David Willey

T’S like the end of the Berlin Wall,’’ said a high-ranking Vatican official after an invisible financial barrier marking the legal separation between the Vatican and Italy was breached for the first time.

According to officials at the Bank of Italy, the Institute for Works of Religion – the Vatican’s own offshore bank – has for years been allowing organised criminals, even terrorists, to launder money with impunity.

On Saturday, Italian tax police arrested a high-ranking Italian prelate, Monsignor Nunzio Scarano, who until about a month ago was a senior accountant in the Vatican’s financial administration.

They also arrested a financial intermediary and an agent from Italy’s secret services on charges of conspiring with Scarano to commit crimes of embezzlement and money laundering.

Scarano is alleged to have masterminded a plot that sounds like an airport novel. He tried to bring 20 million (NZ$33.5m) in cash belonging to a wealthy family of shipowners from a Swiss bank to Rome in a private plane, thereby evading customs and tax controls.

Italian prosecutors have had their eye on the Vatican bank for several years but, until now, have had great difficulty getting any information from the Holy See, which has pleaded diplomatic immunity and exemption from normal international banking rules on the grounds that the Institute for Works of Religion ‘‘is not a bank in the normal sense of the word’’.

After Scarano’s arrest, however, Vatican spokesman Father Federico Lombardi promised ‘‘full collaboration’’ with Italian justice authorities. This in itself marks a