Institute for the Works of Religion

Based on Wikipedia: Institute for the Works of Religion

The Bank That Answers Only to God

In June 1982, a 62-year-old Italian banker named Roberto Calvi was found hanging from scaffolding beneath Blackfriars Bridge in London. His pockets were stuffed with bricks and cash. He had fled Italy on a false passport just days earlier, leaving behind a collapsed bank, a web of Mafia connections, and a trail that led directly to an institution most people didn't even know existed: the Vatican Bank.

The Vatican has a bank. Let that sink in for a moment.

It's not called the Vatican Bank, officially. It's the Institute for the Works of Religion—in Italian, the Istituto per le Opere di Religione, or IOR. And for nearly a century, it has operated in the shadows of one of the world's most visible institutions, handling billions of dollars while remaining almost entirely unaccountable to anyone except the Pope himself.

What Exactly Is This Place?

The Institute for the Works of Religion is not, technically speaking, a bank. It has no shareholders. It issues no stock. It doesn't operate like JPMorgan Chase or Deutsche Bank or any financial institution you've heard of. Instead, it's structured as what lawyers call a "juridical canonical foundation"—essentially, a legal entity that exists under the Catholic Church's own internal legal system, canon law.

Think of it this way: most banks exist to make money for their owners. The IOR exists to hold and manage money for the Catholic Church and its associated organizations. Its stated purpose, according to its current statutes, is "to provide for the custody and management of movable and immovable assets transferred or entrusted to it by individuals or legal entities, intended for works of religion or charity."

That sounds innocuous enough. But the IOR's unique position—inside Vatican City, outside the reach of Italian law, answerable only to an internal hierarchy—has made it a magnet for controversy.

A Pope Creates a Bank

The IOR was established on June 27, 1942, by Pope Pius XII. This was not an accident of timing. Europe was engulfed in war. The Vatican was a neutral island surrounded by Fascist Italy. And the Church needed a secure way to manage its finances during deeply uncertain times.

But the IOR didn't emerge from nothing. It absorbed an earlier institution called the Administration of the Works of Religion, which itself had grown out of a Commission for Works of Charity that Pope Leo XIII established back in 1887. So while the IOR as we know it dates to 1942, its roots stretch back more than 135 years.

Here's what makes the IOR unusual in the Vatican's organizational structure: it's not part of the Roman Curia. The Curia is the central administrative apparatus of the Catholic Church—think of it as the Vatican's civil service, the bureaucracy that keeps a 1.4-billion-member global institution functioning. Most Vatican entities answer to the Curia in some way.

The IOR doesn't. It reports to its own Commission of Cardinals and, ultimately, to the Pope directly. This independence has been both its strength and its fatal flaw.

How the Bank Actually Works

The IOR's governance structure is relatively straightforward, at least on paper. There are four main bodies.

First, a Commission of Cardinals—five of them, appointed for renewable five-year terms. They elect their own president and provide high-level oversight. As of the most recent appointments, this commission includes some significant figures: Christoph Schönborn, the former Archbishop of Vienna, serves as president. Luis Antonio Tagle, who heads evangelization efforts for the global Church, sits on the commission. So does Konrad Krajewski, who holds the wonderfully medieval title of Papal Almoner—essentially, the Pope's charitable giving officer.

Below the cardinals sits a Board of Superintendence, which defines strategy and oversees operations. This board is led by Jean-Baptiste de Franssu, a French financier who has served as president since July 2014. Unlike the Commission of Cardinals, the Board of Superintendence includes laypeople—bankers and financial professionals from the secular world.

Then there's the Prelate of the IOR, currently Monsignor Battista Ricca, who serves as secretary to the Commission and attends board meetings. And finally, there's the Directorate, which handles day-to-day operations.

This structure might seem like standard corporate governance. But remember: all of this exists inside a sovereign city-state of 121 acres, exempt from most external regulation, with its own courts and its own legal system.

The Sindona Disaster

In 1968, the Italian government revoked the Holy See's tax-exempt status on income from Italian investments. This created a problem. The Vatican needed to diversify its holdings, to move money beyond Italy's reach. And so the Church turned to a financial adviser named Michele Sindona.

Sindona was, at the time, one of Italy's most powerful businessmen. He was also, it would later emerge, deeply connected to the Sicilian Mafia. And he was a member of Propaganda Due—better known as P2—a secret Masonic lodge that the Italian Parliament would eventually classify as a "subversive organization."

