The Vatican’s Institute of Works for Religion (IOR) also known as the Vatican Bank is a private bank in Vatican City. It is located in a medieval tower that once was a dungeon. At the entrance you are checked by two Swiss Guards, pass through a two-door security kiosk set in a plate-glass window. Inside there is a manned reception desk and a cash machine in the wall that flashes instruction in Latin. For generations the bank has been one of the world’s most secretive institutions. It has also been the most controversial and least understood part of the Vatican‘s finances. It is not really a bank, but a cross between a credit union and an investment fund. It doesn’t make loans, nor hold reserves. Much of its money comes from collection plates so it handles unusually large amount of cash. It was founded in 1942 at the height of the second world war by Pope Pius XII to protect church assets from Nazi and communist threats and to hold and administer money designated for religious works and charity. It accepts deposits from entities or persons of the Holy See and the Vatican City State. Of its 15,000 clients nearly half are religious orders and others are Vatican offices, diplomatic missions (embassies), episcopal conferences, parishes, and clergy. In the 1980s Pope John Paul II used the Bank to send money to Solidarity, the Polish trade union movement that played a major role in starting the fall of communism in Eastern Europe. Millions of dollars of covert US aid passed through the Vatican Bank to Solidarity. In the 1990 there were suspicions that funds passed through the Bank to the Contras in Nicaragua and other anti-communist guerrillas in Argentina, El Salvador, and Honduras. In 2013 large cash withdrawals and deposits were uncovered in bank accounts held by the Vatican embassies in Iran, Iraq, Syria and Indonesia. The Bank has been used to quickly and secretly get money to difficult places, but it also has been attractive to criminals. Throughout the 1970 and 80s the chairman of the Bank did business with the Banko Ambrosiano of Milan. That Bank turned out to have links with the Sicilian mafia. In 1982 the Milan Bank had a fraudulent bankruptcy and the Vatican Bank turn out to be its main shareholder. The Vatican Bank insisted it had no responsibility for the Milan Bank’s collapse, but never-the-less it agreed to make a “goodwill payment” to the creditors of $244 million. The scandal cost the Vatican hundreds of millions of dollars in legal battles with the Italian authorities and did tremendous damage to the moral authority of the Church. The shadow of shame has never completely left the Bank. Over the decades, the Vatican Bank has been at the center of many scandals and accusations of mismanagement, money laundering and fraud. After the terrorist attacks of Sept. 11, 2001, the world’s financial authorities, at the request of the US government, began cracking down on money-laundering. What in the past had been considered purely a criminal matter, became an issue of national security since money-laundering could be disguising the financing of terrorism.
