Global watchdog questions Vatican compliance with anti money laundering standards
Introduction
The Vatican’s efforts to modernize its financial system are under renewed scrutiny as a leading global watchdog has questioned whether recent reforms meet international anti money laundering standards. The report, compiled by the Financial Action Task Force (FATF) and supported by European regulators, praises progress in some areas but highlights serious shortcomings in enforcement and transparency. For the Holy See, the findings represent a reminder that decades of scandal cannot be undone by structural reforms alone.
Background of Vatican reforms
Since the early 2010s, the Vatican has sought to rebuild credibility in its financial governance following a series of scandals involving the Institute for the Works of Religion and the Secretariat of State. Successive popes have introduced new oversight bodies, mandated external audits, and strengthened cooperation with global regulators. Pope Francis created the Supervisory and Financial Information Authority, now known as ASIF, to monitor compliance, while Pope Leo XIV has emphasized continuity with these reforms. Despite these steps, watchdogs remain concerned that the system lacks sufficient independence to enforce rules against powerful clerical figures.
Findings of the watchdog report
The FATF report acknowledges progress in creating institutional frameworks but questions whether they are truly effective. While the number of suspicious activity reports filed by the Vatican has increased over the past decade, enforcement outcomes remain limited. Few high level cases have resulted in sanctions or criminal referrals. The report highlights a gap between rules on paper and action in practice, suggesting that internal resistance within the Curia hampers full implementation.
Concerns about enforcement
The watchdog points to persistent opacity in investment activities managed by the Administration of the Patrimony of the Apostolic See. Although reporting standards have improved, information about real beneficiaries and offshore structures remains incomplete. The report further criticizes the Vatican’s limited capacity to pursue complex cross border investigations, noting that cooperation with European and American regulators is often slow. Without stronger enforcement mechanisms, analysts warn, the Holy See risks becoming vulnerable to misuse of funds by both insiders and external actors.
Implications for global credibility
For donors and international financial institutions, the watchdog’s findings raise concerns about the Vatican’s ability to meet its obligations as a sovereign financial entity. Banks may increase scrutiny of transactions linked to Vatican institutions, and regulators may pressure the Holy See to adopt stricter measures. This could complicate efforts to manage investments and access liquidity at a time when deficits and pension liabilities are already pressing concerns.
Historical context of non compliance
The Vatican’s challenges with anti money laundering standards are not new. Past scandals, including the Banco Ambrosiano collapse and the London property affair, were enabled by secrecy and lack of oversight. Critics argue that while new agencies and statutes exist, the culture of financial privilege has not been fully dismantled. This pattern reinforces skepticism among policy researchers who view each new reform as another cycle of promises without consequences.
Reform advocates versus internal resistance
Inside the Vatican, reformers continue to push for greater transparency, arguing that meeting global standards is essential to maintaining legitimacy in both finance and moral leadership. However, resistance persists from traditionalist factions who fear external scrutiny undermines sovereignty. The tension between these camps has slowed progress, leaving watchdogs unconvinced that meaningful enforcement is possible without structural change.
Potential next steps
Experts suggest that the Vatican must go beyond symbolic reforms to satisfy global regulators. This includes publishing comprehensive data on investment portfolios, disclosing ultimate beneficiaries of accounts, and demonstrating accountability through prosecutions or sanctions where misconduct is found. Expanding cooperation with foreign financial authorities and adopting more advanced compliance technology could further strengthen enforcement. Without such measures, watchdogs warn, the Vatican may continue to be perceived as a financial outlier rather than a model of ethical stewardship.
Conclusion
The global watchdog’s report questioning the Vatican’s compliance with anti money laundering standards highlights the unfinished nature of reform. Despite progress in building oversight institutions, enforcement remains weak and transparency incomplete. For Pope Leo XIV, the findings underscore the urgency of moving from structural reform to cultural change. The Vatican’s financial credibility depends not only on rules and audits but also on the political will to apply them consistently at every level of governance.