In 1974, Sindona's American venture, Franklin National Bank, collapsed. It was, at the time, the largest bank failure in United States history. And when his financial empire crumbled, it took a substantial chunk of Vatican money with it. Estimates suggest the Holy See lost around 35 billion Italian lire—roughly 20 million British pounds at the time.

Sindona fled to Sicily, faked his own kidnapping, and eventually died in prison after drinking coffee laced with cyanide. He had been convicted of ordering the murder of a lawyer who was investigating his affairs.

But the Vatican's involvement with dangerous financiers was just getting started.

The Banco Ambrosiano Affair

If the Sindona scandal was embarrassing, what came next was catastrophic.

Roberto Calvi ran Banco Ambrosiano, which at its peak was Italy's largest private bank. Like Sindona, Calvi was a member of the P2 lodge. And like Sindona, Calvi had deep ties to the IOR. The Vatican Bank held a 10 percent stake in Banco Ambrosiano. More significantly, Archbishop Paul Marcinkus—who ran the IOR from 1971 to 1989—had allegedly provided "letters of patronage" supporting the troubled bank.

A letter of patronage is essentially a comfort letter, a document suggesting that one institution stands behind another without legally guaranteeing its debts. When Banco Ambrosiano collapsed in 1982, leaving behind more than a billion dollars in losses, those letters became very important indeed.

Calvi was convicted of violating Italian currency laws. He fled the country on a false passport. And then, in June 1982, his body was found hanging beneath that London bridge, pockets full of bricks.

Was it suicide? Murder? The first inquest ruled suicide. A second inquest, in 1983, returned an open verdict. In 2007, five people—including a Mafia boss and Calvi's former driver—were tried for his murder. All were acquitted for lack of evidence.

Meanwhile, Italian prosecutors issued an arrest warrant for Archbishop Marcinkus in 1987, accusing him of being an accessory to fraudulent bankruptcy. Marcinkus responded in the only way available to him: he stayed inside Vatican City for four years, beyond the reach of Italian law, until the warrant was finally dismissed in 1991. He then returned to the United States, where he lived quietly until his death in 2006.

The IOR never admitted legal responsibility for Banco Ambrosiano's collapse. But it did acknowledge "moral involvement"—whatever that means—and paid 224 million dollars to creditors.

Cold War Connections

The IOR's scandals weren't limited to Italian financial intrigue. During the Cold War, the bank allegedly served as a conduit for American intelligence operations.

According to various accounts, the Central Intelligence Agency used the IOR to funnel money to Solidarity, the Polish trade union that played a crucial role in undermining Soviet control of Eastern Europe. Tony Abse, writing in The Weekly Worker (a publication of the Communist Party of Great Britain), described this as "part of the final offensive against the Soviet Union."

Other sources claim that IOR accounts were also used to channel funds to the Contras, the rebel groups fighting the socialist Sandinista government in Nicaragua during the 1980s. If true, this would mean the Vatican Bank was effectively serving as a financial cut-out for covert American operations—a remarkable role for an institution whose stated purpose is to support "works of religion or charity."

None of this has been conclusively proven. But the allegations persist, adding another layer of intrigue to an institution that seems almost designed to attract conspiracy theories.

Holocaust Claims

In 1999, a group of Holocaust survivors filed a class-action lawsuit against the IOR in San Francisco. The case, known as Alperin v. Vatican Bank, alleged that the Vatican Bank had helped launder assets stolen from Jews and others during World War II.

The legal journey was complex. A district court dismissed the case in 2003, ruling it was a "political question" that courts shouldn't decide. But in 2005, the Ninth Circuit Court of Appeals reinstated part of the case, creating an important precedent at the intersection of two federal laws: the Alien Tort Claims Act, which allows foreign nationals to sue in American courts for violations of international law, and the Foreign Sovereign Immunities Act, which generally protects foreign governments from lawsuits.

Ultimately, in 2007, the complaint was dismissed on the basis of sovereign immunity. The Vatican is, after all, a sovereign state, and sovereign states enjoy broad protection from foreign lawsuits. But the case raised uncomfortable questions about what the IOR might have known, and when, about the origins of money flowing through its accounts during and after the Nazi era.

The Money Laundering Era

If you thought the scandals were relics of the Cold War era, think again. In September 2010, Italian magistrates seized 23 million euros from the IOR on suspicion of money laundering violations.

The money had been destined for transfer from an Italian bank called Credito Artigiano to JPMorgan Chase and another Italian institution, Banca del Fucino. Both the origin and destination accounts were controlled by the IOR. Italian authorities believed the transfers violated anti-money laundering laws—specifically, requirements to identify the ultimate source and purpose of funds.

