Prosecutors say Vatican bank is defying law

Italian prosecutors are contesting claims by the Vatican bank that it is trying to comply with international rules to fight money laundering, saying an investigation that led to the seizure of €23 million from a Vatican bank account shows "exactly the opposite".

An Italian court on Wednesday rejected a Vatican request to lift the seizure, leading the Vatican to express "astonishment" at the court's ruling and indicating the case will not be cleared up quickly, as the Vatican originally predicted.

Since the money was ordered seized last month, the Vatican and the bank's chairman, Ettore Gotti Tedeschi, have repeatedly said the allegations resulted from a "misunderstanding" and that the Vatican bank - officially known as the Institute for Works of Religion - has been working to comply with international rules to fight money-laundering.

It has emerged that a strongly worded document from the prosecutors' office given to the court said that while there is a "generic and stated will" to conform by the bank "there is no sign that the institutions of the Catholic Church are moving in that direction". It said the prosecutor's investigation had found "exactly the opposite".

The document was submitted to the court as part of the prosecutors' case against the bank.

Under the investigation, financial police seized the money on 21 September from a Vatican bank account at the Rome branch of Credito Artigiano, after the bank informed the Bank of Italy about possible violations of anti-money laundering rules.

The bulk of the money, €20m, was destined for JP Morgan in Frankfurt, with the remainder going to Banca del Fucino.