By Foo Yun Chee
STRASBOURG (Reuters) - Latvian Prime Minister Krisjanis Karins pledged on Wednesday to rid the country's banking system of money-laundering "rats" in a year, as the Baltic state faces international pressure over its ability to counter financial crime.
In a speech to European Union lawmakers, Karins also said the best way to address the problem across the bloc was to set up a central supervisor to monitor and tackle money laundering, replacing the patchwork of national watchdogs that have sometimes proved ineffective against cross-border crime.
EU lawmakers and the European Central Bank have repeatedly called for the creation of a new supervisor against financial crime, but many EU governments have opposed the move as they prefer leaving powers at a national level.
Karins said he wanted to turn the Latvian banking system into "the cleanest" in Europe, after its reputation was tarnished by the collapse last year of ABLV, the country's largest bank, amid money-laundering allegations.
Karins said he was confident that in a year's time he could be in a position to provide tips to other Europeans on how to clean up banking systems.
"But it's a little bit like fighting rats. I can make sure that I get the rats out of my house and my house will be clean, but what about my neighbours?" he told lawmakers.
Baltic and Nordic countries are grappling with a huge money-laundering scandal, after allegations the Estonian branch of Danske Bank, Denmark's largest lender, handled 200 billion euros (£173 billion) in suspicious transactions of Russian money between 2007 and 2015.
Sweden's Swedbank has recently been drawn into the scandal, after it was reported that it handled some of the same payments that went through Danske.
"The criminals may have left Latvia for now but they have unfortunately, I'm convinced, not left Europe," Karins said, adding the problem concerned all European states.
Latvia faces a review by international money-laundering standards watchdog Moneyval in the coming months, which some officials fear could label the country as risky, alongside the likes of Serbia and Pakistan.
(Reporting by Foo Yun Chee in Strasbourg and Clare Roth in Brussels; Writing by Francesco Guarascio; Editing by Mark Potter)