Ettore Gotti Tedeschi, who then headed the Vatican Bank, was placed under investigation along with another IOR manager. The seizure made international headlines. Here was the Vatican, which positioned itself as a moral authority, having its assets frozen over alleged financial crimes.

The funds were eventually released in May 2011, apparently in recognition of steps the Vatican had taken to improve its compliance with international standards. And in 2013, money laundering charges against Gotti Tedeschi were dropped. He was formally acquitted in March 2014.

But by then, Gotti Tedeschi was already gone. In May 2012, he had been ousted as head of the Vatican Bank for what the IOR called his "failure to fulfill the primary functions of his office." The exact reasons remain murky. Some saw it as a clash over transparency reforms. Others suggested internal Vatican politics. Gotti Tedeschi himself reportedly kept detailed notes about what he knew, which he said he would only reveal if something happened to him.

The Monsignor and the Missing Millions

Just weeks after Pope Francis was elected in March 2013, another scandal erupted. In June, Italian police arrested three people on suspicion of corruption and fraud. One of them was Monsignor Nunzio Scarano, a senior accountant at a different Vatican financial entity called the Administration of the Patrimony of the Apostolic See, or APSA.

The allegations were almost comically brazen. Scarano and his alleged co-conspirators had allegedly planned to smuggle 20 million euros in cash from Switzerland into Italy aboard a private plane. When that scheme apparently fell through, Scarano was separately charged with money laundering through IOR accounts.

According to investigators, millions of euros in "false donations" from offshore companies had moved through Scarano's accounts at the Vatican Bank. The IOR had actually frozen his accounts back in July 2013, and Vatican officials were reportedly cooperative with Italian investigators, providing detailed information about Scarano's transactions.

In January 2016, Scarano was acquitted of corruption charges but convicted of making false allegations and sentenced to two years. His money laundering trial in his hometown of Salerno was still pending at that time.

One of Scarano's alleged co-conspirators was particularly interesting: a former Italian secret service agent. The intersection of Vatican finance, Italian intelligence, and alleged criminal activity seemed almost too perfect for a thriller novel.

Francis Takes Charge

Pope Francis was elected in March 2013 with a mandate for reform. The Argentine pontiff had made his name as a champion of the poor, a critic of clerical careerism, and someone willing to challenge entrenched Vatican interests. The IOR was an obvious target.

In June 2013, Francis created a special Pontifical Commission—known by its Italian acronym CRIOR—to study IOR reform. This was not window dressing. Francis wanted answers, and he wanted changes.

By April 2014, the commission had delivered its recommendations. The Pope approved them, and the Vatican issued a statement that carefully balanced continuity and change. "The IOR will continue to serve with prudence and provide specialized financial services to the Catholic Church worldwide," it said, while "reaffirming the importance of the IOR's mission for the good of the Catholic Church, the Holy See and the Vatican City State."

What did reform actually mean? Several things. The IOR became more transparent, publishing its first-ever annual report in October 2013 and launching its own website in July of that year. It submitted to external audits for the first time. And it began closing accounts that couldn't demonstrate legitimate purposes.

In August 2019, Francis issued a chirograph—a papal document written in the Pope's own hand—establishing new statutes for the IOR. These formalized the governance structure and reinforced the institution's charitable purpose.

Then, in August 2022, Francis went further. He signed a rescript—another type of papal document—establishing that all financial resources of the Holy See and its associated institutions must be transferred to the IOR. The Vatican Bank was to become "the sole and exclusive entity responsible for asset management activities and the custodian of the Holy See's movable assets."

This was a remarkable consolidation of power. By centralizing financial management in one institution, Francis was making it easier to monitor and control how Vatican money moves. Whether this will prevent future scandals or simply concentrate risk remains to be seen.

Entering the International System

For most of its existence, the IOR operated in a regulatory vacuum. It was inside Vatican City, exempt from Italian law, and unaccountable to international financial authorities. This made it useful for people who wanted to move money without scrutiny—which, of course, was precisely the problem.

Change came slowly, then all at once.

In January 2010, a new monetary agreement between the European Union and Vatican City State entered into force. Under this agreement, the Vatican committed to implementing EU legislation on euro counterfeiting and money laundering. Crucially, it also accepted the European Court of Justice as the sole jurisdiction for settling disputes under the agreement.

This was significant. The Vatican was voluntarily submitting to external oversight for the first time in its financial history.

