The plan was announced Tuesday by Peteris Putnins, the FKTK deputy chairman whose candidacy for the top job following the resignation of chairman Kristaps Zakulis is being pushed through at high speed by central bank chief Ilmars Rimsevics and outgoing Finance Minister Janis Reirs.
Putnins told Latvian Radio all of Latvia's 17 boutique banks will undergo a stringent audit in line with US and EU practises and carried out by three reputable US companies.
"That will take us to the highest international standards possible," Putnins claimed, "Banks and bank owners have to understand and implement checks and standards... that's important not only for themselves but for wider national interests."
Despite coverage for years of money-laundering suspicions among the banks which cater largely to depositors from Russia and other former CIS countries, the authorities in Riga consistently denied Latvia had a major problem with money laundering.
However, evidence pointing to numerous examples including the notorious Magnitsky case in Russia and the recent disappearance of one billion dollars from Moldova via Latvian banks has finally forced FKTK to act - though too late to save Zakulis' job.
But now with fears that hoped-for membership of the Organization for Economic Cooperation and Development (OECD) could be denied because of foreign fears about the boutique banks, efforts to clean up the image of the banking sector have belatedly gone into overdrive.
Putnins said the presence of a sector serving a non-resident clientele was not necessarily a bad thing but that more care should be taken by banks in checking the identities of their clients and their sources of income.
"If you don't understand it, it shouldn't be accepted," he suggested as a rule of thumb for the banks.
It was "difficult to say" to what extent Zakulis was responsible for the problems now being experienced, he said but explained that FKTK "has not only recently reacted to events" with concerted efforts to counter money-laundering beginning last summer.
Prior to his role at FKTK, Putnins worked as a lawyer and as a consultant at the central bank.
No other candidates for the position of FKTK chairman have been named and it seems there will be no open competition for the post with Rimsevics and Reirs apparently very keen to get Putnins in place before Dana Reizniece-Ozola takes over as Finance Minister.
Reizniece-Ozola has criticised the apparent haste with which Putnins' candidacy is being pushed.