It was just nine months ago that the eurozone had to rescue Cyprus, a similarly tiny member state that also specialized in attracting huge deposits from Russia. Since then, eurozone leaders have vowed to crack down on financial sanctuaries and improve transparency.
But as the 18th member of the eurozone, Latvia is likely to see a greater - not smaller - influx of dirty money as the country will be viewed as safer than other former Soviet states while financial oversight remains loose.
"Immediately after Latvia joins the eurozone, I imagine we're going to see an actual spike in dubious money flowing in," said Mark Galeotti, a professor at New York University whose researches organized crime in the former Soviet Union.
For years, Latvia's political and financial leaders had hoped to create a mini-Switzerland in Eastern Europe - a place where capital in unstable countries such as Russia or Kazakhstan could either park for a while or channel its way further west to banking meccas like Zurich or London.
After a slight dip during Latvia's financial crisis in 2008-2010, the amount of non-resident bank deposits has risen rapidly over the past two years ahead of the country's entry into the eurozone.
"The issue with Latvia is that you have a pretty permissible political environment, and you have the massive and quite efficient infrastructure for managing these funds from the East. The question is, why wouldn't you want to go to Latvia?" said Galeotti.
Latvia has 20 domestically registered banks, or one for every 100,000 residents - an extremely high ratio. Of these, about 13 are considered "boutique banks" that rely almost exclusively on foreign funds, mainly from volatile countries of the former Soviet Union. Rather than lend to businesses and consumers, these tiny financial institutions primarily serve as safe havens or money transfer operations. They tend to keep their money in liquid assets so it can quickly be moved.
Some of the money is dirty. This year, Latvia's bank regulator slapped a 100,000-lat ($200,000) fine on a bank for failing to exercise sufficient internal controls with money connected to the so-called Magnitsky case.
Sergei Magnitsky was a Russian lawyer who worked for Hermitage Capital, an investment fund whose chief executive accused Russian police officials of stealing $230 million in tax rebates after illegally seizing Hermitage subsidiaries. In 2008 Magnitsky, at the age of 37, died in prison of pancreatitis, allegedly after being beaten and denied medical treatment.
Hermitage Capital claimed that tens of millions of dollars of the stolen money passed through Latvia.
Claiming confidentiality and a risk of destabilizing the industry, Latvia's regulator refused to "name and shame" the bank connected to the case. This refusal, as well as the small size of the fine, triggered criticism and renewed doubts about the regulator's integrity despite imminent eurozone membership.
"The regulators don't have teeth," said Galeotti. They maintain "a kind of culture that emerged in Latvia in the late 1990s...which was ultimately 'Latvia desperately needs business,' and therefore the role of the regulator is not to impede business," he said.
Non-resident bank deposits comprise nearly half of all deposits, which is unusual, and they are on the rise. In the first quarter of 2013, non-resident deposits soared 17.7 percent compared with the same period in 2012 - clear evidence that Latvia's attractiveness as a safe haven is not relenting. The economy has been the fastest-growing in the EU for the past three years and the country displays a remarkable degree of political stability.
"Latvia has historically had a large banking sector, has extremely strict data privacy laws, speaks Russian and 'gets' the post-Soviet mentality," said Tom Wallace, an analyst C4ADS, a Washington, D.C.-based firm that specializes in data analysis and security.
Wallace, who co-authored a report on the links between Latvian banks and Ukrainian companies involved in the illicit arms trade, added that Latvia "is an EU member and so acts as a conduit to Western financial institutions. If you have money you want to discreetly move out of the former Soviet Union, Latvia has a lot of advantages."
Latvia's banks face scrutiny in a eurozone-wide review by the European Central Bank, which is trying to find weak spots in the financial sector to improve transparency and confidence.
The good news for the eurozone is that Latvia's banking system is not too big compared with its economy. That means the country is less likely to need a bailout from its new eurozone partners to save its banks, should they run into trouble, as happened with Cyprus. As of Sept. 30, the banks held nearly 20 billion lats ($30 billion) in assets, or about 120 percent of gross domestic product, far less than the average 320 percent in the eurozone in 2011.
On the flip side, for Latvia, the eurozone is now a safer economic bloc to join than it was 18 months ago, when many investors worried it would break apart. Markets have calmed since the ECB vowed in the summer of 2012 to do whatever it takes to keep the bloc together.
Latvia's regulator says it has introduced a number of controls aimed at anti-money laundering, counter-terrorist financing, and preventing excessively large sums from entering the banking system. Experts agree that the regulator has acknowledged the risks of dirty money and is addressing them, even if slowly.
But Latvian bankers say that pinpointing dirty money is not cut-and-dry.
"As anti-laundering regulations become more elaborate across the globe, so are the schemes used by persons who try to avoid them," said Arvids Sipols, who has worked 16 years in Latvian banks and is now on the board of Nord Capital Markets, a Riga-based asset management firm.
"In certain cases, simple filters do work and help to avoid the acceptance of rogue players," said Sipols. "In other cases it will not suffice, and it is not a banker's job to become an international detective."