'God's Bank' and Its New Boss

Ernst von Freyberg (Image credit: DC Advisory/SP Photo

ROME - Today it was more than just a routine personnel matter for Pope Benedict XVI to name a new president of the Vatican Bank: German lawyer Ernst von Freyberg. The appointment may well be the last of the pope's papacy, filling a vacancy created a year ago in the midst of a money laundering investigation.

The job of "God's Banker" has long been a tricky one. Conspiracy theorists have always been fond of the Vatican Bank. And with good reason.

The Institute for Works of Religion (as it's officially called) has been linked to plenty of bad guys over the years, including mobsters, Nazis and Freedom Fighters.

"God's Bank" (as it's long been known) has been so fraught with scandal that last month, citing concerns about possible money laundering, Italy's Central Bank stopped all bankcard payments at the Vatican.

That meant tourists could no longer swipe their debit cards to pay the entrance fee at the Vatican Museum or buy a rosary at the gift shop. No Visa. No Mastercard. No American Express. The Vatican was forced into "cash only."

Only this week did Italian authorities allow those electronic transactions to resume.

The Institute for Works of Religion is a private bank within the Vatican that functions something like a credit union. It is believed to have $4 billion in assets and nearly 34,000 accounts. But its accounting system falls short of the transparency required under European banking laws.

The bank's assets are not owned by the Holy See, but the pope is effectively the chairman of the board. He oversees a committee of cardinals who act as a board of directors. The cardinals, in turn, oversee the bank's president.

The bank has a checkered past.

In the 1970s and '80s, there was the massive money laundering scandal involving Sicilian mafia drug money. The Vatican Bank was the main shareholder in Banco Ambrosiano, a multi-billion dollar private bank that collapsed amid accusations it was laundering the Gambino crime family's heroin profits.

Banco Ambrosiano's Chairman Roberto Calvi - nicknamed "God's banker" because of his close ties to the Vatican - was eventually found hanging by a noose from Blackfriar's Bridge in central London. Whether it was suicide or murder remains a mystery.

The scandal inspired part of the plot of "The Godfather III."

In the 1990s, Holocaust survivors sued the Vatican bank, alleging it housed large deposits of gold looted by Nazis. Declassified U.S. documents from the 1940s appeared to corroborate that those truckloads of gold from Croatia ended up in the hands of the church. But the case was ultimately dismissed because of "sovereign immunity."

Conspiracy theorists later accused the Vatican of minting gold euro coins with the pope's face using gold looted from Nazi concentration camps. The Vatican has repeatedly denied any involvement with Nazi gold.

The bank's latest scandal comes in the wake of the global financial crisis of 2008. The pope appointed Ettore Gotti Tedeschi to reform the Vatican bank. But in 2012 the bank's board fired him for dereliction of duty and erratic personal behavior.

An independent audit in 2012 by Moneyval, Europe's anti-money laundering agency, found that the Vatican Bank had made significant progress in achieving greater transparency, but there was still much work to be done.

It will be up to Ernst von Freyberg to do it.

Who is he?

He's the head of the Blohm & Voss group, a German shipbuilding and engineering company. He's also a prominent member of Knights of Malta, the ancient chivalric order composed of wealthy European aristocrats who support the papacy - the so-called Black Nobility.

Financial regulators - and conspiracy theorists - will be extremely interested in his work.