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WASHINGTON, Feb 29 (Reuters) - The U.S. Treasury warned foreign banks on Wednesday they could now be blocked from the country's financial system if they continued to deal with Iran's central bank for their non-oil transactions.
Starting Wednesday those banks "risk losing their correspondent account access to U.S. financial institutions," David Cohen, Treasury's undersecretary for terrorism and financial intelligence, said in remarks prepared for a securities conference.
The first phase of sanctions designed to stop Iran from acquiring nuclear weapons only applies to foreign banks that engage in "significant" transactions unrelated to the purchase of oil. Those sanctions could ensnare companies and manufacturers that sell Iran items such as cars and computers.
"Whatever bank they were using to handle the financial part of that transaction will have to think twice about using that bank for that transaction," said Jeanne Archibald, a former Treasury general counsel.
"It could have a significant impact. It will depend in part on whether the president determines that a foreign bank has knowingly engaged in a significant transaction and how they determine 'significant,'" said Archibald, who is now in private practice at Hogan Lovells law firm and advises clients on sanctions compliance.
The second phase of sanctions goes into effect June 28 and will block countries and their institutions from U.S. markets if they do not significantly reduce their Iranian oil purchases.
That has sent Iran's biggest trading partners scurrying to find other sources of oil before the deadline. Japan's government has said the country will likely be spared from the U.S. sanctions and has cut its Iranian oil imports by 40 percent over the past five years.
It is unclear when or whether the United States will exempt countries from the sanctions.