(By Kate Carlisle) Vatican City, July 2 - Vatican bank head Paolo Cipriani and deputy director Massimo Tulli resigned on Tuesday following the arrest of a top Catholic prelate last Friday. Recently appointed president, Ernst von Freyberg, will fill in for Cipriani as Vatican Bank head, known as the Istituto per le Opere Religiose (Institute for Religious Works, IOR). "After many years of service, the two decided it would be in the best interest of the institute and of the Holy See," said a Vatican release. The resignations of Cipriani and Tulli follow the arrest of Msgr Nunzio Scarano, who was suspended a month ago from his job as head of analytic accounts at the Holy See's asset-management agency APSA when police started sifting through his assets because of his suspiciously large financial holdings and artistic trove. Scarano was arrested on suspicion of planning to elude customs controls along with Giovanni Maria Zito, a recently transferred agent in the AISI domestic intelligence agency, and financial broker Giovanni Carenzio. He denies charges that he conspired with the former Italian spy and financial broker to try to secretly repatriate 20 million euros of laundered money from Switzerland to Italy. Police said Scarano and Zito set up a private jet to fly the cash for three Salerno-based shipowner brothers, the D'Amicos, whose family was friendly with Scarano. Zito is suspected of getting 400,000 euros for arranging cover for the flight, which never took place because of last-minute cold feet. The prelate told prosecutors he "acted in good faith" but things began to unravel when Carenzio started making "excessive demands". Cipriani has had his own woes surrounding his handling of Church finances. In 2010 probes into suspicion of failing to observe Italian money-laundering laws were opened against Cipriani, Tulli and former IOR President Ettore Gotti Tedeschi. While investigators said on Tuesday that Gotti Tedeschi would most likely not be called to trial for a suspicious 23-million-euro transfer, Cipriani and Tulli risk indictment. IOR, to which APSA is indirectly linked, said it would launch an internal inquiry "in line with the zero-tolerance policy promoted by (new) president Ernst von Freyberg". The head of Italian bishops' conference CEI, Cardinal Angelo Bagnasco, said Tuesday that he believed the resignation of the two senior Vatican bank executives was a "concrete episode" linked to Pope Francis's "precise will" to see the scandal-hit institution reformed. The Vatican Bank has made a series of moves to show greater transparency since Argentinian Jesuit bishop Jorge Mario Bergoglio became pope in March, succeeding Benedict XVI, the first pontiff to voluntarily abdicate in 700 years. Francis is reportedly keen to remove stains from IOR's reputation and get it onto the 'white list' of countries with unimpeachable credentials by working with the Council of Europe's Moneyval anti-money-laundering agency. German aristocrat and industrialist von Freyberg, appointed in February by Pope Benedict XVI in one of his last official acts as pontiff, last month vowed to bring greater transparency to IOR's dealings.