The Holy See said its financial transactions were transparent and expressed “surprise” after the Vatican Bank and its chairman Ettore Gotti Tedeschi were targeted for alleged violations of money-laundering laws.

“It is well known that the authorities of the Holy See have frequently manifested a clear desire for full transparency regarding the financial operations of the Institute for Works of Religion,” or IOR, as the Vatican Bank is called, the Vatican said today in an e-mailed statement.

Italian police today temporarily froze 23 million euros ($30 million) from an account registered to the IOR as Rome prosecutors probe Gotti Tedeschi for alleged violation of money- laundering laws, Italian media including Ansa news agency said, without citing anyone.

The Vatican Bank, after a series of scandals including involvement in the fraudulent bankruptcy of Banco Ambrosiano in the 1980s, is under pressure to adopt new financial standards following a 2009 push by the Group of 20 nations for greater transparency. The IOR has been working “for some time” with the Bank of Italy and the Organization for Economic Cooperation and Development “for the Holy See’s inclusion in the so-called White List,” according to the statement, referring to the OECD list for jurisdictions that implement its global tax standards.

Wire Transfers

Finance Police froze the funds from an IOR account at Credito Artigiano SpA after the Bank of Italy’s financial intelligence unit on Sept. 15 suspended two wire transfers from the account for omitting information in possible violation of money-laundering laws, daily Il Sole 24 Ore reported today.

A spokesman for Credito Artigiano in Milan declined to comment when contacted by telephone by Bloomberg News.

The funds were to be transferred to non-Italian banks for use by the IOR, and the “necessary information was already available at the competent Bank of Italy office, and analogous transactions frequently take place with other Italian credit institutes,” the Vatican said.

The Holy See expressed “surprise” and “bewilderment” at the operation, and “full confidence” in Gotti Tedeschi. The 65-year-old, appointed in September 2009, is also non-executive chairman of Santander Consumer Bank in Italy and a professor of financial ethics at Milan’s Catholic University.

‘Deeply Humiliated’

Gotti Tedeschi said he felt “deeply humiliated” by the probe, Italian news agency AdnKronos said today, citing a phone interview with him. The IOR chairman said he has been striving since his appointment “to tackle the very issue for which I am now under investigation.”

Today’s action came after the Bank of Italy on Aug. 27 recommended that the country’s lenders pay closer scrutiny to financial transactions with institutions in nations outside the European Union that are not on the OECD’s white list.

“The Bank of Italy’s focus on IOR activities shows that the wall of silence that has long existed between Italy and the pope’s bank has now broken down,” Gianluigi Nuzzi, author of Vaticano SpA, a 2009 book about the IOR, said by phone.

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