A high-ranking prelate who embarrassed the Vatican in June after being arrested on charges of plotting to smuggle millions of euros from Switzerland to Italy faces new money-laundering accusations.
A judge issued a second house arrest warrant for Nunzio Scarano, nicknamed "Monsignor 500" for his reported habit of flashing large banknotes.
He was already being detained at home in relation to last year's accusations.
Scarano is suspected of movings funds on behalf the D'Amicos, a shipping family from his hometown of Salerno, southern Italy, from offshore tax havens, through his accounts at the Vatican's bank, the Institute for Religious Works (IOR).
Authorities started investigating the prelate last year, finding out that he had withdrawn more than 500,000 ($A776,000) from the IOR, parcelling out the cash among relatives and friends.
On Tuesday, prosecutors said participants in the scheme received about 10,000 euros each in return for cheques disguised as donations for the Catholic Church.
Scarano is accused of returning part of the money to the D'Amico family, helping them avoid taxes, and using the rest to pay off a mortgage and fund some charity work, his lawyer Silverio Sica said.
He warned that his client was suffering from clinical depression and was at risk of suicide. Salerno prosecutors said 52 people in total were under investigation.
Another priest, Father Luigi Noli, was placed under house arrest, and a notary, Bruno Frauenfelder, was temporarily suspended.
In the separate case that led to his arrest on June 28, Scarano was accused of trying to smuggle 20 million euros, also on behalf of the D'Amicos, with the help of a former intelligence officer and a financial broker.
The attempt failed because the broker pulled out at the last minute.
Scarano was later released from prison due to ill health, placed under house arrest, and sent to trial last month.
Proceedings could be over before the summer, Sica said.
The multiple scandals have cost the prelate his job as an accountant at the Administration of the Patrimony of the Apostolic See, the Vatican's central bank, which manages the papacy's assets.
Also, his arrest led to the resignation of the IOR's two top managers.
The bank has been criticised for failing to alert financial authorities about Scarano's activities.
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