The unnamed individual is believed to have been part of a group a group that caused more than three million euros' worth of losses to the state, according to information from VID.
The specialist Tax and Customs Police Department has carried out searches at locations and property linked to the suspect which have turned up significant evidence, as well as amounts of cash.
The company through which the unlawful activities were performed provided security and legal services, and was linked to a company involved in the wholesale flower business, with as many as 12 people taking part in the scheme in total.
"In a series of investigations and operational activities, it was discovered that a former police officer supported and advised another group that scammed money in the wholesale flower business," VID said.
"The group has created fake business chains for tax avoidance purposes. It also legalized the proceeds of crime by establishing a cash transfer mechanism through several fictitious business accounts in both Latvian, Estonian and Czech credit institutions, thus masking the true origin and ownership of the proceeds of crime," a statement said.
The alleged crimes were committed from July 2016 until September this year.
Criminal proceedings have been initiated by the tax authority.