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Pope replaces financial watchdog head amid fallout from raid

Pope Francis on Monday replaced the head of the Vatican’s financial watchdog agency amid continuing fallout from a controversial Vatican police raid on the agency’s offices.

Francis thanked Rene Bruelhart for his work as president of the Financial Intelligence Authority as his term ends. The Vatican said the replacement’s name would be released next week.

The AIF board had given its full support to AIF’s management after the Oct. 1 raid, which was sparked by a police investigation into a Vatican real estate deal in London.

But even with that vote of support, international damage to the Holy See’s reputation was done. AIF works with financial intelligence units around the world in the fight against money laundering, tax evasion and other financial crimes. Officials expressed alarm that countries would be less willing to share confidential information with AIF in the future if it could so easily end up in the hands of Vatican police.

According to the search warrant, which was seen by The Associated Press, Vatican prosecutors only alleged that the AIF's actions in the real estate operation were "not clear" and faulted its director, Tommaso Di Ruzza, for being in contact with a London law firm.

Prosecutors appeared to have misunderstood that AIF was working with Britain's financial intelligence unit to try to catch the businessmen who were fleecing the Holy See in the real estate deal.

The Vatican’s secretariat of state had put 150 million euros into the luxury apartment building in London's tony Chelsea neighborhood, only to see tens of millions end up in the pockets of middlemen managing the venture.

The secretariat of state in 2018 decided to buy the building outright while working with British authorities to nab the middlemen. But internally, the Vatican bank and auditor general's office raised an alarm with Vatican prosecutors that the buyout looked suspicious, sparking the raids on AIF and the secretariat of state.

As a result, the Vatican investigation appears more the result of an internal turf battle — between the Vatican bank on one side, and the secretariat of state and AIF on the other — over the secretariat of state’s sizeable financial assets, which are kept outside the bank and off the Vatican’s balance sheet.