Monsignor Nunzio Scarano held in Vatican bank inquiry

A senior Italian cleric has been arrested in connection with an inquiry into a Vatican bank scandal over allegations of corruption and fraud.

Monsignor Nunzio Scarano works in the Vatican's financial administration. A secret service agent and a financial broker have also been arrested.

They are suspected of trying to move 20m euros ($26m; £17m) illegally.

Pope Francis ordered an unprecedented internal investigation into the bank's affairs in the wake of recent scandals.

Monsignor Scarano, 61, worked for years as a senior accountant for a Vatican department known as Apsa (the Administration of the Patrimony of the Apostolic See).

He was suspended from that position "about a month ago, after his superiors learnt about an investigation into his activities", Vatican spokesman Federico Lombardi said.

Monsignor Scarano has been under investigation by Italian police for a series of suspicious transactions involving the recycling through the Vatican bank of a series of cheques described as church donations.

Nunzio Scarano is a priest from Salerno in southern Italy, who is called "monsignor" in recognition of his seniority at the Vatican.

He was arrested along with two other men suspected of plotting to move 20m euros illegally from Switzerland to Italy. One, Giovanni Maria Zito, is described as an Italian secret service agent, and the other, Giovanni Carenzio, a financial broker.

Secretive bank

Earlier this month, the Pope named a trusted cleric to oversee the management of the bank, which has been beset by allegations of money laundering.

Officially known as the Institute for the Works of Religion (IOR), the bank is one of the world's most secretive. It has 114 employees and 5.4bn euros of assets.

Pope Francis has given the commission carte blanche, bypassing normal secrecy rules, to try to get to the bottom of scandals which have plagued the bank for decades.

Traditionally, the Vatican Bank has refused to co-operate with Italian authorities investigating financial crime on the grounds of the sovereign independence of the Vatican city state, the BBC's David Willey reports from Rome.

But Pope Francis has shown that he is now determined to get to the bottom of long-standing allegations of corruption and money laundering involving the bank, our correspondent adds.

The Institute for the Works of Religion was a major shareholder in the Banco Ambrosiano, a big Italian bank which collapsed in 1982 with losses of more than $3bn.

Its chairman, Roberto Calvi, was found hanging from Blackfriars Bridge in London - in a murder disguised as a suicide. Mr Calvi had close relations with the Vatican.