Iran rejects Western charges of bank illegalities

UNITED NATIONS (Reuters) - Iran rejected on Friday Western allegations that its central bank and other financial institutions were trying to skirt U.N. sanctions by covering their tracks, and threatened to seek compensation.

In an August 1 letter to the U.N. Security Council, the United States, Britain and France warned of "Iran's continued attempts to conduct prohibited proliferation-related activity and terrorist financing."

The 15-nation council has imposed three rounds of sanctions on Iran for refusing to halt sensitive nuclear enrichment activities, which Western states fear could be used to make atomic weapons. Iran says its nuclear program is intended solely for the peaceful generation of electricity.

In a letter of reaction to the Security Council, Iranian U.N. charge d'affaires Mehdi Danesh-Yazdi said Iran "categorically rejects such baseless allegations."

"The fact is that the Iranian banks have never been involved in any illicit activities including in non-peaceful nuclear activities -- simply because there are no such non-peaceful nuclear activities in Iran," he said.

"The attempt of the three countries to seek the restriction of the activities of the Iranian banks is intended not only to exert undue pressure on the Iranian government, but also to disrupt the banking and financial affairs of millions of deposit holders and customers of those banks."

Tehran reserved the right to seeks compensation for any damages to the banks and their customers, Danesh-Yazdi said.

Among the Iranian companies that have been placed on the U.N. sanctions lists is Bank Sepah for allegedly financing Tehran's nuclear and missile programs.

The third sanctions resolution, passed in March, also named Bank Melli, Iran's largest, and Bank Saderat as dubious institutions that countries need to be vigilant about. Western powers are now contemplating a fourth resolution.

The U.S.-British-French letter said Iran's central bank appeared to be playing a key role in efforts to bypass sanctions by facilitating transactions for sanctioned banks.

It listed the names of nearly 60 Iranian banks and bank subsidiaries in Europe, the Middle East and Asia that world financial institutions needed to be on the lookout for.

Iran's response also dismissed Western allegations that its banks financed terrorism. It called it "a sad irony that France, UK and the United States with their disturbing long record of sheltering, financing and supporting terrorist groups ... are raising such baseless allegations against others."

(Editing by Eric Beech)