Later that year, Pope Benedict XVI established the Vatican's own Financial Intelligence Authority—in Italian, the Autorità di Informazione Finanziaria, or AIF. This body was charged with monitoring all Vatican financial operations and ensuring they conformed to international norms against money laundering and terrorism financing.

In 2012, the Vatican took an even more dramatic step. It invited Moneyval—the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering Measures—to conduct an independent assessment of its financial systems. This was unprecedented. The Holy See was voluntarily subjecting itself to the judgment of an external auditor.

The Italian news magazine l'Espresso called it "an historic watershed." And the results, while mixed, were encouraging. The Vatican received passing grades on 22 out of 45 guidelines and met international standards in 9 out of 16 core areas. Moneyval noted that the Vatican "has come a long way in a very short period of time."

In November 2012, the Vatican hired René Brülhart, a Swiss anti-money laundering expert, to direct the AIF. Brülhart had previously worked for the Financial Intelligence Unit in Liechtenstein—a country with its own complicated history of banking secrecy—and for the Egmont Group, an international network of financial intelligence units. His appointment signaled that the Vatican was serious about meeting international standards.

More Trials, More Convictions

Reform didn't mean the end of prosecutions. In February 2017, a Roman court convicted two former IOR officials—Paolo Cipriani, a former director, and Massimo Tulli, his deputy—for failures in reporting requirements involving three small transfers. They were acquitted of more serious money laundering charges involving 60 million dollars in transfers, but still sentenced to four months and ten days in prison, plus fines.

The following year, Vatican prosecutors indicted Angelo Caloia, who had served as IOR president from 1989 to 2009, along with an attorney named Gabriele Liuzzo. The charge: embezzling 62 million dollars through a real estate scheme between 2001 and 2006. The case has moved slowly through the Vatican's own court system.

These prosecutions represent something new. For most of its history, the IOR's scandals resulted in accusations and allegations but rarely in accountability. The fact that former officials are now facing trials—sometimes in Vatican courts, sometimes in Italian courts—suggests that the culture of impunity may finally be cracking.

What the Vatican Bank Does Today

So what does the IOR actually do in 2024? According to its own statements, it provides "specialized financial services to the Catholic Church worldwide." That's deliberately vague.

In practice, the IOR holds accounts for Vatican entities, religious orders, Church-affiliated organizations, and some individuals—primarily clergy and Vatican employees. It manages investments. It facilitates transfers. It provides banking services for an institution that operates in virtually every country on Earth.

This last point is worth emphasizing. The Catholic Church has a presence in places where normal banking is difficult or impossible—conflict zones, countries under sanctions, regions with corrupt or collapsed financial systems. The IOR provides a way to move money to missionaries, charitable operations, and local churches in these places.

This is a legitimate and important function. It's also, obviously, a potential vulnerability. An institution designed to move money to difficult places is an institution that could be exploited by people who want to move money for illegitimate reasons.

The Fundamental Tension

At its core, the IOR embodies a tension that runs through the entire institutional Church.

On one hand, the Vatican claims a unique moral authority. It speaks for a tradition that values poverty, charity, and the care of souls over material wealth. Jesus, after all, threw the money changers out of the temple.

On the other hand, the Church is a massive global organization that needs money to function. It runs hospitals, schools, universities, and charitable operations on every continent. It maintains diplomatic relations with most of the world's governments. It employs thousands of people. All of this costs money—lots of it.

The IOR exists in the space between these realities. It's a bank for an institution that is supposed to be above worldly concerns. It handles wealth for an organization that preaches simplicity. And it operates in secrecy for a church that claims to teach universal truth.

No wonder it has attracted so much trouble.

Looking Forward

What happens next? Pope Francis has centralized financial control in the IOR, imposed new governance structures, and submitted Vatican finances to international scrutiny. These are real changes.

But the fundamental challenges remain. The IOR operates inside a sovereign state with its own legal system. It serves an institution that spans the globe and operates in every political context. And it answers, ultimately, to the Pope—who has many concerns beyond financial regulation.

The scandals of the past grew from a combination of factors: insufficient oversight, too much secrecy, and too many people willing to exploit an institution that operated beyond normal accountability. Whether the reforms of the Francis era have addressed these vulnerabilities—or merely papered over them—will only become clear with time.

One thing seems certain: the Vatican Bank will continue to fascinate, frustrate, and occasionally scandalize. An institution that combines the mystique of the papacy with the complexity of international finance could hardly do otherwise.

After all, money changers and temples have a complicated relationship. They have for two thousand years.