The bank has also branded as arbitrary and unjustified penalties imposed by the US Treasury last week.

"The Commercial Bank of Syria categorically denies all of these unjustified US accusations," it said on Wednesday in its first reaction to the penalties.

The Treasury acted to cut off the bank from the US financial system, accusing it of being involved in a scandal linked to the United Nations' Iraq oil-for-food programme and of possibly funding "terrorists".

It designated the bank as a "primary money laundering concern", and said it would seek to prohibit US banks and other financial services providers from maintaining so-called correspondent accounts on behalf of the bank that would give it access to the US banking system.

Surprise decision

"We were surprised by the American decision issued on 11 May 2004, which...accuses (the bank) of matters that are not based on objective evidence," the bank said.

"We consider the decision to be arbitrary and unjustified," it said in a statement obtained by Reuters. "Since the mid-1980s the bank bans any foreign transfers without documents proving their commercial justification."

The US Treasury's measure came alongside a host of US sanctions against Damascus, mainly for supporting anti-Israel or Palestinian resistance groups and not doing enough to stop anti-US fighters from entering neighbouring Iraq.

The department said the bank had "acted as a conduit for the laundering of proceeds from the illicit sale of Iraqi oil".

The General Accounting Office, a congressional watchdog agency, has estimated Iraq earned about $10.1 billion in illegal profits from the UN's humanitarian oil-for-food programme from 1997 through 2002.