Pope lifts veil of secrecy around the Vatican Bank

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The Vatican, whose bank is the focus of a money laundering investigation, moved yesterday to bring it into line with international standards on financial transparency and the fight against funding terrorism.

It was the biggest action ever taken by the Vatican to meet international demands for more financial openness. Pope Benedict signed an executive order saying its bank and all other departments will adhere to regulations and co-operate with foreign authorities.

The decree creates an independent Vatican compliance watchdog, the Financial Information Authority, whose duty is to ensure all Vatican financial transactions comply with banking laws.

The move is aimed at making the Vatican compliant with the rules of the Financial Action Task Force, the inter-governmental Paris-based body charged with combating money laundering and terrorism financing.

The Vatican Bank was in the spotlight in September when Italian officials froze €23m (£20m) of funds after they opened an investigation into possible money laundering. The bank's chairman Gotti Tedeschi and his deputy were placed under investigation. They have not been charged.

The bank said it was merely transferring funds between its own accounts. The Italian investigation is continuing.