Responding to questions from Reuters, the unlisted bank said on Thursday it was complying with all requirements to prevent illegal transactions and that it saw the inspection as "part of the normal supervision process" in the banking sector.

It also noted that the inspection began in late November, before Angolan authorities froze dos Santos' assets in the African country in late December.

The asset freeze followed allegations by prosecutors that dos Santos and her husband, who have denied any wrongdoing, had steered payments of more than $1 billion from state companies Sonangol and Sodiam to firms in which they held stakes.

One Portuguese financial sector source close to the process told Reuters an on-site inspection was ongoing at Eurobic and there was no estimated end date yet.

"In September 2019, well before the referred asset freeze, the Bank of Portugal told us it was going to carry out an inspection of mechanisms of prevention and control of money-laundering and financing of terrorism, which began in late November," Eurobic said in written replies.

Dos Santos, who is called "Africa's wealthiest woman" and also nicknamed "the Princess" in Angola after amassing a fortune estimated at more than $2 billion during her father Jose Eduardo's decades-long presidency, has called the asset freeze a "witch hunt".

In Portugal, she holds significant stakes in several important firms, including telecoms company NOS, engineering company Efacec, and oil firm Galp Energia.

A spokesman for dos Santos said she was "a shareholder in Eurobic, who does not follow the day-to-day management of the bank and is not aware of any new inspection".

A spokesman for the Bank of Portugal declined to comment on Thursday but earlier this month, the financial authority said it was evaluating dos Santos' suitability as a shareholder in Portuguese banks..

Eurobic made no specific reference to dos Santos, who holds a 42.5% stake in the bank indirectly via two entities and does not sit on the board.

The bank had assets worth 7.5 billion euros in 2018, with deposits of 5.7 billion euros and loans of 4.9 billion.

It said it acted "in rigorous respect of the legislation concerning transactions with related parties - shareholders, related entities, family members, etc - and politically-exposed persons, subjecting them to greater scrutiny".

The Bank of Portugal also investigated Eurobic in 2015. At the time the central bank concluded, according to documents seen by Reuters, that "the inherent risk (of illegal transactions) is considered as high" due to its shareholders' close links to Angola, while citing a Transparency International report that listed the country among the world's most corrupt.

According to the latest such report in 2018, Angola ranked 165 out of 180 countries, measured from least corrupt to most.

The central bank also, in 2015, noted that Eurobic's clients included various foreign, mainly Angolan, politically-exposed persons - a loose definition used by financial regulators to identify people holding prominent functions that can be abused for the purpose of laundering illicit funds, corruption or bribery.

It also noted at the time that some of Eurobic's clients often made transactions involving large sums in cash.

Eurobic said it had made "significant investment in the prevention of money-laundering or financing of terrorism" since receiving central bank instructions in 2016, "namely reinforcing its personnel and their functions" among other activities. It added that the central bank has been monitoring its progress.

(Writing by Andrei Khalip; Editing by Ingrid Melander; Kirsten Donovan)

By Sergio Goncalves