One day after we reported that the central bank governor and ECB Governing Council member Ilmars Rimsevics was detained by Latvia’s anti-corruption authority on Saturday on suspicion of accepting a bribe of more than €100,000, prompting both Latvia’s Prime Minister and the president to call on Rimsevics to resign, Latvia appears to have a full-blown banking crisis on its hands, after the European Central Bank froze all payments by Latvia’s third largest bank, ABLV, following U.S. accusations the bank laundered billions in illicit funds, including for companies connected to North Korea’s banned ballistic-missile program.

The troubles started on February 14, when Latvia began investigating  ABLV over suspicions of illegal trading related to North Korea’s weapons system. The investigation was launched after the Treasury Department charged the bank with having “institutionalized money laundering as a pillar of the bank’s business practices,” which proposed preventing the bank from opening an account in the U.S.

That decision immediately made ABLV a pariah to other financial institutions, effectively cutting its access to the dollar and funding flows from the world’s most important market, and forcing it to rely exclusively on the ECB as it sole-source of funds.

As the WSJ reported, in proposing the ban on ABLV, Treasury said the bank managed transactions for clients connected to several long-sanctioned North Korean firms.

These include North Korea’s Foreign Trade Bank, the institution that manages Pyongyang’s foreign-currency earnings, revenue that U.S. and United Nations officials say go directly to North Korea’s nuclear and missile programs.

According to the Treasury, ABLV’s alleged illegal activity also included funneling billions of dollars in public corruption proceeds from Azerbaijan, Russia and Ukraine through shell company accounts.

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