Prime Minister Maris Kucinskis confirmed that Rimsevics, 52, was being detained, but didn’t provide details. Neither Rimsevics nor his lawyer could be immediately reached for comment.
During a news conference Sunday, Finance Minister Dana Reizniece-Ozola said Rimsevics “should resign from his post at least for the time of the investigation.”
The finance minister noted that the Latvian parliament cannot force Rimsevics out unless there is evidence of a crime, as the central bank is independent by law.
Reizniece-Ozola did not specify why Rimsevics was detained. However, she cited a U.S. Treasury report Tuesday that singled out a Latvian bank, ABLV, as a haven for money laundering that allegedly bribed local officials. She made no connection between the bank and Rimsevics.
Latvia’s president called for a meeting of the National Security Council to discuss the situation in the banking sector.
The anti-corruption agency, the Bank of Latvia and the European Central Bank all declined to comment.
Rimsevics’ arrest is particularly sensitive because he sits on the top policymaking council of the ECB, Europe’s most powerful financial institution, and is privy to the state secrets of Latvia as well as those of NATO and the European Union.
Any connections to money laundering, experts said, will raise concerns of the risk of blackmail from Russia, where the secret services and organized crime largely control the flow of illegal cross-border money transfers.
Latvia, one of the three Baltic nations that became independent after the 1991 collapse of the Soviet Union, has a well-documented history of acting as a money laundering funnel for Russian capital.
Its own banking system has been plagued by corruption and money laundering scandals in recent years. Among the most high-profile was the $230 million in Russian taxpayers’ money that was siphoned off by Russian officials, largely through Latvian banks, according to U.S. and European authorities.
Whistleblower Sergei Magnitsky was imprisoned in Russia in 2008 and allegedly beaten and denied medical care, leading to his death. The U.S. and EU sanctioned Russian individuals over the case in December 2010.
In 2014, a trove of leaked documents, the so-called Laundromat reports, detailed how billions were sent from Russia through Latvia in the years 2011-2014. Latvian banks then went through an independent audit last year, but regulators levied fines on only 3 banks of 640,000 euros.
Barely one week later, France fined Latvian bank Rietumu 80 million euros for money laundering and encouraging tax evasion among French citizens. France gave the bank’s chairman a four-year sentence, though he remains in his job.
Major global banks have stopped making dollar transactions with Latvian banks. The Laundromat’s leaked documents illustrated how dirty money had reached firms like Deutsche Bank by way of Latvian banks.
On Tuesday, the U.S. Treasury told banks to not make dollar transactions with one of Latvia’s biggest banks, ABLV, which it said “has institutionalized money laundering.”
The Treasury report said ABLV’s disregard for measures against money laundering and terrorism financing made it “attractive to a range of illicit actors engaged in organized crime, weapons proliferation, corruption and sanctions evasion.”
Bad banking practices have also contributed to making Latvia poorer.
The collapse of a bank called Parex in 2008 under the weight of bad loans cost the state a billion dollars, overwhelming the government’s finances and requiring it to need an international bailout. The recession was so deep that a one-tenth of the Latvian population emigrated.
Rimsevics has been the head of Latvia’s central bank throughout. He became chairman in 1992 and then governor in 2001. Everyday oversight of the banks is managed by a specific regulator, whose chairman is nominated by Rimsevics. The current chief regulator, Peters Putnins, also worked under Rimsevics for years at the central bank.
His detention comes as Latvian authorities have warned that Russia is actively trying to obtain state secrets from Latvian officials and is trying to weaken the U.S. and EU by, for example, interfering in the U.S. presidential election.
The banking scandal, meanwhile, is likely to shake confidence in governance in Latvia, a small nation of 2 million people that is struggling to deal with Russia’s attempts to re-exert influence over the former Soviet satellite state.
The finance minister, Reizniece-Ozola, said “the Latvian financial system is stable.”
Jari Tanner in Helsinki contributed to this report.
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