Latvia’s financial watchdog attempted to reassure lenders handling dollar transactions that the deals are properly vetted and pose little risk, in response to criticism from the Organization for Economic Cooperation and Development and U.S. officials.

Banks in the country of 2 million people have become embroiled in scandals that included bribes by a Scandinavian telecommunications company and a Russian tax fraud. Latvia’s regulator has stepped up penalties since a critical report by the OECD was published last year. The watchdog fined Privatbank AS’s Latvian unit a record 2 million euros ($2.2 million) for handling some of the money from a $1 billion theft from Moldova, more than ten times the previous record fine. The bank denies wrongdoing.

Reassuring counterparties of adequate safeguards "is a question of national interests, because it can’t be that an EU and euro member state remains without the ability to carry out clearing with dollars directly,” Peters Putnins, the new director of the regulator, said in an interview with Dienas Bizness newspaper published Tuesday. “That would be scandalous,” said Putnins, whose comments were confirmed by Ieva Upleja, a spokeswoman for the regulator.

Kristaps Zakulis resigned as financial regulator on Jan. 25 after demands for tighter oversight of banks that play a key economic role by processing dollar payments from businesses across the former Soviet Union. The Baltic country needs to use correspondent institutions like Deutsche Bank to clear U.S. dollar transactions through their units in New York.

Losing access to these banks would make dollar transactions slower and costlier, according to Putnins. To address the criticism, the regulator is hiring additional experts in money laundering and asked U.S. firms to perform anti-money laundering audits of the sector.

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