(Adds comment from the bank)
NICOSIA, July 18 (Reuters) - Cyprus's central bank took control of the Cypriot branch of a Tanzanian-based bank on Friday, a day after the United States called it a "financial institution of primary money laundering concern".
The Central Bank of Cyprus said that, acting under the authority given to it by law, it had assumed the administration of operations of the FBME Bank branch on the island from Friday.
FBME, which is headquartered in Tanzania, said it was "shocked" at the allegations, which the bank said it was not given an opportunity to address.
It rebuked money laundering allegations. It said it had commissioned the German division of an international accountancy firm to carry out a detailed assessment into its operations and practices over the past two years. FBME, it said, was found in compliance with applicable rules on anti-money laundering regulations of both Cyprus and the European Union.
"FBME Bank welcomes the involvement of its regulator, is cooperating fully with it and reiterates its absolute continued commitment to full compliance with applicable laws and regulations," the bank said in an announcement posted on its website.
A central bank spokeswoman declined comment.
The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury said on Thursday that FBME had facilitated a "substantial volume" of money laundering through the bank for many years and had systemic failures in its anti-money laundering controls.
Although the bank is headquartered in Tanzania, most of its activities are carried out through its Cypriot branch, FinCEN said.
FinCEN said a large shell company customer base facilitated international terrorist financiers and international narcotics trafficking, including the evasion of sanctions on countries such as Syria.
"FBME solicits and is recognized by its high-risk customers for its ease of use," FinCEN said in its report.
Cypriot authorities found FBME's compliance with Cypriot banking laws and anti-money laundering regulations deficient on at least two occasions, the U.S. agency said.
It also said the bank came under scrutiny by Cypriot authorities in 2013 for allegedly circumventing currency controls, imposed by Cyprus in the wake of an international bailout in March of that year.
It was not clear how long the Cypriot branch of the bank would be under central bank management. The legal statute invoked by authorities says "as long as the central bank deems it necessary". (Reporting by Michele Kambas; Editing by David Evans, Pravin Char and Lisa Shumaker)