances on clergy privileges, including cardinals. While we must strive away from a Church governed by the pure majority, we also must seek lay checks to make sure corrupt clergy are brought to justice. This will ensure a greater growth of our Church in most places like France for example, where Catholic numbers keep decreasing with each increasing scandal. Stay away from corrupting the Faith, but also stay away from corrupting more of the secular matters of our Church like money should be our motto.
This change is not without concerns though, and the major concern is about the lack of asset division that may result because of this decree. It is good to divide assets into many banks, and we must make sure that Pope Francis is not seeking centralization of these assets to use this money to help fund some shortcomings in the budget. If this were to happen, it is almost a guarantee that this alternative would lead to a bigger deficit and a potential loss of most of the liquidity belonging to the central governance of various Catholic entities, whereas now, if one falters, the others usually still do well. Luckily, many regional entities like dioceses for example, will continue to operate the same way, but the danger is real to too much centralization. This could also lead to too much authoritarian power of the Pope who could extend his power financially over various entities that do not see eye to eye with him, and could endanger our current Church dependending on how Pope Francis uses these powers.
However, it does appear the change is for the reasons listed in past paragraphs, and that is to put the asset management into financial experts loyal to our Church so that our assets are not stolen, and to put an agency to oversee these assets to stop financial crimes of these various individuals and entities. If these latter reasons are true as displayed throughout this article, then this is a very applaudable move by Pope Francis, and should decrease financial crimes in our Church.
The entities included in last week's decree have until the end of September to transfer these funds to the IOR.