Ex-CIA agent held in arms peddling probe

Italian police investigating a worldwide racket in arms, drugs, nuclear materials and precious stones have arrested a former CIA agent living in Italy, accusing him of recycling profits from the illegal trade through his banking contacts in Switzerland and the Vatican.

Roger D'Onofrio, a 72-year-old former CIA paymaster who has lived in Italy since 1993, was picked up near Naples early on Saturday morning and immediately placed in solitary confinement for 10 days' interrogation - an unusually tough form of detention which magistrates said was justified by the "exceptional gravity of the affair".

His arrest promises to help unravel a network of worldwide organised crime originally set up to provide arms to the former Yugoslavia in the run-up to the war there, and now dedicated to recycling those same weapons across the globe via established criminal trade routes.

Details are as yet sketchy, but police in Italy, Spain and the United States have arrested dozens of suspects in the last year, pointing to the involvement of the warring factions in former Yugoslavia, the various mafias of Calabria, Puglia and Sicily, a shady front company in Singapore, and the cocaine barons of Latin America. In addition, international investigators want to check out a claim made by one of their arrested suspects that $65m (pounds 42m) was laundered through the Institute of Religious Works, better known as the Vatican Bank.

Last month Spanish police asked if they could question the Cardinal Archbishop of Barcelona, Ricard Maria Carles, who is alleged to have been the intermediary between the gangsters and the Vatican. The Catholic Church has denied the allegations.

In the build-up to hostilities in former Yugoslavia in the early 1990s, investigators noticed a large movement of small arms across Italy into Slovenia and Croatia. Evidence on the battlefield suggests that Croatia managed to buy weapons from the US, Italy, Israel and the former Soviet bloc - apparently via a front operation in Singapore.

Once the war got under way, the arms began moving out of the Balkans because they were cheap and plentiful. Barter deals were set up: while arms flowed one way, drugs and precious stones would flow the other.

Mr D'Onofrio is accused of laundering the profits. He is also suspected of collusion in the murder of an Italian secret service agent who had been trailing him.