Monsignor Nunzio Scarano has been charged with laundering millions through the Vatican bank, police say.
The former Vatican accountant is already on trial and under house arrest on separate charges of plotting to smuggle 20 million euros ($26 million) into Italy.
Monsignor Nunzio Scarano and two other people were served with arrest warrants on Tuesday, police said.
Last year, Pope Francis set up a commission to review the bank’s activities after a series of scandals.
Traditionally the Vatican has opposed the right of the Italian judiciary to investigate alleged crimes committed by its officials on the grounds of diplomatic immunity and privilege.
Under Pope Francis, increased cooperation between the Vatican and Italian authorities led to the arrest of Monsignor Nunzio Scarano last summer.
On Tuesday, police seized some 6.5 million euros in bank accounts and real estate, including Monsignor Nunzio Scarano’s luxury apartment in the southern city of Salerno.
Monsignor Nunzio Scarano has been charged with laundering millions through the Vatican bank
Authorities said the latest charges against the senior cleric related to “false donations”, which he allegedly recycled from offshore accounts through the Vatican bank.
Prosecutors allege that Monsignor Nunzio Scarano got dozens of people to make contributions to a home for the terminally ill in Salerno, and used the money to pay off a mortgage on one of his properties.
Another Catholic priest has also been arrested on charges of laundering and making false statements, officials say.
Monsignor Nunzio Scarano worked for two decades as a senior accountant in a Vatican department known as APSA (the Administration of the Patrimony of the Apostolic See).
The division manages the Vatican’s real estate holdings and stock portfolios.
The cleric was suspended from his position last year, after he was accused of conspiring to smuggle millions from Switzerland into Italy with the help of a secret service agent and a financial broker.
The trio’s high-profile trial began in early December in Rome.
Officially known as the Institute for the Works of Religion (IOR), the Vatican bank is one of the world’s most secretive. It has 114 employees and 5.4 billion euros of assets.
The Vatican bank is undergoing a major restructuring on the orders of Pope Francis.
Pope Francis has hired an American financial services company to examine all 19,000 accounts to ensure that international rules against money laundering are being correctly observed.
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The Vatican’s bank has unveiled its first annual report in its 125-year history as part of an attempt to become more financially transparent.
The Institute for Religious Works (IOR) has been dogged by accusations of corruption.
The report shows 2012 was a successful year for the bank, with net profits more than quadrupling to 86.6 million euros.
The bank said this jump was mainly due to favorable trading results and an increase in the value of bonds it held.
A majority of this profit – 54.7 million euros – was given to the Pope to carry out the Church’s mission around the world.
Its balance sheet shows a total of 4.98 billion euros in assets and 769 million euros in equity funds.
The assets were primarily held in bonds and money market accounts.
The Vatican’s bank has unveiled its first annual report in its 125-year history
But the report also reveals the IOR had 41.3 million euros in gold, coins and other precious metals, a stake in an Italian real estate company, and received two inheritance properties worth around two million euros in 2012.
In the report, President Ernst Von Freyberg, said the IOR needed to be a well-respected member of the global financial community.
“The annual report seeks to contribute to the transparency which the Catholic Church, our customers, our correspondent banks, our authorities and the public rightfully expect,” he said.
Ernst Von Freyberg added that the bank had been “been engaged in a process of far-reaching reform” to improve its organization, compliance and transparency.
The IOR has been accused of money laundering and lack of due diligence in allowing non-religious businessmen to hold accounts in what amounts to an international offshore tax haven.
In August Pope Francis stepped up the fight against corruption at the Vatican by strengthening supervision of financial transactions at the bank.
He issued a decree designed to combat money-laundering and prevent any financing of terrorism.
Pope Francis also recently set up a commission to investigate the bank and report back to him personally.
In July the Vatican froze the account of a senior cleric, Monsignor Nunzio Scarano, suspected of involvement in money-laundering.
Nunzio Scarano and two others were arrested by Italian police in June on suspicion of trying to move 20 million euros ($26 million) illegally.
At the time the bank said it would have “zero tolerance for any activity, whether conducted by laity or clergy, that is illegal or outside the Statutes of the Institute”.
As of the end of 2012, the IOR had around 18,900 customers, most of which were institutional investors.
This was down from 21,000 the previous year, which the bank said was due mostly to it closing inactive accounts.
It handles the payroll for some 5,000 Vatican employees and funds for the central administration of the Catholic Church.
The IOR also holds the accounts of cardinals, bishops, priests, nuns and religious orders around the world.