Vatican City, Jul 13 (IANS/AKI): The Vatican's chief prosecutor has frozen the assets of a senior cleric after he was arrested last month over his involvement in a 20 million euro money smuggling plot.

Vatican spokesman Federico Lombardi said the investigation into Monsignor Nunzio Scarano was triggered by several suspicious reports of transactions filed with the Vatican's financial watchdog agency.

"The investigation could be extended to other people," Lombardi said.

"The Vatican is adopting a zero-tolerance policy towards all illegal activities or those that fall outside its statute - both by lay people and clerics," he said.

A judge July 5 refused to grant Scarano house arrest on the grounds that he could tamper will evidence or flee abroad.

Scarono, a Vatican accountant, was arrested June 28 together with Italian secret service agent Giovanni Maria Zito, and a financial broker, Giovanni Carenzio.

All three suspects are accused of attempting to smuggle cash to Italy from Switzerland on a private jet.

Scarano allegedly paid a 400,000 euro bribe in the cash-smuggling case.

His lawyer said he did not dispute the facts of the bribery investigation but claimed he was merely "trying to help out some friends".

Scarono reportedly told prosecutors that a total 41 milion euros were meant to be smuggled into Italy, but the operation was unsuccessful and the money ended up in Lebanon.

The cleric is at the centre of separate probe in a series of suspicious transactions involving recycling of cheques described as church donations through the Vatican Bank.

He has denied wrongdoing in that case.

Scarono was suspended in May from his post within the Administration of the Patrimony of the Apostolic See, the body that manages the Vatican's portfolio of assets including its real estate.