The Bank of New York is cutting ties with most of its correspondent bank customers in Russia and nearby countries as part of an effort to narrow its business in the region, industry sources said today.

The move is one of the clearest indications of fallout from the sprawling federal investigation of allegations that a series of suspicious, related accounts at the Bank of New York were used to move more than $7 billion out of Russian banks and into financial institutions around the world.

Bank of New York officials last month began notifying officials at about 200 banks that they will no longer be permitted to maintain accounts at the Bank of New York or to use the bank's facilities to transfer dollars, according to people familiar with the initiative. The Bank of New York will continue correspondent relationships with something less than 100 banks in the region. Bank of New York officials declined to comment.

Banks overseas must have a correspondent relationship with a licensed U.S. bank to electronically conduct business in dollars, the currency most used for commerce around the world. Money-laundering specialists and banking regulators fear that banks with correspondent links are increasingly used to move or hide ill-gotten money.

The action by the Bank of New York, one of the leaders in correspondent banking in Russia, comes less than a month after rival Republic National Bank took similar measures. In early October Republic told about 100 banks--or approximately 40 percent of its correspondent relationships in the region--that it was cutting ties. That cutoff took effect two weeks ago.

People familiar with the industry said the Bank of New York is trying to put its affairs in order as banking regulators at the Federal Reserve conduct their own inquiry into whether the bank adequately monitored the activities of the suspicious accounts and its correspondent banks.

The Bank of New York has not been charged with any violations, and its officials are cooperating with the investigation. It remains unclear whose money moved through the Bank of New York accounts, or whether U.S. officials will be able to bring a money-laundering case to court.

But the bank is already facing questions about its correspondent relationships. During a hearing by the House Banking Committee in September, in response to questions, Thomas A. Renyi, the bank's chairman and chief executive, acknowledged that the bank was reviewing its correspondent relationships to make sure they were safe from abuse.

Renyi said the bank generally knows whether a correspondent bank is creditworthy. But he added that "does not give us any knowledge as to the identity or activities of their customers."

Banks that have had their correspondent relationships cut recently include Sobinbank and Depozitarno-Kliringovy, which originally wired much of the money to the suspicious Bank of New York accounts, a source said today. But those ties were cut earlier, shortly after news of the probe surfaced.

Jack Blum, a lawyer and money-laundering specialist in Washington, said it appears the Bank of New York and other financial institutions are backing away from potentially profitable correspondent relationships because of the rising scrutiny and the risks of something going awry.

"They now are realizing--albeit belatedly--that correspondent relationships can get you into trouble. That's my surmise," Blum said. "The issue is on the table."