VATICAN CITY — Inside a 13th-century monastery in a sleepy village north of Rome, Father Salvatore Palumbo was allegedly serving more than one higher authority. Italian prosecutors say a Ferrari-driving lawyer who defrauded insurance companies used the priest as a front man, with Father Palumbo stashing the illicit cash inside the secretive Institute for Works of Religion.
A.k.a., the Vatican Bank.
The arrests over the past six months of Palumbo and the 34-year-old lawyer, Simone Fazzari, highlight one major source of the scandals and power struggles that observers say contributed to Pope Benedict XVI’s historic resignation this week — the murky world of Vatican finances.
With ATM machines offering transactions in Latin and a castlelike headquarters protected by spear-toting Swiss Guards, the financial arm of the Vatican has never been a run-of-the-mill bank. But a sense of crisis has been building around it and other Vatican financial dealings.
Italy last month barred its own banks from doing business in the Holy See, citing a lack of transparency by the city-state’s financial apparatus that has routinely declined to release data on accounts held there by church bodies, clergy, foreign embassies and lay entities related to the Vatican. The move cut off credit card processing at Vatican commercial sites including the Sistine Chapel, effectively forcing them to go cash-only. This week, plastic was finally welcomed again in Vatican City, but only after church authorities cut a deal with a Swiss firm that is not subject to European Union banking laws.