Priests working in the Vatican's finance department were treated with massages and luxury holidays by clients keen to win their favour, Italian investigators have been told.
Monsignor Nunzio Scarano, 61, a former Vatican finance official who is facing trial for attempting to smuggle €20m (£17m) into Italy from Switzerland, said his superiors were spoiled by private banks they were doing business with.
"Our bosses had many benefits: voyages, cruises, five-star hotels, massages and so on," Scarano told prosecutors according to a transcript of an interview leaked to Italian media.
"Banks [did so] to gain a good client; to grow their reputation by holding the key to the Vatican."
Scarano worked for the Administration of the Patrimony of the Holy See (Apsa), a Vatican department which manages the Holy See's property.
The Monsignor nicknamed "Monsignor 500" for his habit handling only €500 notes, told Rome prosecutors that although Apsa wasn't a bank, it acted as one and was in competition with the Vatican's embattled official bank: the Institute for Religious Works (IOR).
According to Scarano, Apsa played on the stock market, bought shares and bonds and managed millions of euros on behalf of lay clients, to whom it offered better interest rates than the IOR.
"We were a bank in a dirty way," he told prosecutors, adding that Apsa held up to €700m in liquid assets.
Apsa relied on a number of private banks, mainly headquartered in the US, to operate on the market, Scarano said. It was these banks that, in turn, made lavish gifts to Apsa's senior officials.
Scarano was arrested by Italian police in June along with two alleged accomplices - Giovanni Maria Zito, a former member of the Italian secret service, and Giovanni Carenzio, a finance broker.
The three are accused of plotting to smuggle €20m into Italy on behalf of a Neapolitan family of ship owners, the D'Amicos. Scarano denies he was moved by personal gain.
He has claimed he reported the numerous abuses he witnessed during his long career at Apsa to his superiors, but was ignored.
After a period of detention, the Monsignor has been transferred to a hospital in Salerno, pending trial that is due to start in December.