10/05/23

EUROPE: More 'incisive' efforts in financial transparency, according to ASIF 2022 report.

As published on vaticannews.va, Wednesday 10 May, 2023.

One hundred twenty-eight cases of suspicious activity reports received in 2022, 124 from the Institute for the Works of Religion (IOR) alone, some of which led to five suspensions. Nineteen reports forwarded to the Vatican’s Office of the Promoter of Justice. Sixty-seven international memoranda of understanding signed so far, the latest with North Macedonia and the Cayman Islands.

According to its annual report released on Wednesday, the Vatican’s Supervisory and Financial Information Authority (ASIF), established by Pope Benedict XVI in 2010 to combat money laundering and terrorist financing and financial intelligence, continues its “incisive” work.

The 2022 annual report traces the activities carried out by the ASIF over the past twelve months, and notes the contributions made “internally” and “externally”, as well as the participation "without interruption or hesitation" in the programs of international fora such as Egmont and MONEYVAL.

The report opens with a letter from ASIF President Carmelo Barbagallo, who dwells on the "long and difficult" interlude of the pandemic.

“Many hoped that 2022 would be a breakthrough year,” he said, “with decisive progress in limiting the spread of the virus and a strong recovery in the global economy.”

Instead, the pandemic, though less virulent, had knock-on effects into the following year as well. It was joined by the war in Ukraine and the emergence of a banking crisis.

“In this difficult environment,” said Mr. Barbagallo, “international action to prevent and counter money laundering and terrorist financing continues to be incisive. The programs of the international fora in which ASIF participates (MONEYVAL and Egmont) have continued without interruption or hesitation.”

However,” he noted, “it is undeniable that the fight against money laundering and terrorism, necessarily transnational, needs a cohesive and fully cooperative world. For that to be achieved, it is vital that the global spirit of cooperation be recovered quickly.”

In more detail, the Vatican jurisdiction has continued to be engaged in “the work of finetuning its measures to prevent and counter money laundering and the financing of terrorism," said the ASIF president.

Spending mechanisms were refined and control bodies strengthened, while “awareness continues to be raised through special training initiatives focused on possible external threats and related procedural and organizational safeguards.”

All this while always pursuing the "financial integrity and transparency."

ASIF Director Giuseppe Schlitzer noted in his introduction to the report that the ASIF has “increased external projection: in relations with the other Authorities of the Holy See/Vatican City State” in 2022.

These were carried out “in the exchange of experiences with equivalent authorities of other states; and in participation in international fora and technical bodies.”

The report makes particular mention of the work with the Financial Security Committee (Co.Si.Fi.), the Joint Committee for the implementation of the Monetary Agreement with the European Union, the Office of the Auditor General, the Office of the Promoter of Justice, and the Gendarmerie Corps.

In addition, the ASIF held training exchanges with the Bank of Italy and the Bundesbank and participated actively in the Egmont Group and MONEYVAL plenaries. Representatives also attended the annual Conference on European Financial Regulation and Supervision in December 2022 in Brussels for the first time.

In the area of prudential supervision, Mr. Schlitzer emphasized that the ASIF's Supervisory Unit has regularly verified profiles “for the purposes ensuring the prudent, sound and sustainable management of the IOR”, which is currently the only entity authorized to carry out financial activities on a professional basis in the jurisdiction.

Thus, the implementation of a "remedial plan" that the IOR prepared following the General Inspection conducted by ASIF in 2020 was constantly monitored.

In 2022, the Financial Intelligence Unit received 128 suspicious activity reports. The receipt and analysis of these reports are among the primary functions of the ASIF, which analyzes each report to assess whether there is "reasonable suspicion" of money laundering, terrorist financing, or a predicate offense, forwarding a report to the Office of the Promoter of Justice if such suspicions are revealed to be well-founded.

Twenty-four more reports were received in 2022 than the 104 received in 2021. In addition to those from the IOR, two were sent by Vatican authorities, one from a nonprofit and one from other entities.

“A total of 19 reports were submitted to the Office of the Promoter of Justice,” said Mr. Schlitzer.

The ASIF report says that 2022 confirmed the trend toward "higher quality" reports, achieved through " the stabilization and normalization of the reporting system and the intensification of the preventive measures undertaken by the IOR" and " more detailed anomaly indicators." These include " unnecessarily complex or illogical activities, use of cash, and uncooperative or suspicious behavior."

Reports of suspicious activity received by the ASIF resulted in five suspensions, totaling 829,050 euro. There were no measures to freeze accounts or funds but, in general—compared to the previous year—2022 saw an increase in the number of cases in which ASIF had to intervene under Article 48 of Law No. XVIII, which precisely provides for the possibility of suspending the execution of a transaction or freezing assets for up to five business days in cases of suspicion of money laundering or terrorist financing.

Cooperation with other Vatican entities remained "intense and productive": the Financial Intelligence Unit (FIU) of the ASIF sent 39 requests for cooperation and received 33 others.

In terms of international cooperation, the FIU sent 30 requests for information or spontaneous communications to counterpart offices and received 11 communications from counterparts.

"As in previous years, international cooperation proved to be very valuable in acquiring relevant information during the operational analysis phase, preparatory to the transmission of a report to the OPJ," the report states.

The report also emphasizes the Holy See remains “strongly committed” to ensuring international cooperation and exchange of information "for the purposes of preventing tax evasion and facilitating the fulfillment of fiscal requirements by foreign citizens and legal entities having relations with the IOR."

Based on a specific Memorandum of Understanding, ASIF was delegated by the Secretariat for the Economy to monitor the adoption of the IOR's procedures to comply with the provisions of the Agreement with the United States on Tax Obligations and implement the Foreign Account Tax Compliance Act (FATCA Agreement) of 10 June 2015.

On the subject of agreements, in 2022 the ASIF also signed a memorandum of understanding with the Financial Intelligence Units of North Macedonia and the Cayman Islands.

A total of 67 memoranda have been signed since 2012.

Finally, in terms of cross-border cash transport declarations, in 2022 the ASIF recorded 154 incoming declarations (total amount of €14,725,989), and 410 outgoing declarations (€6,273,198).