Cyprus has launched an independent probe into its passport-for-investment scheme after accusations it was exploited by criminals, the Mediterranean island's Audit Office said.

Last week, Qatar-based broadcaster Al Jazeera reported that dozens of those who applied for so-called "golden passports" are under criminal investigation, international sanctions or serving prison sentences.

Cypriot Interior Minister Nicos Nouris called Al Jazeera's report "propaganda" intended to damage Cyprus politically and economically.

The state-backed but independent Audit Office said Friday that an investigation was necessary due to the tarnished image of the passport scheme "that has recently deteriorated" after the reports from Al Jazeera.

"The Audit Office is an independent institution which can respond credibly to complaints and allegations against the programme, apportion responsibility and take corrective action, or preserve the prestige of the Republic," the statement read.

Cyprus began offering citizenship in exchange for investment following the island's 2013 economic crisis, but faced pressure from Brussels to reform after concerns it may help organised crime gangs infiltrate the EU.

In February 2019, Nicosia updated its criteria for obtaining passports, imposing what it describes as more stringent due diligence procedures.

The Audit Office said it would intially investigate citizenships granted after the changes were made to the investment programme.

Al Jazeera's report, based on leaked data, showed wealthy, Kremlin-linked Russians, as well as Chinese nationals were "prepared to pay millions of dollars for an EU passport", the broadcaster said.

Nicosia has insisted the claims related to a past era before the scheme was tightened, and that those Al Jazeera said dubiously received a passport met the criteria at the time and had no criminal record.

Under the latest rules, the government grants a passport in exchange for an investment of €2.5 million.