Banker Finds He Has ‘Even More Enemies Than I Thought’

RIGA, Latvia — The governor of Latvia’s central bank, a pillar of Europe’s financial system for years and a zealous champion of austerity, has long been lambasted by his critics as a heartless enforcer of economic dogma. In a play that recently ended a long run at the National Theater, his character is stabbed to death onstage.

“The same thing is happening to me in reality,” Europe’s longest-serving central bank chief, Ilmars Rimsevics, said in an interview last month just after the Latvian Parliament voted 55 to 0 asking him to resign because of a swirl of corruption allegations.

At the center of a tumultuous real-life drama that has left him under investigation on suspicion of taking bribes and has destroyed the country’s biggest locally owned private bank, Mr. Rimsevics, never a popular figure, has been taken aback by all the hostility. “I have even more enemies than I thought,” he said.

Mr. Rimsevics was detained by anti-corruption investigators — just a day after the last performance of “Success Story,” a play pillorying his role in Latvia’s harsh program of austerity at the end of the last decade. The austerity drive allowed the country to adopt the euro currency in 2014, but also led to widespread suffering.

Grabbed by the police in February after returning to Riga, the Latvian capital, from a holiday in Spain, Mr. Rimsevics was held for two days and subjected to hours of questioning.

Since then, his home has been burgled by unidentified intruders and he has struggled to defend himself against what he describes as a conspiracy by crooked bankers who want him in jail because he threatened their profits from highly risky money laundering deals.

About the only person to defend him publicly is his ex-wife, Lyga. A family, she said, even a divided one, should look out for its own.

Rules protecting the central bank from political meddling make it difficult to unseat Mr. Rimsevics, who denies any wrongdoing and has refused to quit. Even his underlings in the central bank, known as Latvijas Banka, seem to want him gone. They decided recently to bar him from using his office, the bank’s computer system, staff cars and other facilities.

He “has few to zero friends,” said Morten Hansen, the head of the economics department at the Stockholm School of Economics in Riga.

After weeks of silence, the European Central Bank, on whose governing council Mr. Rimsevics sits but whose meetings he cannot attend because he is barred from leaving Latvia, this month offered a timid gesture of support. It asked the European Union’s top court to weigh in on whether the “security measures” imposed on him violated rules protecting the independence of European central banks.

The standoff is unlikely to end soon. The European court rarely makes swift decisions and Latvia’s Corruption Prevention Bureau, which is leading the investigation into Mr. Rimsevics, has said that the case would not be handed over to prosecutors for months.

Mr. Rimsevics attributes his troubles to what he says was his hard line against Latvian banks that profit from taking deposits from and moving funds for nonresident clients, mostly citizens of former Soviet lands. “They are taking their revenge,” he said.

The biggest of these banks, ABLV, announced last month that it was going into “self-liquidation” after the United States Treasury Department issued a damning report describing the bank as a sprawling money laundering racket with a rogue’s gallery of disreputable clients who, among other things, helped North Korea develop ballistic missiles capable of hitting the United States.

The American bombshell, which the bank insists was the result of “false information,” but that supported what many have long suspected, was followed quickly by an even more shocking blast — the news that Mr. Rimsevics, a man so powerful and seemingly immovable that he was known as “the king,” was under investigation for taking bribes.

Officials say the two events are not connected, but Mr. Rimsevics insists they both flow from the same source — the dirty shenanigans of Latvia’s “nonresident” banking sector.

He said it was no coincidence that anticorruption investigators first raided his central bank office and his home a few hours after he declined a request from ABLV bank for a billion euros in “liquidity support” to help survive a bank run caused by the Treasury Department report. “The two things are absolutely connected,” he said, claiming that he is the victim of a “big plot” by dodgy bankers.

Latvia’s finance minister, Dana Reizniece-Ozola, a chess grandmaster well versed in elaborate gambits, derided Mr. Rimsevics’s conspiracy theory. “I know this is his line of defense,” she said. “This is a free country so he can say whatever he wants.” Yet, she added, “He is not a victim. He is a suspect.”

Also skeptical about Mr. Rimsevics’s claims of victimhood is Ainars Latkovskis, the chairman of the Latvian Parliament’s Defense, Internal Affairs and Corruption Prevention Committee. Mr. Latkovskis said his committee had long pushed for tighter controls on banks like ABLV but, speaking in the chamber where the committee has discussed ways to toughen measures against money laundering, he said, “we never saw him here in this room.”

