UPDATE 2-U.S. pushes EU, SWIFT to eject Iran banks

Wed Feb 15, 2012 5:28pm EST

* SWIFT general counsel to meet with U.S. lawmakers

* SWIFT says working with U.S., EU to address issues

By Rachelle Younglai and Roberta Rampton

WASHINGTON, Feb 15 (Reuters) - U.S. President Barack Obama's administration is pressuring the European Union and a global electronic banking system to expel Iranian banks from a network used to transfer money, another step in Western efforts to deprive Tehran of funds needed to develop nuclear weapons.

Kicking Iranian banks out of the Belgium-based SWIFT, or Society for Worldwide Interbank Financial Telecommunication, would cut off one of the only remaining avenues for Iran to transact business with the rest of the world.

SWIFT facilitates the bulk of the world's cross-border payments, exchanging 18 million payment messages per day between banks and other financial institutions in 210 countries.

The United States and Europe have already slapped sanctions on Iran's central bank, the main clearinghouse for its oil revenues, which would punish Tehran's trading partners if they continue to buy Iranian oil.

The U.S. Congress is considering new legislation that would give the United States authority to sanction SWIFT, but the Obama administration indicated it was already ramping up the pressure.

The U.S. Treasury's undersecretary for Terrorism and Financial Crimes, David Cohen, traveled to Brussels this month to discuss the sanctions.

"He discussed the issue of SWIFT providing services to designated Iranian banks and urged the EU to take action on the issue," said a Treasury official.

EU TO TAKE LEAD

The two regions have been trying to move in lockstep on policies and implementation, giving countries such as India and their institutions until mid-year to significantly reduce their Iranian oil purchases.

Now their discussions with SWIFT have intensified after the U.S. Senate Banking Committee ratcheted up public pressure with a bill that would require Washington to press the Belgian group to get rid of Iranian banks.

The chairman of the House of Representatives Foreign Affairs Committee, Ileana Ros-Lehtinen, has introduced a companion bill targeting SWIFT for sanctions.

A spokeswoman for SWIFT declined to comment on whether the banking system would take action. The organization is working with U.S. and EU authorities as well as the central banks that oversee its operations to address the issues, the spokeswoman said.

SWIFT's board may meet within a week to expel designated Iranian bank users - possibly under an order from SWIFT's European financial regulators, according to a source familiar with the matter.

The EU's sanctions laws give it a stronger case that SWIFT must act to stay in compliance with EU laws, a U.S. congressional source said. Most members of SWIFT's board are from European banks and the Belgian central bank has a lead oversight role.

The issue of sales of humanitarian items, such as medicine, has complicated the situation. Those sales are allowed under U.S. and EU sanctions laws, but SWIFT cannot distinguish between different types of transactions.

"All SWIFT does is provide the pipe for secure communication," a congressional source said.

The U.S. Congress is working on legislation that would force the administration to consider further isolating Iran by denying Iran's leaders visas needed to enter the country, along with fresh sanctions on Iran's national oil and shipping companies. The Senate has yet to set a date to vote on the new package of sanctions that include the SWIFT measure.

"I think this is going to get resolved more quickly," said a congressional aide, well before the United States could take action on the proposed new sanctions.

The general counsel for SWIFT is expected to meet with key U.S. lawmakers before the end of the month, a second congressional aide said. "They want to see whether this will become law," the aide said.

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