(CNN) -- The Vatican Bank will adapt to meet international standards on money-laundering and other illegal activities, Pope Benedict XVI decreed Thursday, after some of the bank's assets were ordered frozen in Italy.
The changes are the first major step by the Vatican to get on the "white list" of banks that comply with internationally agreed standards.
All Vatican organizations will adhere to the standards so they can take part in a "just and honest coexistence in an increasingly globalized world," Vatican spokesman Father Federico Lombardi said in a statement, "a world in which, unfortunately, economy and finance is not infrequently a field for illegal activities, such as the recycling of the profits of crime and the financing of terrorism, true threats to justice and peace in the world."
Italian prosecutors in September froze Vatican Bank transactions for the first time after the bank failed to provide all the information required under Italian anti-money laundering rules.
In a move later upheld by an Italian court, the prosecutors seized 23 million euros (about $30 million) in Vatican Bank transactions that occurred on Italian soil.
Ettore Tedeschi, who heads the bank, said the investigation was the result of a misunderstanding.
Still, Tedeschi has said he realized the need to speed up the process of getting the Vatican Bank on the white list "to prevent other misunderstanding events like the one that just happened."
Thursday's decree sees the Vatican adopting four new laws to bring its bank and other financial institutions up to international standards. The Vatican has been working on the laws with the European Union and European Central Bank.
Among the new measures is the establishment of a watchdog body, the Financial Information Authority, that will ensure the new laws are followed by all Vatican institutions. The body will be headed by a cardinal who has yet to be named.
The pope also established that the Vatican will have jurisdiction over any Vatican institution or personnel that violate the norms.
Three of the new laws deal with the counterfeiting, size, and value of euro coins and banknotes. The focus for many, however, is the law concerning the laundering of proceeds from criminal activities and the financing of terrorism.
That law will apply to all of the Vatican's financial activities, including the Vatican Museum and the dioceses. It will become effective April 1, giving a few months for Vatican financial institutions to adapt.
It will also acknowledge the punishment under Italian law for any violations of the money-laundering norms, which can call for a sentence of six months to 15 years and a fine of 5,000 to 50,000 euros ($6,650 to $66,550).
Lombardi said the measures will make the church more credible in the eyes of the international community.
"The new norms respond both to the need to conserve the effectiveness of the organizations that work in the economic and financial sector at the service of the Catholic Church in the world and -- more importantly -- to the moral requirement of 'transparency, honesty, and responsibility,' which must always be observed in the social and economic field," Lombardi said.
"This cannot but be of benefit to the church. Vatican organizations will be less vulnerable in the face of the continuous risks that inevitably arise in the handling of money. Those errors which so quickly become the cause of 'scandal' for public opinion and the faithful will be avoided."
The Vatican Bank is "the most secret bank in the world," according to Jeffrey Robinson, who wrote "The Laundrymen," a book about money laundering worldwide. The Vatican's sources of income include its vast real estate holdings, and there is no way to find out how much money the bank controls, Robinson said.
The Vatican Bank was created by an order of the pope "to carry on activities that are for pious causes," according to expert testimony related to a lawsuit by Holocaust survivors against the bank in a U.S. court last year.
It accepts deposits only from top Catholic Church officials and entities, Settimio Caridi testified in U.S. District Court in 2006. It uses its funds "for designated pious purposes" and is "an autonomous pious foundation," he said.
Caridi, a top Italian legal scholar who was called to testify by Vatican lawyers, said the bank is an integral part of the Vatican, a "central entity under the oversight of the Holy See."
It is ultimately overseen by a commission of five cardinals -- the top position in the Vatican hierarchy below the pope -- which is headed by the Vatican secretary of state.
The Vatican Bank is subject to particularly stringent anti-money-laundering regulations because Italian law does not consider it to be operating within the European Union.
It must supply more detailed information about transactions than European Union banks have to give.