The law makes the world's 415,000 Catholic priests and 660,000 religious sisters mandated reporters.
Before Thursday's decree, reporting abuse was a matter of individual conscience for the world's priests and nuns.
It calls for whistleblower protection, saying bishops with conflicts of interest in cases of cover-up should recuse themselves from investigations and that bishops can also be held accountable for abuse of power in sexual relations with adults.
"We can consider the Motu proprio Vos estis lux mundi as one of the fruits of the Meeting for the Protection of Minors convoked by Pope Francis in the Vatican this past February", Cardinal Ouellet said. But bishops and religious superiors could be accused of cover-up or negligence if they fail to implement the provisions, or retaliate against priests and nuns who make reports against them.
Religious officials also are expected to comply with civil laws regarding reporting sex abuse, according to the Vatican.
"First of all that leadership is not above the law", Scicluna said, "and second that leadership needs to know, all of us in leadership we need to know, that if the people love the Church they're going to denounce us when we do something wrong".
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The law makes clear he can use lay experts to help, a key provision that is already used in many dioceses to give bishops expert advice on handling cases from people with law enforcement or medical backgrounds.
In the "Motu Proprio", a legal document issued under the pope's personal authority, anyone who has knowledge of abuse, or suspects it, is "obliged to report (it) promptly" to the church, using "easily accessible systems".
The law defines the crimes that must be reported as: performing sexual acts with a minor or vulnerable person; forcing an adult "by violence or threat or through abuse of authority, to perform or submit to sexual acts", and the production, possession or distribution of child pornography. Now it is church law.
Bishops' conferences must establish a fund by which to finance the investigation of sexual abuse allegations.
When he was elected in 2013, he called for "decisive action" on abuse but critics say he has not done enough to hold to account bishops who allegedly engaged in cover ups. "To date, that hasn't proven true". Francis defrocked McCarrick this year after a USA church investigation determined he sexually abused minors as well as adult seminarians.
The decree also allows victims or their representatives to report alleged abuses by bishops directly to the Vatican or a Vatican ambassador, bypassing diocesan procedures that have been discredited by multiple instances of cover-ups.
A spate of abuse scandals has battered Church credibility around the world and forced some dioceses to declare bankruptcy because of billions of dollars paid in settlements with victims.