Cyprus says will not tolerate sanctions-busting amid scrutiny

NICOSIA (Reuters) - Cyprus on Wednesday said it would not tolerate any deviation from EU sanctions on Russia, and said it was in touch with the U.S. and Britain after a number of its nationals were blacklisted last week as sanctions-busting enablers.

Britain sanctioned two Cypriots, and the U.S. about a dozen Cypriots or dual-nationals on April 12 for alleged ties to people facing sanctions or entities sanctioned over Russia's invasion of Ukraine.

It alarmed Cyprus, which has a thriving services industry in part built on hosting an extensive network of businesses with links to Russia and a past reputation of light-touch regulation.

Cyprus has asked both Britain and the U.S. for additional information to pass on to its own law enforcement agencies for assessment, officials said.

"The credibility of our country must be safeguarded and no deviation from EU sanctions will be tolerated," government spokesman Konstantinos Letymbiotis said.

Cyprus has significantly reduced its exposure to Russia since a financial crisis in 2013 forced the island to seek an international bailout and triggered an extensive shake-up of its banking sector.

Meanwhile, Bank of Cyprus, the island's largest bank, said it had notified around 4,000 clients with Russian passports who were not resident in the EU that their accounts would be closed.

"This action follows the suspension of Russia's membership by the Financial Action Task Force and the designation of Russia as a non-cooperative tax jurisdiction by the European Union," Bank of Cyprus said in a statement.

The bank said deposits held by the 4,000 clients accounted for less than 0.5 percent of total deposits.

(Reporting By Michele Kambas; Editing by Alex Richardson)