Vatican investigation prompts financial reform

Pope Francis is pushing ahead with reforms of Vatican finances on the back of an ongoing investigation into a €200 million London property investment, which had been overseen by the Secretariat of State – the body at the heart of the Catholic Church’s central administration.

A new law came into effect on 1 January 2021 that has removed the Secretariat’s power to manage investments and property holdings, handing that authority to the Administration of the Patrimony of the Apostolic See (APSA). Under the new law, APSA will gain ownership of funds, bank accounts, and investments, including real estate.

APSA’s management of its new responsibilities will be subject to “ad hoc control” by the Vatican’s Secretariat for the Economy, established in 2014 to oversee the financial activities of the Holy See and Vatican City State, which will also serve as the Papal Secretariat for Economic and Financial Matters.

The law requires the Secretariat of State to transfer as soon as possible, and no later than 4 February 2021, all of its liquid assets held in current accounts at the Institute for the Works of Religion, commonly known as the Vatican bank and foreign banks.

The investigation into suspected misuse of Catholic charitable funds centres on the purchase of a luxury property in London in 2018 using Church funds, including alms.

It became public knowledge last year following a raid on the Secretariat’s office by Vatican police, who seized documents and computers.

During the investigation, which began in October 2019, there have been several arrests and the sacking of a Cardinal.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The Catholic Church has not traditionally been known for its openness or transparency, particularly when it comes to its financial affairs.  However, the new legislation that has been enacted at the start of this year seems to herald a change to its approach and an intention to impose more rigorous oversight.

If any financial impropriety is identified, it will be interesting to see whether prosecutions follow but, if they do, the finances of the Holy See are likely to be exposed to an unprecedented level of public scrutiny.  Specifically, a prosecution will almost inevitably rely on expert forensic accountancy testimony that will seek to identify, expose and explain the money trail along which any allegedly misappropriated funds may have flowed.”

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