LATVIA does not want to be the new Switzerland. At least not now.

But the Baltic republic – perhaps inspired by “wild east” free market reforms that followed the collapse of the Soviet Union – has got itself an unwanted reputation for banks that do not ask questions of their clients.

That image of Latvia was cast into the light again yesterday when one financial institution, Rietumu Banka – part owned by Celtic shareholder Dermot Desmond – was fined for facilitating industrial-scale tax evasion in France.

Read more: Bank linked to Celtic's biggest shareholder Dermot Desmond fined £70m for ties to crime

Rietumu has previoúsly hit the headlines in this newspaper after its accounts were advertised elsewhere in the former Soviet Union as part of secrecy kits that also include Scottish limited partnerships or SLPs.

Essentially, anybody wishing to remain anonymous – and perhaps untaxed – could enjoy the legitimacy of corporate entity in one European Union jurisdiction, Scotland, and a bank account in another, Latvia. But regulators in the Baltics and beyond have grown tired of this arrangement.

Last month the UK ordered SLPs to reveal their controllers, at least in theory. That was a response to the EU’s anti-money- laundering directives.

Read more: Bank linked to Celtic's biggest shareholder Dermot Desmond fined £70m for ties to crime

Latvian MEP Krisjanis Karins was one of the European Parliament’s rapporteurs on those reforms. Speaking in Strasbourg, the centre-right politician said his country was now eager to clean up its non-resident banks. He said: “You could say we have two parallel banking systems.

“One - the largest - is made up of normal banks that deal with financing the local economy, business loans, mortgages and car loans. The other, which has a large number of banks but which is collectively smaller by turner, provided services to foreigners.

“Translated loosely, they gladly accepted deposits from from the east, Russia and further.

“We have had a number of terrible scandals and a number of these banks have been closed because they were in engaged in money-laundering.”

Mr Karins, who was brought up in the American state of Delaware, which has its own reputation as a tax haven, believes banking watchdogs in Latvia have grown teeth. Why? Because, like SLPs in Scotland, non-resident no-questions-asked banking is a bad look for a nation.

Read more: Bank linked to Celtic's biggest shareholder Dermot Desmond fined £70m for ties to crime

The MEP said: “The country is absolutely interested in giving a signal to any and all investors that is a sound place to put sound money. If you want to launder money, please try some place else. We are not open for business. That is what the government wants to do. That is what the banking industry wants to do, but I cant say in all honesty that is what all banks individually agree with.”

He added: “On a scale of one to 10, in the 1990s the problem was a nine. Now it is maybe down to three. Maybe there are some surprises still waiting.”

However, he believes EU-wide principles of transparency – making sure company registers and bank regulators know who owns what – offer the best way to combat criminal cash. A new fifth anti-money-laundering directive is in the pipeline.

Will Brexit Britain impose it?