RIGA, June 13 (Reuters) - Latvia's parliament on Thursday passed a bill aimed at strengthening control over the financial watchdog as the Baltic state moves to distance itself from a series of scandals that have hit the banking sector in recent years.
The country's new government, formed in January after months of political deadlock, hopes to tighten rules ahead of a review by international money-laundering standards watchdog Moneyval, which some officials fear could label the Baltic state as risky.
Lawmakers passed beefed-up regulations that set out the duties of the country's banking watchdog, the Financial and Capital Market Commission, in combating money laundering and terrorism financing (AML/CFT) in the financial sector.
It has been seen by many as too soft on banks.
"These ambitious reforms are a big step forward in our fight against money laundering, the financing of terrorism and arms proliferation," Prime Minister Krisjanis Karins said in an emailed statement to Reuters.
"These measures demonstrate our unbending political will to make further changes in the financial sector as quickly as possible and to become a leader in transparency and governance in EU."
The new rules will mean the board of the Commission will be appointed by parliament, which will also be able to fire members.
The current head, Peter Putnins, criticized the changes as damaging the Commission's independence.
"This is an unprecedented case of political interference in the Financial and Capital Market Commission's operations," he said.
Latvia has been struggling to put a series of recent financial scandals behind it.
Its third biggest bank, ABLV, was shut last year after U.S. authorities accused it of money laundering and U.S. sanctions breaches, plunging the country into its worst financial crisis in a decade.
Washington has been critical of the decision by the financial watchdog to allow ABLV to liquidate itself, according to people familiar with the matter.
In addition, central bank Governor Ilmars Rimsevics, also a top policy-maker at the European Central Bank who led Latvia into the euro, is awaiting trial after he was accused last year by the public prosecutor of accepting an offer of a 500,000 euro ($566,100) bribe from a Latvian bank.
He denies the allegation. (Reporting by Gederts Gelzis; Editing by Simon Johnson and Emelia Sithole-Matarise)