Vatican Bank (IOR)

Establishment and Early History of the IOR

The Institute for the Works of Religion (IOR), commonly known as the Vatican Bank, was founded on June 27, 1942, by Pope Pius XII and Bernardino Nogara, its first president, through a papal decree. Based in Vatican City, the IOR was created to manage and safeguard assets entrusted to it for religious or charitable purposes. As a sovereign entity under the pope’s direct authority, it operates independently of other Holy See agencies, with no obligation to disclose financial records externally. This autonomy, coupled with Nogara’s policy of destroying transaction records, earned the IOR its reputation as “the most secret bank in the world.”

The IOR’s financial foundation stems from the 1929 Lateran Treaty, which resolved the “Roman Question” between the Holy See and Italy, granting the Vatican sovereignty and a $90 million payment. This capital enabled diversified investments, including in Mussolini’s government during the Great Depression, marking the start of the IOR’s complex financial engagements.

Financial Scandals and Mafia Connections

The IOR’s history is marked by significant controversies, particularly from the 1970s onward. In the late 1950s, the Vatican employed Michele Sindona, a Sicilian financier with Mafia ties, as a financial adviser. Sindona’s acquisition of Banca Privata Finanziaria (BPF) and connections to Continental Illinois Bank facilitated the movement of funds, some allegedly tied to drug trafficking, through the IOR. Archbishop Paul Marcinkus, appointed IOR head in 1971, oversaw its most scandal-ridden period. Marcinkus was implicated in the 1982 collapse of Banco Ambrosiano, where his “letters of patronage” supported the bank, leading to $1.3 billion in losses. The scandal culminated in the death of Ambrosiano’s director, Roberto Calvi, found hanging under Blackfriars Bridge in London in June 1982, with bricks in his pockets.

In 1974, Sindona’s Franklin National Bank collapsed, costing the Vatican an estimated 35 billion Italian lire (£20 million). Later investigations, including a 2010 Italian probe into €180 million in money laundering and a 2013 case against Monsignor Nunzio Scarano for laundering millions, reinforced allegations of the IOR’s role in laundering Mafia and drug-related funds.

Connection to Operation Gladio and the CIA

Operation Gladio was a clandestine NATO and CIA-led “stay-behind” operation launched after World War II to counter a potential Communist invasion of Europe, particularly in Italy. It involved secret paramilitary units, numbering 5,000 to 15,000 operatives, funded initially by smuggled SS morphine and counterfeit British banknotes from concentration camps, and later through illicit channels like drug trafficking. Gladio’s tactics included false-flag terror attacks to discredit opposition groups, with operations extending to Latin America’s Operation Condor.

The IOR’s alleged role in Gladio centers on its use as a conduit for “black funds” to finance these covert activities. Journalist Paul L. Williams, in Operation Gladio: The Unholy Alliance Between the Vatican, the CIA, and the Mafia, asserts that the IOR laundered CIA funds, including drug money, to support Gladio’s anti-communist efforts.

CIA Funding Through the IOR

The CIA, under figures like William Colby, Rome station chief, channeled over $350 million through the IOR, including $65 million in 1948, to fund Gladio units and political groups like Italy’s Christian Democratic Party, which received over $20 million annually. The IOR’s lack of record-keeping enabled untraceable transfers to Swiss accounts.

Vatican’s Anti-Communist Alignment

The Vatican, led by figures like Cardinal Francis Spellman, supported Gladio’s anti-communist goals, viewing communism as a threat to Catholic influence. Spellman approved operations in the pope’s name, and the CIA reportedly placed microphones in papal apartments until 1984. The IOR also allegedly stored sensitive CIA documents, including those related to nuclear weapons, as claimed in the 2006 Alperin v. Vatican Bank lawsuit by Holocaust survivors alleging the IOR held Nazi-looted gold from Croatia’s Ustasha regime.

Key Figures and Networks

Paul Helliwell, a former OSS officer and CIA operative, devised schemes to launder drug money through the IOR and other banks, like Castle Bank & Trust, for Gladio operations. Michele Sindona, Licio Gelli (head of the Propaganda Due P2 Masonic lodge), and Marcinkus formed a network linking the CIA, Mafia, and Vatican. The P2 lodge, tied to Italian military intelligence, was a key Gladio conduit, with members aware of terror campaigns like the 1970s Italian bombings blamed on leftists. Continental Illinois, under David Kennedy, facilitated CIA fund transfers to the IOR, often through Sindona and Vatican banker Massimo Spada.

Latin American Operations

The IOR’s role extended to Operation Condor, a Gladio offshoot in Latin America, where the CIA and Vatican-backed Opus Dei supported coups, such as the 1973 overthrow of Chile’s Salvador Allende. The CIA funneled millions to Opus Dei’s Chilean Institute for General Studies, aiding Pinochet’s regime, which was responsible for thousands of deaths and widespread torture.

Reforms and Modern Context

Since the 1980s scandals, the IOR has faced reform efforts, particularly under Pope Francis since 2013. He established a Pontifical Commission and appointed leaders like Ernst von Freyberg and Jean-Baptiste de Franssu to enhance transparency. Despite these efforts, allegations of money laundering persisted, with investigations in 2010 and 2013. The IOR’s 2023 statutes emphasize its mission to serve Catholic institutions, but its historical opacity continues to fuel speculation about past activities.

Conclusion

The IOR’s history reflects a complex blend of financial autonomy, scandal, and alleged involvement in covert operations. Its role in Operation Gladio, as described by Williams, involved laundering CIA funds to support anti-communist activities, often in collaboration with the Mafia and figures like Helliwell, Sindona, and Marcinkus. While aligned with the Vatican’s anti-communist stance, the full scope of these activities remains obscured by classified records and the IOR’s sovereign status.

Sources

• The Washington Post, “CIA Helped Quash Major, Star-Studded Tax Evasion Case,” April 24, 1980 • Wikispooks, Castle Bank & Trust • Wikipedia, Institute for the Works of Religion • Paul L. Williams, Operation Gladio: The Unholy Alliance Between the Vatican, the CIA, and the Mafia • Spartacus Educational, Paul Helliwell • HandWiki, Castle Bank & Trust (Bahamas)