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Vatican City • European inspectors gave the Vatican a mixed report card Thursday in its efforts to comply with international norms to fight money laundering and terror financing: They praised the speedy overhaul of its legal code, but said the jury's still out on how well those new laws are being implemented.

The chief complaint in the report by the Council of Europe's Moneyval committee was that the Holy See's financial watchdog agency has yet to inspect the embattled Vatican bank, a true test of whether the new laws to fight financial crimes are being enforced at the Holy See's main financial institution.

That said, the system does seem to be working: The report revealed that 105 suspicious transactions had been flagged to the financial watchdog agency in 2013 as potential cases of money-laundering — a significant increase over 2012, when only a half-dozen were reported. The increase stemmed from a review by the bank — formally called the Institute for Religious Works — of all its accounts.

Three of those cases were forwarded to Vatican prosecutors for investigation, including one that made headlines this year: the case of the Vatican accountant, Monsignor Nunzio Scarano, who was arrested in June after he allegedly tried to smuggle 20 million euros ($26 million) from Switzerland into Italy.

The Scarano affair prompted the bank's top two managers to resign and laid bare the lax controls that for years fueled the bank's reputation as an off-shore tax haven where money could be laundered. Scarano is also under investigation for alleged money-laundering in a separate case involving his Vatican bank accounts.

John Ringguth, the executive secretary of the Moneyval committee, said the Vatican's progress to address shortcomings in its financial crime legislation was "enormous" given it had essentially no laws on the books prior to 2010.

But given that Moneyval's evaluation was primarily a desk-based review and that the Vatican's financial intelligence authority hasn't conducted an inspection, "we're not in a position to really make a judgment about the effectiveness of implementation."

"Are they following it? I'm not in a position to judge. None of us are at this point," he said in a telephone interview from Strasbourg, France.

Rene Bruelhart, who as director of the Vatican's financial intelligence agency is spearheading the Vatican's compliance efforts, said the report was very positive in highlighting achievements over the past year and said an on-site inspection of the bank would be conducted shortly.

He said he chose to build a "proper legal and institutional framework" for the Holy See, while conducting the review of the Vatican bank accounts at the same time, before conducting an inspection.

"It's a clear work plan in place to build a functioning and sustainable system for the Holy See," he told The Associated Press.

The Vatican submitted itself to the Moneyval evaluation process more than three years ago in a bid to shed its shady reputation and comply with the requirements of signatories to the 2009 EU Monetary Convention. Since then, the Vatican has written and rewritten laws criminalizing money laundering, ratified U.N. anti-crime treaties and created the financial watchdog agency to supervise its financial activities and work with other countries in cross-border investigations, among other measures.

Pope Francis has ramped up the reforms, forming two commissions of inquiry into the Vatican's finances. Outside consultants have been brought in to help speed along compliance.

Moneyval's latest report praised the Vatican's efforts to revamp its legislation to clarify the role and autonomy of the financial watchdog agency, and measures taken to improve reporting of suspicious transactions.

But it said it was "somewhat surprising" that the Financial Intelligence Authority watchdog hadn't inspected the bank or the Vatican's other main financial institution APSA, where Scarano worked, and said a basic regulation to make sure criminals don't end up in management positions must be enacted quickly.

The report was the second from Moneyval. In July 2012, the Vatican passed the inaugural Moneyval test but received poor or failing grades for its bank and financial intelligence authority. This second round didn't revise those grades but merely evaluated how the Vatican had responded to recommendations made last year.

Many of the areas where the Vatican fell short in 2012 have been addressed by the new legislation, Moneyval said.

One area that had been singled out for criticism in the 2012 report was the bank's lax customer due diligence practices, which are necessary to make sure the bank knows who its clients are and where their money comes from. The revised report noted continued shortcomings — there's still no clear law about who can have an account at the IOR — and said only 30 percent of the bank's accounts had been reviewed by October; the review was to have been completed a year ago.

Bank officials noted that the first batch of accounts that were reviewed were the highest-risk accounts and therefore took more time; they say the pace is faster now and that the process is expected to be completed by the first quarter in 2014.

The Moneyval report said the bank, which was founded in 1942 by Pope Pius XII to manage assets destined for religious or charitable works, is considering codifying a law to clarify its client base and is now closing accounts that "are not strictly related to the purpose of the IOR at the service of the Catholic Church."