Latvia's ABLV bank
© Ints Kalnins / Reuters
The head of Latvia's central bank and member of the European Central Bank (ECB) governing council has been detained as part of a corruption investigation in the country.

The arrest comes four days after the US Treasury accused Latvia's third-largest lender of "institutionalized money laundering". According to the US officials, Latvia's ABLV bank had made money laundering into "a pillar of the bank's business practices."

"Illicit financial activity at the bank includes transactions for parties connected to UN-designated entities, some of which are involved in North Korea's procurement or export of ballistic missiles," the US Treasury said.

Following the report, Latvia's central bank governor Ilmars Rimsevics was interrogated for eight hours on Saturday. "We are facing a crisis of the international reputation of the Latvian financial system," said Latvian Finance Minister Dana Reizniece-Ozolaana. Prime Minister Maris Kucinskis has called for the resignation of the central bank governor.

ABLV claims the US reports are based on unfounded and misleading information. The bank is based in the Latvian capital Riga but also has subsidiaries in Luxembourg and the US.

The European Central Bank (ECB) stopped all payments by ABLV on Monday. "In recent days, there has been a sharp deterioration of the bank's financial position," the ECB said in a statement on Monday.

"A moratorium was considered necessary given that the bank is working with the Latvian central bank and authorities to address the current situation."

To stabilize the financial situation, ABLV asked the Bank of Latvia to issue a loan of €480 million, offering securities as collateral. It loaned ABLV €97.5 million on Monday. Last year, two Latvian banks were fined for allowing clients to make payments to North Korea.