John Christmas, a banker who worked with Latvia’s now defunct Parex bank, said Mr. Rimsevics had, at times, shown concern about money laundering. He remembers meeting the central bank chief in 2004 and getting an earful about Parex. “He started cursing that Parex was a criminal organization,” Mr. Christmas said.

The banker later left Parex and Latvia to become a vociferous online critic of the country’s banking system. But, he said, Mr. Rimsevics did not respond to a 2005 letter urging the closure of Parex, which collapsed three years later after a bank run.

All the recent tumult, accompanied by purported death threats and accusations of Russian meddling, has delivered a sharp blow to Latvia’s image as a placid and predictable country firmly anchored in the West, a counter-model of post-Soviet development to that offered by Russia.

The evidence against Mr. Rimsevics for bribetaking has not been revealed, and the only accuser to come forward so far is Grigory Guselnikov, the Russian owner of Norvik, another Latvian bank focused on nonresident clients. Speaking by telephone from London, where he lives, Mr. Guselnikov said he had been asked to pay 100,000 euros, around $125,000, in bribes a month by an intermediary sent by Mr. Rimsevics. He also accused the central banker of having once worked for the Soviet K.G.B.

Mr. Guselnikov’s accusations, said Mr. Rimsevics, “are total, total lies.”

Latvia’s Defense Ministry, in a statement in response to the crisis rocking the country’s financial world, claimed that the tiny Baltic nation had fallen victim to a “massive information operation from outside” that was “identical in structure and execution” to operations linked to Russia that preceded elections in France, Germany and the United States.

Hardly anybody is buying that, least of all the United States Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN, which issued the February report cataloging how ABLV bank’s “executives, shareholders and employees have institutionalized money laundering as a pillar of the bank’s business practices.”

Marshall Billingsea, an assistant secretary at Treasury, visited Riga last month to again press officials to curtail Latvia’s shady nonresident banks and assure them that Washington has evidence that ABLV not only laundered dirty money but “used bribery to influence Latvian officials when challenging enforcement actions and perceived threats to their high-risk business.”

The bank has categorically denied paying bribes and has cast itself, like Mr. Rimsevics, as a victim.

The finance minister, Ms. Reizniece-Ozola, said the Defense Ministry statement portraying Latvia as a victim of a Russian-inspired hybrid war did not mean to suggest that Moscow is to blame for all the troubles that have engulfed Mr. Rimsevics and ABLV bank. It was, she said, simply a reminder of the tense geopolitical backdrop to the banking crisis at a time when Russia is working hard to undermine NATO and the European Union, both of which Latvia has belonged to since 2004.

Only 6 percent of ABLV’s deposits, which totaled $3.2 billion at the end of 2017, came from Latvians. The largest share — 43 percent — was from Russians.

The problem, said Ms. Reizniece-Ozola, is not that depositors are Russian but that “we don’t really know who they are,” as most operate through layers of opaque shell companies.

Over the years Latvian banks, particularly ABLV, have figured in scandals involving crime-tainted money. These include the transfer of funds stolen by corrupt Russian officials exposed by Sergei Magnitsky, a Russian lawyer who died in a Moscow prison in 2009; money from a $1 billion bank heist in Moldova in 2014; and billions of dollars transferred out of Russia in what the Organized Crime and Corruption Reporting Project called the “Russian laundromat.”

After long denying that Latvia had a serious problem and arguing that the country was merely utilizing its “competitive advantage” as Russia’s neighbor but part of Europe, the authorities and even some banks have tried to end the free-for-all. They have imposed tougher anti-money laundering controls and are at least paying lip service to the idea that crime-tainted money should be shunned.

“It is clear that the credibility and reputation of the financial sector has been damaged,” said Sanda Liepina, the new chairman of the Association of Latvian Commercial Banks, which for years played down accusations of money laundering. Control measures introduced starting in 2015, she said, “should have been taken four or five years earlier.”

Mr. Rimsevics, the beleaguered central bank chief, says he, too, “felt uneasy about what has been going on for years” in Latvian banks catering to Russians, but when he tried to curb their shady activities, ABLV, Norvik and other banks “ complained about me big time.”

He said he had even received text messages on his cellphone warning that he would be shot if did not ease up.

Whatever the truth of that, one thing seems clear: Latvia’s role as the “Switzerland of the Baltics,” a business model eagerly cheered by European and American consultants and officials in the early 1990s, seems over.

“This is really yesterday’s business,” Ms. Reizniece-Ozola said. “The sooner the banks themselves understand that, the better.”