Operations at the bank's UAE branch, which is licensed in the emirate of Abu Dhabi, will be wound down within six months under UAE central bank supervision.

A statement from MTS Bank said it will fulfil all settlement obligations to existing customers and guarantee the safety of their funds for six months.

"This decision comes after considering the available options regarding the new status of the MTS Bank and taking into account the sanctions risks associated with the bank," the UAE central bank's statement said.

During the winding down process the branch will not be allowed to open new accounts or conduct transactions apart from clearing prior obligations, for which it will be allowed to use the central bank's payment systems, it said.

The UAE, a member of the OPEC+ oil alliance that includes Russia, has maintained good ties with Moscow despite Western pressure to help to isolate Russia over the invasion of Ukraine. It has not matched global sanctions imposed on Moscow.

Large numbers of Russians have sought a safe haven in the UAE since the Ukraine conflict began. U.S. officials have visited the UAE to discuss with regulators including the central bank the importance of clamping down on sanctions evasion.

MTS Bank, a fintech unit of Russia's largest mobile operator Mobile TeleSystems (MTSS.MM), was part of a broader sanctions package against 200 entities and individuals announced in February on the first anniversary of Russia's invasion of Ukraine.

Russian conglomerate Sistema (AFKS.MM) holds a 42.09% stake in MTS. Russian billionaire Vladimir Yevtushenkov last year relinquished formal shareholder control of Sistema after Britain imposed sanctions on him, transferring a 10% stake to his son.