By Thomas Arnold and Archana Narayanan

(Reuters) - Standard Chartered has notified thousands of UAE small and medium enterprise customers it is closing their accounts as it responds to pressure from US regulators to cut its risks following an anti-money laundering settlement.

"We regret to notify you that Standard Chartered Bank will no longer be able to provide banking services to you, and your account(s) will be closed 30 days from the date of this letter," the London-listed bank wrote in a letter to customers dated Oct. 9.

The letter - seen by Reuters - has angered UAE customers, who say they have not been given enough time to close their accounts.

Under a settlement agreed with the New York State Department of Financial Services in August, the bank was fined $300 million and given 90 days to end high-risk relationships with SMEs in the UAE and suspend processing of dollar-denominated payments for some clients at its Hong Kong unit.

The UAE central bank said in August that between 1,400 and 8,000 Standard Chartered accounts in the country were expected to be affected by the U.S. settlement.

"The bank is putting a lot of peoples’ livelihoods at risk as businesses like ours have salaries and suppliers to pay," said Louay al-Samarrai, managing director of Active Public Relations in Dubai, who has banked with Standard Chartered for 13 years.

"I need more than 30 days notice as it takes a minimum of a few weeks to set up a new account with another bank."

In a statement, Standard Chartered said it would honor existing borrowing agreements with customers with loans, allowing them to pay back outstanding amounts under the existing repayment timetable. It would make every effort to minimize the inconvenience, it said.

Those affected by Standard Chartered’s exit have an annual sales turnover of between $1 million and $35 million, it added.

The bank had initially considered selling part of the SME business, sources familiar with the matter said in August, and several local banks Reuters spoke to had expressed a potential interest in buying the assets.

But the tight deadline imposed by the US regulator and the risk to potential buyers of handling accounts that could lead to further regulatory penalties proved stumbling blocks to a sale.

"In an ideal world you would sell it and get some value but in the overall scheme of things it’s not that large an asset. The key driver is to keep the regulator happy,” one of the sources with knowledge of the matter said.

Standard Chartered declined to comment on any potential plan to sell the SME business.