By Philip Pullella
VATICAN CITY (Reuters) - An Italian bank has returned to the Vatican 23 million euros (18 million pounds) that was blocked in a 2010 money laundering investigation, the Vatican bank said on Tuesday, in a sign that the Holy See's efforts to make its finances more transparent are paying off.
The Vatican bank, whose official name is Institute for Works of Religion (IOR), said in a statement that the move was "a consequence of the introduction of a fully-fledged anti-money laundering and supervisory system".
A Vatican bank spokesman said the IOR hoped it would mark a turning point and put the IOR on a new footing in relations with Italian financial institutions. The IOR, which was founded in 1942, has been plagued by financial scandals over the decades.
The Bank of Italy did not immediately respond to a request for comment.
In 2010, as part of a global effort to halt illicit financing, the Bank of Italy ordered Italian banks to improve their anti-money laundering efforts. As part of their response, Italian financial institutions curtailed their dealings with the IOR, waiting for it to improve standards.
That year, a Rome magistrate who was investigating a money-laundering case froze 23 million euros that the Vatican bank held in Italy's Credito Artigiano, now known as Credito Valtellinese. The IOR said at the time that the money it held there had been used to transfer its own funds between its own accounts and had done nothing wrong.
Although the magistrate unfroze the funds a year later in connection with the investigation, the money remained blocked because of unresolved due diligence issues between Italy and the Vatican, the Vatican bank's Tuesday statement said.
Since then, the Vatican has been working to make its bank compliant with international financing norms.
In January of this year, the IOR said in its financial statement that its reforms merited "a resumption of full interaction with Italian financial institutions".
As part of its clean-up, the IOR has blocked the accounts of more than 2,000 clients and ended some 3,000 "customer relationships".
In December of last year, Moneyval, a global financial monitoring committee, gave the Vatican high marks for its financial reforms after a highly critical initial report a year earlier.
Pope Francis has named an outsider - Australian Cardinal George Pell - to oversee the Vatican's often muddled finances after decades of financial control in the Vatican by Italian officials.
(Additional reporting by Stefano Bernabei; Editing by Alessandra Galloni and Angus MacSwan)