Amid $31M Bank Probe, Vatican Creates Financial Watchdog New laws will also fight terrorist financing By Newser Editors and Wire Services Posted Dec 30, 2010 11:53 AM CST 3 comments Comments This Sept. 21, 2010 file photo shows Italian financial Police officers talking to each other with St. Peter's Basilica at the Vatican in the background, in Rome. (Angelo Carconi) (Newser) – The Vatican today created a financial watchdog agency and issued new laws to fight money laundering and terrorist financing in a major effort to shed its image as a tax haven that for years has been mired in scandal and secrecy. The decrees, which go into effect April 1, were passed as the Vatican's own bank remains implicated in a money-laundering investigation that resulted in the seizure of $31 million and scrutiny for its top two officials. In addition to the new independent Vatican compliance agency, the Financial Information Authority, new legislation was adopted making it against the law in the Vatican to train anyone for terrorist acts or to provide them with chemical or bacteriological weapons. Punishment is five to 10 years in prison—in this case an Italian prison since the Vatican doesn't have a jail. Stiffer penalties were also adopted for human and organ trafficking, as well as growing, selling, or transporting drugs.