RIGA (Reuters) - Latvia’s ABLV Bank sought emergency support on Monday after U.S. officials accused it of helping breach North Korean sanctions while the country’s central bank chief faced bribery allegations, turning up the spotlight on its financial system.

The Baltic country, which is a member of the euro zone and shares a border with Russia, has come under increasing scrutiny recently as a conduit for illicit financial activities.

Last year, two Latvian banks were fined more than 2.8 million euros ($3.26 million) for allowing clients to violate sanctions imposed by the European Union and United Nations on North Korea. Three others received smaller fines.

ABLV said it had sought temporary liquidity support from the central bank after depositors withdrew 600 million euros, about 22 percent of total deposits, following a warning by the United States that it was seeking to impose sanctions on the bank.

Latvia’s third-biggest lender denied wrongdoing.

“We don’t participate in any illegal activities,” ABLV Bank Deputy CEO Vadims Reinfelds told a news conference. “There are no violations of sanctions.”

The bank said it would not look for a bailout from the government and that it had adequate liquidity and capital.

The European Central Bank had earlier stopped all payments by ABLV, citing the sharp deterioration in its financial position in recent days and saying a moratorium was needed to allow the bank and Latvian authorities to address the situation.

A source close to the matter said the moratorium would be short, giving ABLV just a few days to assess its situation.

Only solvent institutions may receive emergency liquidity support and should the ECB determine that ABLV cannot meet its financial, liquidity and capital obligations, it could start proceedings that may lead to the bank being wound down.

Latvia’s own central bank said it had agreed to provide 97.5 million euros worth of funding to ABLV but that the bank has yet to receive the money.

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) said on Feb. 13 that ABLV “had institutionalized money laundering as a pillar of the bank’s business practices”.

It linked some of the alleged activities to North Korea’s ballistic missiles program, saying bank executives and management had bribed Latvian officials to cover up their activities.

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CENTRAL BANK GOVERNOR

Separately, Latvia’s anti-corruption authority released central bank Governor Ilmars Rimsevics, an ECB policymaker, who was arrested on Saturday on suspicion of having solicited a 100,000 euro bribe. Rimsevics denied the allegations.

The Corruption Prevention and Combating Bureau said its investigation was not connected to the probe into ABLV.

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“(Rimsevics’ arrest)... is about demanding a bribe of no less than 100,000 euros,” the bureau’s head Jekabs Straume told reporters at a news conference on Monday.

Neither the police nor the anti-corruption authority gave details of the alleged request for a bribe.

A lawyer for Rimsevics, who was arrested after police searched his office and home, said he would hold a news conference at 11:00 a.m. (1000 GMT) on Tuesday.

“I disagree with it categorically,” Rimsevics told Latvian news portal Delfi following his release, referring to the bribery allegations.

Prime Minister Maris Kucinskis had earlier called on the central bank chief to quit, saying: “I can’t imagine that a governor of the Bank of Latvia detained over such a serious accusation could work.”

Latvia joined the European Union in 2003 and adopted the euro currency at the start of 2014, a move that gave its central bank governor a seat on the ECB’s interest-rate-setting Governing Council.

The European Commission said on Monday that Rimsevics’ detention was a matter for Latvian authorities.

BOOM TIME

The economy of Latvia, which gained independence from the Soviet Union in 1991, has boomed in recent years. Its commercial banking sector is dominated by Nordic banks alongside a number of privately-owned local lenders.

In its document detailing the allegations against ABLV, the FinCEN said the reliance of some parts of the Latvian banking system on non-resident deposits for capital exposed it to increased illicit finance risk. It said such deposits amounted to roughly $13 billion.

“Non-resident banking in Latvia allows offshore companies, including shell companies, to hold accounts and transact through Latvian banks,” FinCEN said, adding that criminal groups and corrupt officials may use such schemes to hide true beneficiaries or create fraudulent business transactions.

“(Former Soviet Union) actors often transfer their capital via Latvia, frequently through complex and interconnected legal structures, to various banking locales in order to reduce scrutiny of transactions and lower the transactions’ risk rating.”