Pope acts to tackle money-laundering in Vatican

Benedict\'s decree, which addressed "the prevention and opposition to illegal financial activity," comes three months after an investigation was launched into two senior figures at the bank.

"As of today, all organisations associated with the government of the Catholic Church... have become part of the system of juridical principles and instruments" set up by the international community, Vatican spokesman Federico Lombardi said in a statement explaining the decree.

The changes come as the Vatican struggles to retain credibility in the face of the financial scandal.

In September, an investigation was launched into the Institute for Religious Works (IOR) -- the official name of the Vatican bank -- for alleged violation of money-laundering rules.

Italy\'s financial police quickly seized 23 million euros from the IOR after the financial intelligence office at the Bank of Italy noticed two operations by the bank that it deemed suspicious.

Lombardi told journalists on Thursday the changes had "nothing to do" with the investigation into the IOR, which until now has been excluded from the "White list" of countries compliant with strict financial controls.

The Vatican\'s new financial authority should finally bring the Holy See in line with international standards.

Lombardi said the Vatican was "committed" to fighting illegal activities such as "recycling profits of crime" and "the financing of terrorism" by adopting international rules "to prevent and combat these terrible phenomena."

He said that by promising to adhere to European rules on money-laundering the Vatican hoped "the Church will be more \'credible\' before the members of the international community."

"Those errors which so quickly become the cause of \'scandal\' for public opinion....will be avoided," said Lombardi in the statement.

The Vatican spokeman also said he hoped the FATF (the international Financial Action Task Force on Money Laundering) would "look favourably" on the Vatican for offering the requested financial safeguard guarantees.

The investigation into the IOR focuses on the bank\'s president Ettore Gotti Tedeschi and chief executive Paolo Cipriani, accused of violating laws on disclosing financial operations. Both men deny any wrongdoing.

Gotti Tedeschi, whose appointment in 2009 was greeted as a move towards greater transparency at the IOR, said he was "profoundly humiliated and mortified" by the probe and that the operations were simply transfers of money between different IOR bank accounts in order to buy German bonds.

At the time, the Vatican said the IOR, which manages bank accounts for religious orders and Catholic associations, was working with the Bank of Italy and international organisations to adhere to tighter transparency standards.

The investigation cast fresh controversy on the Vatican after the priest paedophilia scandal that has rocked the Catholic Church around the world.

It was also a fresh blow to the bank itself, whose reputation was badly hit in the 1980s.

In 1982 IOR was caught up in one of Italy\'s biggest fraud cases when Milan\'s Banco Ambrosiano -- of which it was the main shareholder -- collapsed.

Banco Ambrosiano\'s chairman Roberto Calvi, known as "God\'s Banker" because of his ties with the Vatican, was found hanging from a London bridge amid suspicions that he had been murdered by the Mafia as part of a money-laundering scheme.

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