Italy and the Vatican are set to sign an agreement that allows regular exchange of financial information between the two countries to curb money laundering, reports Reuters.

The Vatican is considering reforming its bank, the Institute for Works of Religion (IOR), whose reputation has been damaged by a series of scandals over 30 years. The deal would mark a first significant step towards normalising banking relations with Italy, sources familiar with the matter told Reuters

The agreement will take the form of a memorandum of understanding between the Vatican’s Financial Information Authority (AIF) and Italy’s the Financial Intelligence Unit (UIF).

Though similar agreements have been signed by the Vatican with other major countries such as the US, but the pact with Italy would be significant due to the large number of Vatican transactions going through the country.

According to Reuters, the Vatican must prove its willingness to co-operate with Italian authorities before the Bank of Italy can lift a de facto ban on transactions between the IOR and Italian-based banks.

In 2010, the Italian banks have stopped dealing with the IOR after the central bank told them they had to enforce anti-money laundering criteria if they wanted to continue doing transactions with the IOR.

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