A senior Catholic cleric accused of plotting to smuggle millions of euros into Italy on a private jet has been arrested as part of a sweeping probe of the scandal-plagued Vatican bank, prosecutors said Friday.

Nunzio Scarano, known as "monsignor" in recognition of his seniority at the Holy See, is accused of fraud and corruption for plotting to illegally fly 20 million euros ($26 million) in cash into Italy from Switzerland.

The 61-year-old priest was arrested along with a former member of the secret service and a financial broker after an investigation into the Institute for Works of Religion (IOR) -- as the Vatican bank is known -- raised suspicions he was involved in money laundering.

Rome prosecutor Nello Rossi said the money belonged to Salerno brothers, Paolo, Cesare, and Maurizio D'Amico, who own a Rome-based fleet of oil tankers, and was the "fruit of tax evasion".

Broker Giovanni Carenzio, who is also under investigation in the Canary Islands for fraud according to Italian media reports, was safeguarding the money for the brothers and was looking for a way to smuggle it into Italy.

Former agent Giovanni Maria Zito was tasked with bringing the money in on a private jet, but the deal fell through when the three men argued, Rossi said.

While the jet made it to Locarno in northern Italy and waited at the airport for four days with 20 million euros on board, the plan to collect the money and drive it to Scarano's house in Rome under armed guard was aborted.

Zito was in any case paid 400,000 euros from Scarano's bank account, Rossi added.

The senior cleric was suspended from his position as a member of the administration that manages the Vatican's assets (APSA) about a month ago, after his superiors learnt about an investigation into his activities, Vatican spokesman Federico Lombardi said.

Scarano, who had worked for years as a senior accountant for the Administration of the Patrimony of the Apostolic See (APSA), is being held in Rome's Regina Coeli prison.

The plot was uncovered during a separate investigation into Scarano by a Salerno prosecutor for alleged money laundering.

"They called him Monsignor 500... because of the great number of 500 euro notes he had at his disposition," which he allegedly used to launder money for friends in southern Italy, La Repubblica said.

The probe into Scarano comes as part of a much wider enquiry launched in 2011 into the Vatican bank, which has long been tarnished by scandals, with criminals using anonymity or false names to launder money.

The biggest scandal was in 1982 over the bankruptcy of Banco Ambrosia, in which the Vatican was the main shareholder and which had been accused of laundering money for the Sicilian mafia.

Banco Ambrosiano chairman Roberto Calvi -- dubbed "God's Banker" -- was found hanging from Blackfriars Bridge in London in 1982 in a suspected murder by mobsters.

The Vatican promised in 2011 to redouble its efforts to reform the bank and overhaul its financial legislation following reports of anonymous accounts being used by organised crime.

The bank was back in the headlines in 2012, when its head Ettore Gotti Tedeschi was sacked by the board after a major falling out with the Holy See's Secretary of State Tarcisio Bertone.

In a bid to tighten control of its activities, Pope Francis announced Wednesday a sweeping study of the bank before a possible clear-out of top management at the Holy See.

In his first real step towards reform, the pontiff is to take a hands-on approach, ensuring that everything a special five-member commission uncovers will be reported directly to him.

The pope, elected amid an in-house debate over whether it is necessary to have a Vatican bank at all, has railed against the cult of money, calling for a "poor Church".

He has also quipped that "St Peter did not have a bank account", and warned the IOR and other Vatican staff that "offices are necessary but they are necessary only up to a certain point."

Earlier this month, Francis named cleric Battista Mario Salvatore Ricca to oversee IOR management -- effectively placing a trusted ally in a key position to report to him.

The IOR, which does not lend money, manages assets of 7.0 billion euros ($9.3 billion) and handles funds for Vatican departments, Catholic charities and congregations as well as priests and nuns living and working around the world.