The Association of Latvian Commercial Banks (LKA) supported on March 22 the Riga government’s latest plan to save Latvia’s international financial reputation by banning the use of shell companies.

The government seeks to put a legislation in force that would ban doing business with shell companies, which are a typical way to make money flows hard to trace. Latvia, which over the years has attracted billions of non-resident money from Russia and other post-Soviet countries, has seen cooperation of its banks with shell companies proliferate.

The government expects the law to be passed in April and enter force in May. According to the plans, the new law would give banks just six months to wrap up business with shell companies.

The move by the government follows the recent shutdown of ABLV bank, charged by the US financial authorities with money laundering and facilitating transactions linked to the North Korean regime.

“To manage the situation in an effective manner, a clear and unambiguous prohibition on cooperating with shell companies must be put into law,” the LKA said in a statement. According to the LKA, the ban would affect ten Latvian banks.

Meanwhile, a concurrent crisis is also unfolding in Latvia. The governor of the Latvian central bank Ilmars Rimsevics is suing the government in the Court of Justice of the European Union (CJEU) for banning him from working at the European Central Bank (ECB).

Rimsevics has been on the ECB’s board as a governor of a Eurozone member’s central bank. The Latvian anti-corruption force detained him in February upon suspicion of taking in a bribe of at least €100,000.

Rimsevics denies the allegations but his detention (he was released on bail a short time later) has added to the tarnished reputation of the financial sector in Latvia and put the ECB in an awkward position as well.