The Vatican bank will automatically report information about American holders of its accounts to US tax authorities. The Vatican Bank has long been accused by Italian authorities as being an offshore tax haven. After the intense pressure from the Bank of Italy, which was intended to cut the Vatican Bank off from working with other banks in Italy, it was decided to begin a clean-up process. As a result, the bank has spent millions of euros on consultants to weed out problematic accounts.
According to the agreement, the Vatican will be party to the Foreign Account Tax Compliance Act in the US. Under the law, the American citizens who live abroad or have foreign bank accounts are required to report those accounts to the Internal Revenue Service. However, the US account holders in the Vatican bank were not surprised by the news. The American ambassador to the Holy See said that the negotiations over the agreement had been continuing for two years.
The Vatican bank has already signed such agreements with other countries including Italy, however, the process is based upon request whereas reporting to the US is automatic. In 2013, the Vatican bank determined that it would restrict the types of clients it would accept to certain categories. Since then, it has closed nearly 5,000 accounts and at the end of 2014 the bank had 15,181 clients. Thus, the bank accepts Catholic institutions, clerics, employees or former employees of the Vatican with salary and pension accounts, and embassies and diplomats accredited to the Holy See.