The Laundromat – October Edition 2025

Welcome to the October edition of The Laundromat, your newsletter on money laundering and fraud, designed to keep you informed and sharpen your awareness of financial crime tactics.

For this edition, we took a more comprehensive look at the Vatican and its finances – and we are not surprised to have found quite a bit of information that leave a bad taste in the mouth.

Topic of the month: Inside the Finances of the Vatican

With an area of only 0.49 square kilometers and a population of 882, Vatican City is the smallest state in the world. However, it wields immense power through its authority over 1.2 billion Catholics. Given its position as the center of the Catholic Church, its global influence cannot be denied. And despite close ties to the EU, the Vatican remains outside the Union due to its political structure and lack of a market economy, but it has adopted some EU standards.

The Vatican’s finances have been characterized by a lack of transparency for centuries, and the various financial scandals of the Vatican in the 20th and 21st centuries alone are sufficient to provide insight into questionable practices in its past. These range from alliances during World War II to mafia-style money laundering and systematic tax evasion, to name just a few examples:

• Financial Ties to the Nazis (1930s)
  In 1933, the Vatican signed a concordat with Germany that weakened Catholic resistance to Hitler. Through the Vatican Bank (Institute for the Works of Religion/IOR), it received regular payments amounting to billions and helped to move war booty discreetly. This turned the IOR into a kind of offshore bank for the Nazi regime.
• Banco Ambrosiano (1980s)
  The Vatican Bank was the main shareholder of Banco
  Ambrosiano, which engaged in large-scale money laundering under Roberto Calvi. After its collapse in 1982, with a financial hole of over 3 billion US dollars, the Vatican had to pay 244 million US dollars in compensation but denied any wrongdoing on its part. Milanese banker Roberto Calvi (known as “God’s banker”), who had ties to the Vatican, is said to have supported a network that included not only the Vatican Bank, but also right-wing politicians, Italian Freemasons, and US intelligence agencies. Calvi was found hanged under Blackfriars Bridge in London in 1982.
• Nunzio Scarano (2013)
  The Vatican accountant wanted to smuggle 20 million euros in untaxed cash into Italy. He was acquitted of serious charges but convicted of defamation. In the same year, the money laundering control authority Moneyval reported over 100 suspicious transactions at the IOR.
• Money Laundering Allegations (year unknown)
  The IOR was long considered a hub for dubious financial transactions. Between 2010 and 2012, the Bank of Italy launched investigations, and even JP Morgan closed a Vatican account with billions in transactions.
• Dubious Real Estate Transactions (2000s-2010s)
  The Vatican exploited a loophole in Italian law that made chapels tax-exempt, saving around 4 billion Euros between 2006 and 2011, which was a case of tax evasion. The European Court of Justice later declared this exploitation of the loophole to be illegal, with additional claims potentially amounting to 13 billion Euros.

The purchase of a luxury property in London between 2014 and 2018 for a total of almost 350 million Euros, which was carried out through a series of complex transactions, was resold in 2022 at a loss of 140 million Euros due to public criticism. It was said that the purchase was partly financed by Peter’s Pence donations. This deal led to corruption charges against Cardinal Angelo Becciu, who had overseen the transaction.

EUROPEAN CEO offers a more detailed insight into the history of the Vatican’s financial scandals. You may also be interested in The Mokonomy documentary on YouTube about “the biggest financial scandal of the last 30 years” which is dubbed in German.

It was not until Pope Francis that serious attempts were made to reform banking in the Vatican and introduce transparency

Under Pope Francis, reforms and closer cooperation with the supervisory authorities began. One could say Pope Francis “cleaned up” using his anti-corruption offensive launched in 2019, including far-reaching personnel consequences, also against the backdrop of a not-so-secure financial situation. The Vatican Secretariat of State was stripped of its responsibility for investments, five presumably high-level employees were suspended, the cardinals’ salaries were cut several times, and the aforementioned Cardinal Giovanni Angelo Becciu was convicted of various fraud and embezzlement offenses.

In addition, the Pope introduced new statutes for the Vatican Bank, brought in external auditors, and implemented ethical guidelines – but at the same time acknowledged the existence of financial corruption.

The measures initiated by Pope Francis proved successful: under his leadership, the Vatican Bank received the highest rating from the European Moneyval in 2021 due to the standards established during his pontificate to prevent money laundering, terrorist financing, and other forms of financial fraud.

Everything on Track at the Vatican Under Pope Leo?

Pope Francis has made significant progress in the fight against corruption. However, his follower, Pope Leo, faces the even more difficult task of getting the balance sheets in order and balancing the budget deficit.

The major challenges this poses for Pope Leo were reported on ALJAZEERA in early September.

New Allegations

As if that is not enough, new allegations have recently come to light, once again highlighting the ongoing controversies and intense pressure for reform in the Vatican’s financial management.

The Vatican Bank allegedly used a “master key for money laundering” by illegally manipulating bank transfers. The city-state’s former chief financial supervisor, who was dismissed in 2017, claims that the Vatican’s payroll agency was able to retroactively change names and account numbers in transactions that had already been completed, thereby concealing the senders and recipients of payments.

These manipulations would have allowed Vatican officials to transfer funds to private individuals without revealing their identities – offering virtually unlimited opportunities for money laundering and violating basic AML regulations.

The allegations come from Libero Milone, a former Deloitte auditor whom Pope Francis appointed in 2015 to restructure the Vatican’s finances. In 2017, he was forced to resign from his post after being accused of espionage. He, however, claims that his forced departure was related to his discovery of financial misconduct involving the then police chief and Cardinal Giovanni Angelo Becciu.

Milone recently reported on tools for editing international bank account numbers (IBAN) within the SWIFT system. He said he did not know exactly how the tools in question had circumvented the existing restrictions, but he had seen evidence that transactions had been altered retrospectively. SWIFT experts consider this technically impossible because transfers cannot be changed after they have been sent, as digital signatures and encryption are designed to prevent manipulation. Nevertheless, the allegations are being taken seriously, not least because of Milone’s high credibility – and, of course, because of the Vatican’s history.

Here is the full article on politico.eu, which reported this new incident in mid-August 2025.

In Case You Missed It

In Case You Missed It: CAPITAL.de: “Switzerland wants to remain a tax haven – and is watering down money laundering rules”

Switzerland wanted to tighten its money laundering rules but is facing resistance from within its own government because many members of parliament see this as a threat to the international competitiveness of their financial center. The country has been under pressure to tighten its rules since 2008 and has long been considered attractive due to its lax laws. Other countries may have stricter laws “on paper,” but they enforce them less consistently. Swiss politicians therefore point to the credibility and strictness of their enforcement.

Click here for the full article published in mid-September 2025 on CAPITAL.de (in German).

Further Reading: The EU Anti-Money Laundering Directive

Money laundering is a serious problem, as it is not only used to launder large sums of money from drug deals in the style of Al Capone and finance terrorist activities. Rather, it poses a continuously growing threat to the financial and economic system as a whole and can also cause significant economic losses and damage to the reputation of affected companies.

In order to put a stop to these criminal activities, the EU Parliament introduced the EU-wide Anti-Money Laundering Directive (AMLD) back in 1991, which imposes a whole series of regulations and standards on financial institutions and other affected companies, on the basis of which the illegal origin of funds must be identified and reported.

Read everything you need to know about AMLD in the WebID glossary now.