(Refiles as UPDATE 2)

(Adds Lloyds comment)

NEW YORK, Oct 15 (Reuters) - U.S. prosecutors said on Monday they filed civil money laundering charges against Lloyds TSB Bank Plc and the Bank of Cyprus PCL BOC.CY, alleging theyhelped launder hundreds of millions of dollars generated from an alleged securities fraud.

The government is seeking civil penalties of at least $130 million from Lloyds TSB Bank, a unit of Lloyds TSB Group Plc (LLOY.L), and at least $162 million from Bank of Cyprus, the U.S. attorney's office in Manhattan said.

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A spokeswoman for Lloyds TSB Group said the bank will defend itself. "We do not believe that there is any basis for this action, so we are disappointed that the U.S. government has commenced proceedings in this case," Lloyds spokeswoman Mary Walsh said. "We intend to defend the action vigorously and are confident that the bank's stance will be vindicated."

Bank of Cyprus officials could not be reached immediately for comment.

The banks allowed Lycourgos Kyprianou, former chairman of AremisSoft Corp, to launder the money from an alleged securities fraud, prosecutors said.

AremisSoft, which was a Nasdaq-listed software company, filed for bankruptcy amid allegations made by U.S. authorities of insider trading on a massive scale.

In 2002, a federal grand jury indicted Kyprianou and others on securities fraud, money laundering and conspiracy charges, prosecutors said.

Kyprianou allegedly engaged in an insider trading scheme, artificially inflating the price of AremisSoft's stock, using nominee companies to hold and sell the stock and misleading the investing public, prosecutors said.

Lloyds TSB Bank and Bank of Cyprus helped Kyprianou in laundering the proceeds of the alleged AremisSoft fraud through numerous accounts he owned or controlled, after AremisSoft's collapse and the indictment of Kyprianou, prosecutors said.

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Lloyds TSB Bank also allegedly confirmed nonexistent AremisSoft cash holdings, prosecutors said.

((Editing by Andre Grenon/Jeffrey Benkoe; +1-212-393-9461; paritosh.bansal@reuters.com)) Keywords: LLOYDS BANKOFCYPRUS/SUIT

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