Senior priest, former spy arrested in Vatican bank scam

A senior priest, a financial broker and a former secret service officer were arrested in Italy on suspicion of fraud and corruption in connection with the sweeping probe of the scandal-plagued Vatican bank.

The three were accused of attempting to smuggle a huge sum of cash into Italy, a prosecutor said in Rome said.

The priest, Monsignor Nunzio Scarano, works as a financial analyst in the Vatican office that administers Vatican-owned property.

Scarano, a priest from Salerno, was arrested after an investigation into the Institute for Works of Religion (IOR), as the bank is known, unearthed a suspected international fraud scheme.

The archdiocese of Salerno, in southern Italy, issued a statement saying earlier media reports calling Sacarno a bishop there were incorrect.

The priest was suspended from his position as a member of the administration that manages the Vatican's assets (the APSA) "about a month ago, after his superiors learnt about an investigation into his activities", Vatican spokesman Federico Lombardi said.

Prosecutor Nello Rossi told reporters today that the three suspects could face corruption charges, with Scarano also facing a possible count of defamation.

The alleged attempt took place in July 2012 but it was never carried out in full, he said, as the money never left Switzerland and never reached Rome.

Scarano and the two other suspects - a former member of the Italian secret services and a financier - were trying at first to bring in €40 million ($52.1 million) in cash from Switzerland using a private plane; then they reduced sum of €20 million, Rossi said.

The money allegedly belonged to friends of Scarano and was brought into Italy on board a private jet belonging to the former secret service agent, Giovanni Maria Zito.

Zito purportedly received €400,000 for the service.

According to the daily La Repubblica, Scarano is also under investigation by the Salerno prosecutor on suspicion of money laundering.

"They called him Monsignor 500 ... because of the great number of €500 euro notes he had at his disposition," which he allegedly used to launder money for friends in southern Italy, the daily said.

It added that it was an initial investigation into Scarano's bank account at the IOR which led to the discovery of the suspected racket.