If some banks don't take drastic steps, they may follow the fate of ABLV Bank, which imploded just weeks after being sanctioned by the US authorities. Furthermore, the state itself may face consequences for failing to prevent money laundering, the minister said.
If Latvia cannot quickly prove it can discover and prevent financial crimes, the US may turn against "both banks and the state itself".
"If we're unable to prove, in a short period of time, that we're able to counter financial crimes-firstly, to identify them, and lead [investigations] to fines and charges.. then there may be graver consequences. But I hope it doesn't come to that," she said.
Therefore, the regulators also need to step up their game. "We have systematic deficiencies," she said. That applies not only to the Financial and Capital Markets Commission (FKTK), but also an anti-money laundering office that is currently seeking a new head, and other institutions.
FKTK's work had been "toothless" before, but the last two years, after a new head was put in place at the institution, have shown a "positive dynamic", according to Reizniece-Ozola.
Latvia has to prove that the whole system is operational and it can counter financial crime, she said.
"We have to change substantially. No one wants us to be considered a grey area in the periphery of the EU where money is being laundered," said the minister.
Reizniece-Ozola's comments come a day after she told reporters that partners in the United States have told the Latvian government they believe Latvian banks are still involved in money laundering schemes, despite recent drastic action taken against ABLV bank that sent it into liquidation.
"Banks must realize that they have to give up this dangerous type of business. Either they have to change their business methods or fold," she told the press.