George Pell Vatican church
Cardinal George Pell

AUSTRAC, the regulator given the job of cracking down on money laundering and terrorism financing, has been caught with its pants down after revelations it had dramatically overestimated the value of payments made from the Vatican City to Australia.

In response to a question at Senate estimates last year, the regulator initially said $2.3 billion had been transferred from the Vatican to Australia over the past seven years. But today it issued a mea culpa. The real figure was just $9.5 million.

The previous sum managed to throw fuel on the fire of a bunch of conspiracy theories surrounding Cardinal George Pell’s quashed conviction for child sex abuse. With the diminished figure, now what?

How did the regulator goof it up?

In October last year, Italian newspapers reported former cardinal Giovanni Becciu, a rival of Pell’s in the Vatican, had been wiring money to Australia. That led to Liberal Senator Concetta Fierravanti-Wells questioning AUSTRAC about money from the Vatican.

AUSTRAC initially determined more than 40,000 transactions between the Vatican and Australia had produced the big figure. Later analysis revealed there’d been just 362 transfers.

How did the usually reliable regulator manage to get its numbers so wrong?

Media reports have put it down to a “computer coding error” or software bungle. The Nine newspapers suggested the agency incorrectly apportioned money coming from Italy to Australia to the Vatican.

In a statement to the Senate revising its original answer, AUSTRAC’s chief executive Nicole Rose said the discrepancy was “due to a range of complexities and inconsistencies in some reporting received by AUSTRAC originating from international institutions, relating to incomplete geo-coding data”.

A spokesperson for the regulator told Crikey the discrepancy “had no impact on the information received and disclosed to AUSTRAC’s Australian and international law enforcement partners, or on AUSTRAC’s financial intelligence and regulatory work”.

It all comes back to Pell

But of course this isn’t just a story about a regulator’s error. It’s a story about Pell, Vatican finances, and allegations of a sinister conspiracy to frame an innocent man.

Since Pell’s convictions for historic child sex abuse, a narrative boosted by Pell defenders such as Andrew Bolt suggests the cardinal was framed by enemies at the Vatican who did not like his attempts to clean out the Holy See’s finances.

Implicit in this story is the allegation that Pell’s enemies, especially Becciu — who was dumped by Pope Francis last year over suspicious transactions — had transferred money to Australia to fund the malicious prosecution.

It’s a theory that grew up in Murdochland, and which Pell has picked up. Last year he hinted that his work trying to clean up the Vatican swamp might have been linked to his prosecution.

Lawyers for Pell’s accusers have strongly denied they were funded by Vatican dark money. But AUSTRAC’s bungle only gave more ammunition to the theory. On Sky News last year, before AUSTRAC had produced its big number, The Australian’s Dennis Shanahan and Bolt discussed the “very wide-ranging scandal” about Vatican payments to Australia.

“It would have suited some people extremely well to have him taken out of the Vatican,” Bolt said.

AUSTRAC’s big number was the perfect smoking gun. For Shanahan (a man who’s very good with numbers) and Bolt, it seemed to add even more weight to the theory that Becciu and other Vatican figures had been pouring money into Australia. Further reporting from Shanahan revealed Catholic bishops in Australia also had no about the funds from the Vatican, or where it went, further hinting that something suspicious was afoot.

But the money never existed. And with one quick accounting adjustment, the latest Pell conspiracy is hosed down. For now…