The British minister responsible for financial services and fighting corruption resigned after weeks of questions over her financial ties to her aunt Sheikh Hasina.
Tulip Siddiq, 42, had repeatedly denied any wrongdoing and Prime Minister Keir Starmer said last week he had full confidence in her.
The resignation of a second government minister in two months is a blow to Starmer, whose approval ratings have plunged since his Labour Party won a general election in July.
Siddiq was handed the portfolio for financial services policy after the election, a role that included responsibility for measures against money laundering.
In a statement, Siddiq said although an investigation into her financial affairs found she had not breached the ministerial code of conduct, her position was “likely to be a distraction from the work of the government”.
“I have therefore decided to resign from my ministerial position,” she said.
Starmer swiftly appointed Emma Reynolds, who was a pensions minister, to Siddiq’s role.
Hasina, who had ruled Bangladesh since 2009, is being investigated there on suspicion of corruption and money laundering. Hasina and her party deny wrongdoing.
Siddiq was named in December as part of Bangladesh’s investigation into whether her family was involved in siphoning off funds from Bangladeshi infrastructure projects.
The anti-corruption commission alleged financial irregularities worth billions of dollars in the awarding of a $12.65 billion nuclear power contract, saying Hasina and Siddiq may have benefited.
