The European Central Bank insisted Thursday that it has no power to investigate and stamp out criminal activity such as money laundering, even within its capacity as eurozone banking supervisor, a role it took over in 2014.
The ECB has found itself under fire for not taking more robust action sooner, after it recently froze payments of a Latvian bank accused of wrongdoing by US authorities.
But it pointed out Thursday that money laundering cases lie outside its jurisdiction.
"Breaches of anti-money laundering can be symptomatic of more deeply rooted governance deficiencies within a bank, but the ECB does not have the investigative powers to uncover such deficiencies," the head of the ECB's supervisory arm, Daniele Nouy, said in a statement.
"Only when such breaches have been established by the relevant national authority can the ECB take these facts into consideration for the purposes of its own tasks."
Her remarks come after the US Department of the Treasury last week named Latvian lender ABLV "an institution of primary money laundering concern" and accused it of having connections to North Korea's weapons development programme.
Latvia joined the single currency in 2014 and the ECB was obliged to suspend payments by the tiny Baltic state's third-largest bank this week to give it breathing space.
ABLV's financial health was in peril after its access to the financial system was cut off following the allegations from Washington on February 13.
At the same time, the Latvian central bank chief Ilmars Rimsevics -- who sits on the ECB governing council by virtue of his position -- was arrested on suspicion of soliciting bribes, in an unrelated case.
Riga's Corruption Prevention Bureau (KNAB) has since banned Rimsevics from carrying out his duties after he refused to resign.
The two simultaneous cases are a rare challenge for the ECB, notably in its relatively new role as top eurozone banking supervisor.
Hoping to harness the central bank's strong international reputation to restore financial stability, governments added the supervisory role to its monetary policy tasks in late 2014 following years of crisis in the 19-nation single currency area.
Since then, the ECB has directly supervised more than 100 of Europe's largest and most significant banks, and worked closely with national authorities to bring supervision of smaller lenders into line.
But observers have criticised the ECB's response to the Latvian cases.
The lack of communication from top ECB officials so far "won't do," Bloomberg News wrote in an editorial on Thursday, before Nouy's statement was released.
"The ECB should acknowledge that the scandals affect its own ability to discharge its responsibilities, make clear it's following events closely, and do whatever it can to help lift this cloud."