* Australian watchdog reduced sum transferred from Vatican
* Vatican sought review after watchdog reported huge figure
* Original figure prompted speculation of money laundering (Adds comment from AUSTRAC in para 5-6)
By Philip Pullella
VATICAN CITY, Jan 13 (Reuters) - Australia's financial watchdog has drastically reduced the sum of money it says was sent from the Vatican to Australia following a joint review, after it earlier reported a huge figure which raised suspicions of money laundering.
The Vatican-Australian review showed A$9.5 million ($7.35 million) transited between 2014 and 2020, a fraction of the A$2.3 billion ($1.77 billion) initially reported by the watchdog to widespread astonishment.
The Vatican contested the huge figures in December and asked the Australian financial intelligence unit, known as AUSTRAC, to review its calculations. Some media had speculated that the Vatican could have been used to launder money.
AUSTRAC's error was first reported by The Australian newspaper earlier on Wednesday, which said it was due to a computer coding mistake.
"The discrepancy in the data occurred due to a range of complexities and inconsistencies in some reporting received by AUSTRAC originating from international institutions," AUSTRAC said in a statement to an Australian parliamentary committee.
"This led to AUSTRAC's system attributing a large series of transactions to the Vatican City State. AUSTRAC's quality assurance processes should have identified this issue."
In a separate statement to Reuters, Austrac said this "statistical data discrepancy" has had no impact on the information received and disclosed to its Australian and international law enforcement partners, or on its financial intelligence and regulatory work.
A Vatican statement said the A$9.5 million sent to Australia was mostly to meet "contractual obligations" as well as "ordinary management", which appeared to be a reference to its embassy in Australia.
The Vatican had said the original report of the huge amount of money and more than 47,000 individual transfers had sounded like "science fiction". L8N2JI2Q0
Cardinal George Pell, who was the Vatican's treasurer from 2014 to 2017 told Reuters on Wednesday: "I was relieved to hear that billions were not laundered through the Vatican while I was head of the Secretariat for the Economy."
Pell, who is now in Rome, returned to his native Australia in 2017 to face charges of historical sexual abuse and spent 404 days in jail before his conviction was overturned last April. ($1 = 1.2923 Australian dollars)