September 20, 2019 / 2:03 PM / a month ago

Latvia criticised for choosing banker to police banks

RIGA, Sept 20 (Reuters) - Latvia's appointment of a banker to supervise the sector is threatening a conflict of interest, Transparency International said on Friday, following a series of financial scandals in the Baltic state.

Government officials this week announced that they had chosen Santa Purgaile, a board member with Citadele Bank , Latvia's fourth-largest lender, to lead the country's financial supervisor.

The decision came more than a year after the United States acted to shut down ABLV, a Latvian bank it said was linked to North Korea's nuclear weapons programme, money laundering and Russian corruption.

Latvia has since sought to reform by changing officials in key roles, with Purgaile's appointment being among the most important.

But Transparency International, a global anti-corruption organisation, said her career in banking could hamper her in the position.

"Her long background in the banking sector poses a risk that her priority could be the interests of the banks and not the interests of the general public," Liene Gatere of Transparency International told Reuters.

"There shouldn't be any doubt about her independence," said Gatere.

Purgaile has said she will be careful to avoid any such conflict earlier this week when her appointment was announced.

"I can assure you here that I will refrain from making any decisions that relate to my former employer," she told journalists.

Her appointment must now be approved by parliament, although Latvia is ruled by a wide political coalition and lawmakers are unlikely to object.

After Latvia secured independence in 1991 from the then-Soviet Union, more than a dozen of its banks promoted themselves as a gateway to Western markets for clients in former Soviet states, promising Swiss-style secrecy.

That policy has now been abandoned under U.S. pressure but despite forecasts by Latvian officials more than a year ago after the shuttering of ABLV that many other banks would also close, they are still open.

Latvia faces a review by international money-laundering standards watchdog Moneyval in the coming months, which some officials fear could label the country as risky, alongside the likes of Pakistan.

Latvia's central bank governor is also accused by prosecutors of corruption, including alleged bribery linked to ABLV, after being detained briefly more than a year ago.

He has returned to his job, denies the allegations and will go on trial on November 4. (Writing by John O'Donnell; editing by Emelia Sithole-Matarise)

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