Serious failings identified in Vatican BankWednesday 18 July 2012 22.14
A European report has given the Vatican Bank a negative rating for transparency-related criteria and criticised its management.
The report was conducted by Moneyval, a department of the Council of Europe.
It suggests that the Vatican still has a long way to go before it can be included on an international "white list".
The "white list" consists of countries that abide by global norms on combating money laundering, the financing of terrorism and tax evasion.
The Vatican said it saw the 241-page report as a constructive starting point.
It said that it would allow it to improve its financial controls rather than as a conclusion.
The report awarded the Vatican negative grades of "partially compliant" or "non compliant" on seven of the 16 so-called core and key recommendations.
The bank got grades of "compliant" or "largely compliant" on nine other core and key recommendations.
The seven negative grades included insufficient customer due diligence, insufficient compliance on reporting of suspicious transactions and insufficient supervision and monitoring.
It was particularly pointed in its criticism of the management of the Vatican bank, officially known as the Institute for Works of Religion.
It "strongly recommended" that the bank be "independently supervised by a prudential supervisor in the near future".
The IOR's former president, Italian Gotti Tedeschi was ousted in a boardroom battle on 24 May.
He said he was fired because he wanted the bank to be more transparent.
The Vatican said he was an obstacle to transparency.
Mr Tedeschi was ousted a day after the arrest of the pope's butler, Paolo Gabriele.
In 2010, Rome magistrates froze €23m that the IOR held in an Italian bank.
The Vatican said at the time that its bank had done nothing wrong and was merely transferring its own funds between its own accounts in Italy and Germany.
The money was released in June 2011, but the investigation is continuing.