VATICAN CITY The new head of the Vatican bank says his top priority is to clean up the bank's reputation, saying the institution hasn't served the pope well but provides valuable financial services to the Holy See and its clients that should continue.
Ernst von Freyberg was named president of the Institute for Religious Works (IOR) in February, replacing Ettore Gotti Tedeschi, an Italian banker ousted by the bank's board last May for incompetence and other failings.
Von Freyberg's appointment was part of the Vatican's efforts to shed the bank's image as a secretive tax haven and improve its reputation in global financial circles following a series of scandals, including a money-laundering investigation launched by Rome prosecutors in 2010.
In interviews published Friday, Von Freyberg said he had hired a leading firm, Promontory Financial Group, and the U.S.-based law firm Cleary Gottlieb Steen & Hamilton to ensure that the bank complies with anti-money laundering and anti-terror financing standards. He also hired an outside public relations expert, saying a big part of the bank's problem was its failure to communicate.
"When I came here, I thought I would need to focus on what is normally described as cleaning out and dealing with improper deposits,'' he told Vatican Radio. "There is -- until now -- nothing I can detect. That doesn't mean that there isn't anything, but it means that it is not our biggest issue.
"Our biggest issue is our reputation,'' he said.
Some of the sharpest calls for reform of the Vatican bureaucracy that accompanied the March election of Pope Francis focused on the bank and came from cardinals who suggested it needn't exist at all, given its shady reputation.
Von Freyberg, a 54-year-old German industrialist and aristocrat, said the bank's 18,900 customers choose to stay with the IOR because it provides "very, very safe'' investment returns and other services such as asset management and wire transfers.
"They want us to be there,'' he said of the customers. But he acknowledged: "We haven't rendered a good service to the Holy Father with the reputation we have, and this reputation obscures the message. And that I consider my first and most important task to address.''
Earlier this month, Von Freyberg announced the bank would publish its annual report online for the first time on Oct. 1.
In a parallel bid to show greater transparency, the Vatican's new financial watchdog agency published its own annual report last week, revealing that six suspect transactions had been reported in 2012, two of which were forwarded onto Vatican prosecutors for further investigation.
Von Freyburg said, so far, another seven suspicious transactions have been reported by the bank in 2013.
The IOR was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works. Located in a tower just inside the gates of Vatican City, it also manages the pension system for the Vatican's thousands of employees.
The IOR on Friday provided preliminary figures for 2012, saying its net profit was 86.6 million euros ($112.6 million), with total assets under management of 7.1 billion euros ($9.23 billion).
It didn't provide figures for 2011, saying only its average net profit from 2009-2012 was 69 million euros ($89.7 million). The bump was due in large part to the performance of Italian government bonds last year.
The bank is not open to the public. Depositors are usually limited to Vatican employees, religious orders and diplomats accredited by the Holy See, though its customer base has long been the subject of speculation that Italians were hiding money there to avoid paying taxes. Currently, each account is being checked to ensure the owner belongs there.
As part of its transparency bid, the Vatican agreed to an independent evaluation process to ensure it was complying with international anti-money laundering and anti-terrorist financing norms. It passed the first evaluation of the Council of Europe's Moneyval process last summer, though it received poor or failing grades for its financial watchdog agency and the IOR, specifically the bank's ability to ensure that its customers and transactions were clean.
Von Freyberg has set a July 31 deadline to come up with norms for customer checks, after the bank missed its December deadline.
"We are late, and I will do my utmost to catch up,'' he said in an e-mail via his Munich-based spokesman, Max Hohenberg of CNC Communications.
Von Freyberg, a member of the Roman Catholic charitable group Knights of Malta, was named IOR president after a months-long search by a headhunting firm, a novelty for the Vatican where backroom deals, nepotism and patronage appointments are common.
His appointment initially raised eyebrows, since he is also chairman of German shipbuilder Blohm + Voss. Von Freyberg chairs the company's civilian branch, but that unit is part of a consortium building four frigates for the German navy.
The Vatican and its bank have traditionally steered clear of investments in companies that manufacture weapons or contraceptives.