Latvian central bank chief says victim of smear campaign after detention

By Gederts Gelzis

RIGA (Reuters) - Latvia's central bank chief, who was held in custody over the weekend on suspicion that he solicited a bribe, said on Tuesday he was the victim of a smear campaign because he has been leading a drive to stamp out corruption.

Latvia's financial system has been rocked in recent days by U.S. allegations that a leading bank engaged in money laundering and, separately, by the arrest of central bank governor Ilmars Rimsevics.

Rimsevics' suggestion he had been targeted because he was tough on corruption may deepen worries about the transparency of the banking sector in the Baltic nation, which shares a border with Russia and has close links with its former colonial master.

"I have not demanded or received any bribes," Rimsevics told a news conference on Tuesday. "I have become the target of some Latvian commercial banks to destroy Latvia's reputation."

Neither police nor the anti-corruption authority have given details of the 100,000 euro bribe allegedly requested by Rimsevics, who sits on the European Central Bank's Governing Council, which sets interest rates for the euro zone.

On Monday, Prime Minister Maris Kucinskis called on the central bank chief to quit. He appeared to soften his stance on Tuesday, however, saying he could not rule out that the bribery allegations were an attempt to damage the reputation of Latvian authorities.

The complaint against Rimsevics had come from Norvik Bank, a small Latvian lender, the prime minister said in a statement, adding that Norvik's owners had not provided evidence of wrongdoing despite being "repeatedly asked".

"If the owners of Norvik Bank have evidence that the management of the Bank of Latvia has requested the President of the Bank of Latvia or another Latvian state official to take unlawful actions, I call for evidence to be provided at the Corruption Prevention and Combating Bureau," Kucinskis said.

Norvik Bank did not immediately respond to a request for comment.

The allegations against Rimsevics and a warning from the United States that it was seeking to impose sanctions on ABLV Bank have highlighted concerns over a number of small banks that operate in Latvia, often acting for clients based abroad.

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) accused Latvia's third-largest lender ABLV Bank on Feb. 13 of "institutionalized money laundering" and helping breach North Korean sanctions.

FinCEN said non-resident banking in Latvia increased the risk that criminals and shell companies could conduct fraudulent transactions or hide their financial dealings.

Last year, two Latvian banks were fined more than 2.8 million euros ($3.26 million) for allowing clients to violate sanctions imposed by the European Union and United Nations on North Korea. Three others received smaller fines.

(Reporting by Gederts Gelzis; Additional reporting by Balazs Koranyi and John O'Donnell in Frankfurt; Writing by Simon Johnson; Editing by Catherine Evans)