Vatican City, July 12 - The Vatican on Friday froze two accounts held in the Vatican Bank by a top prelate and former accounting chief arrested in connection with a failed attempt to fly 20 million euros of laundered money back from Switzerland to Italy. A Vatican investigation into suspect transactions at the bank, whose official name is Institute for Religious Works (IOR), may be extended to other persons as well as Msgr Nunzio Scarano, Vatican Spokeman Federico Lombardi said. "The Vatican is determined to pursue a zero-tolerance policy on possible financial irregularities, whether by clertics or lay persons," Lombardi said, citing a recent statement from IOR's new head, Ernst von Freyberg. Scarano, who until recently led a key Vatican accounting unit, was refused release to house arrest this week in a probe claiming he conspired with a former Italian spy and a financial broker to try to secretly repatriate the cash, allegedly the fruit of tax evasion by a family close to the prelate. Scarano, from the port city of Salerno near Naples, 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. He was arrested JUne 28 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. 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 has told prosecutors he "acted in good faith" and was only "trying to do a favour for the D'Amicos". Police have said the D'Amico brothers were the alleged beneficiaries of what they called "a complex and expensive operation to evade airport customs controls and bring back into Italy money that is believed to be the fruit of tax evasion". The Vatican has said it would cooperate "fully" with the probe, which gained headlines worldwide and was seen as a fresh blot on the reputation of the troubled IOR. The Scarano probe is part of a wider investigation into alleged shady transactions at IOR, in which former president Ettore Gotti Tedeschi and his former No.2 were placed under investigation in connection with suspected money laundering. Gotti Tedeschi was cleared last week but his No.2 and another official were charged in the case. 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". 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. Von Freyberg said the bank planned to publish its profit and loss accounts online by the year's end and would run checks on its 19,000 account holders. In addition, the bank will start to have a different "communication policy", and plans to give interviews with "qualified representatives of the international press", von Freyberg said. The Vatican Bank has made a series of moves to show greater transparency since Argentinian Jesuit bishop Jorge Mario Bergoglio became Pope Francis in March, succeeding Benedict XVI, the first pontiff to voluntarily abdicate in 700 years. As a new broom with a reputation for plain talking, Francis is reportedly keen to remove stains from IOR's reputation and get it onto the 'white list' of countries with unimpeachable anti-money-laundering credentials. The new pope has vowed to take on power elites in the Curia, or central governance, of the Catholic Church, and recently admitted he would even have to tackle a gay lobby. Two days before the Scarano case broke Francis set up a pontifical commission on IOR, to brief the pontiff on the bank's activities and make sure it operated in harmony with the "Church's mission". After coming into the prosecutors' cross-hairs, IOR has started working with the Council of Europe's Moneyval anti-money-laundering agency in a bid to make it onto the white list. In a report last July, Moneyval said that the Holy See had made progress on financial transparency, but added that more reforms were needed. The Italian press has increasingly speculated on the fate of the scandal-plagued bank, wondering whether the pontiff might reorganize or shut it down. The new IOR panel will be chaired by Cardinal Raffaele Farina, and it will include another three prelates and Harvard Law Professor Mary Ann Glendon, a former United States Ambassador to the Holy See. Last month the Vatican's financial watchdog published its first annual report on the Holy See's efforts to combat money laundering and funding terrorism. In it, the Financial Information Authority (AIF) said it had uncovered six cases of suspect transactions in 2012, a notable increase since 2011 when only one such case was flagged. Two of those cases were sent on to Vatican prosecutors for a probe. AIF Director Rene' Bruelhart did not go into the specifics of the transactions, specifying only that "they were not tied to financing terrorism". Established by Benedict XVI in 2010, the AIF is charged with monitoring the commercial and monetary activities of Vatican agencies like the Vatican Bank. Over the years the Vatican Bank has acquired a murky image on transparency. There have been allegations that IOR was used to launder money most notably by 'God's Banker' Roberto Calvi, the former head of Italy's biggest private bank, whose body was found hanging under Blackfriar's Bridge in London in 1982, a suspected victim of the Sicilian mafia. IOR was also named in kickbacks probes stemming from the 1990 collapse of public-private chemicals colossus Enimont, part of the Clean Hands investigations that swept away Italy's old political establishment. More recently, there has been a series of Italian TV reports and a best-selling book claiming to show how individuals have used IOR to squirrel away money, dodging Italian regulations. A Vatican report to Moneyval is due in December on the basis of a questionnaire the Holy See will receive in September.