Main findings
- The Holy See has come a long way in a very short period of time and many of the building blocks of an AML/CFT regime are now formally in place. But further important issues still need addressing in order to demonstrate that a fully effective regime has been instituted in practice.
- No AML/CFT risk assessment has been undertaken. A process has been initiated to commence a risk assessment as the evaluators identified factors present in the system which could potentially increase AML/CFT risks.
- The legislative base for supervision needs strengthening. The evaluators considered that there was a lack of clarity about the role, responsibility, authority, powers and independence of the Financial Intelligence Authority (FIA), as the AML/CFT supervisor. No on-site visits have been conducted and no sample testing of customer files has taken place. It is strongly recommended that the Institute for Works of Religion is independently supervised by a prudential supervisor in the near future, and that “fit and proper” criteria are applied to senior management in financial institutions by the AML/CFT supervisor.
- Money laundering has been fully criminalised in accordance with FATF standards although effectiveness of implementation has yet to be demonstrated. Financing of terrorism has also been criminalised although the specific criminalisation of financing in respect of certain terrorist acts in relevant UN counter-terrorism conventions is absent. While detailed legislative provisions for freezing of funds associated with terrorism under UN Security Council Resolutions have been introduced, they had not been brought into effect within the timeframe of this evaluation.
- The FIA exercises the financial intelligence unit (FIU) functions of receiving and analysing suspicious activity reports. The number of such reports received was low, even if allowances are made for the small size of the financial sector. The FIU is adequately resourced, though its ability to collect additional information from all entities subject to reporting obligations appeared to the evaluators to be uncertain in the revised law.
- Preventive measures introduced in the revised AML/CFT law now provide a comprehensive framework including customer due diligence and record keeping requirements although there are still a number of technical shortcomings. Effectiveness of implementation however still needs to be demonstrated. The Institute for Works of Religion launched a process before implementation of AML/CFT legislation to review its client database. The report recommends that serious consideration is given to introducing a statutory provision describing those eligible to maintain accounts in the Institute for Works of Religion.
- Overall there are adequate arrangements in place to facilitate both national and international co-operation. The evaluators welcomed the Holy See’s decision to become a full party to the Vienna, Palermo and Terrorist Financing Conventions of the United Nations in January 2012. Information provided showed a broadly satisfactory track record in international judicial co-operation, although one country indicated it had experienced difficulties in its mutual legal assistance relationships with the Holy See. The FIA is limited in its ability to exchange information with other FIUs by the requirement to have a Memorandum of Understanding in place with its counterparts.
- 46 non-profit organisations operate within the Holy See/Vatican City State. The FIA should have its responsibilities extended to risk-based monitoring of this sector, with necessary access to relevant books and financial records.
Moneyval press release link: click here
Link to executive summary: click here
Direct link to the evaluation report: click here