On June 28 this year, Italian police arrested a silver-haired priest, Monsignor Nunzio Scarano, in Rome. The cleric, nicknamed Monsignor Cinquecento after the 500 bills he habitually carried around with him, was charged with fraud and corruption, together with a former secret service agent and a financial broker. All three were suspected of attempting to smuggle 20m by private plane across the border from Switzerland.It looks like accusations of facilitating money-laundering may have led to the Vatican being disconnected from SWIFT for a while.Prosecutors alleged that the priest, a former banker, was using the Institute for Religious Works the formal name for the Vaticans bank to move money for businessmen based in the Naples region, widely regarded in Italy as a haven of organised crime. Worse still, Scarano (who, together with the other men, has denied any wrongdoing) had until only a month earlier been head of the accounting department at the Administration of the Patrimony of the Apostolic See, the treasury of the Vatican.
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The reforms now under way at the Vatican have come about in part because of the pressure brought to bear by banks such as Deutsche Bank, JPMorgan and UniCredit, all of which found themselves in the sights of regulators because of their business relationships with the Holy See. About three dozen banks, including some of the worlds biggest financial institutions, were for years correspondent banks to the Vatican, providing services when the popes business went beyond the boundaries of Vatican City. As with other institutional clients, the banks gave the Vatican access to foreign financial markets. Correspondent banks moved as much as 2bn a year from the Vaticans bank to other accounts across the globe, according to a Vatican spokesman. It was the bankers fear of being tarnished by their links with the Vatican bank after the credit crisis and fears of fines from emboldened regulators that led them to take steps that forced it to clean up its act.