|Ettore Gotti Tedeschi, head of the Vatican Bank: Reuters|
(Story reported by BBC News)
The head of the Vatican Bank, Ettore Gotti Tedeschi, is under investigation as part of a money-laundering inquiry, police sources say.
Prosecutors also seized 23m euros ($30m; £19m) from the bank's accounts with another smaller institution.
The inquiry was launched after two suspicious transactions were reported to tax police in Rome.
The Vatican said it was "perplexed and astonished", and expressed full confidence in Mr Tedeschi.
The Vatican Bank, known officially as the Institute for Religious Works, was created during World War II to administer accounts held by religious orders, cardinals, bishops and priests.
In a statement, the Vatican said it had been working for some time to make its own finances more transparent to comply with anti-terrorism and anti-money laundering regulations.
Investigators are looking into claims that Mr Gotti Tedeschi and another senior official violated laws that require banks to disclose information on financial operations.
(Click here to read the full story on the BBC News website.)