UPDATE 2-UAE central bank says StanChart liable to legal action
* Between 1,400 and 8,000 accounts affected in the UAE
* Threat a further complication for CEO Sands
* Bank agreed to pay $300 million fine on Tuesday
* Bank says will work with regulators (Adds Standard Chartered response, shares, background)
By Stanley Carvalho and Matt Scuffham
ABU DHABI/LONDON, Aug 21 (Reuters) - Banking group Standard Chartered Plc is liable to legal action in the United Arab Emirates after it agreed to close some customers' UAE accounts in an anti-money laundering settlement with U.S. regulators, the UAE central bank said on Thursday.
Under the settlement, announced on Tuesday, the bank agreed to pay a $300 million fine, end high-risk relationships with small- and medium-sized business clients in the UAE, and suspend the processing of dollar-denominated payments for some clients at its Hong Kong unit.
The threat of further legal action in the UAE is a further complication for StanChart Chief Executive Peter Sands, who is fighting to retain the backing of investors after a series of transgressions and a decline in the bank's earnings.
"We have noted the announcement made by the UAE Central Bank. We always work with our regulators to achieve the right outcomes," the lender said in an e-mailed statement.
Shares in the bank were down 1 percent by 1415 GMT.
In the UAE, between 1,400 and 8,000 Standard Chartered accounts are expected to be affected, the central bank said, adding that it would examine every account to identify any violations.
The British-based bank will be liable to legal action by the account owners "because of the material and moral damage which is falling on them", the central bank said.
It added that its Consumer Protection Unit was willing to consider complaints from affected account holders. However it did not say if it believed any action was likely by account holders.
The central bank said that while Standard Chartered had not fulfilled U.S. regulatory requirements, its UAE branches had committed "no significant violations" of international money laundering rules, such as the standards of the Financial Action Task Force, an inter-governmental body.
Standard Chartered said on Tuesday, after the settlement was announced, that it was in any case seeking to leave the business of serving small- and medium-sized clients in the UAE as part of a broad effort to sharpen its strategic focus.
"The UAE remains one of Standard Chartered's leading franchises globally and the move does not reflect a decreased focus on the country," it said in a statement.
The UAE, including Dubai, is the top financial hub in the Middle East and like other banking centres, has been under pressure from Washington to crack down on money-laundering as well as sanctions-busting by Iranian businesses.
In 2011 Dubai-based Noor Islamic Bank, since re-named Noor Bank, halted a business in which it channelled billions of dollars from Iranian oil sales through its accounts, as Washington stepped up sanctions over Iran's disputed nuclear plans.
In May last year, the UAE revoked the licences of two local money exchange companies for non-compliance with regulations including rules against money laundering. (Writing by Andrew Torchia; Editing by Jason Neely and David Holmes)