U.S. lawmakers urge more financial sanctions on Iran

By David Lawder and Carol Giacomo

WASHINGTON (Reuters) - Targeted U.S. sanctions and other financial measures are having a significant impact on the economies of Iran and North Korea, senior administration officials said on Wednesday, but Congress members urged further action, especially on Iran.

At a hearing of the U.S. House of Representatives Foreign Affairs subcommittee on terrorism, lawmakers suggested that the U.S. Treasury should consider blacklisting more of Iran's state-owned banks to pressure Tehran into ending its suspected nuclear weapons program.

The Treasury has cut off two Iranian banks from the U.S. financial system, Bank Sepah over its links to nuclear missile development and Bank Saderat for its ties to terrorist groups.

U.S. Rep. Brad Sherman, the California Democrat who chairs the panel, applauded the move, but said, "We'd like to find out why you're not doing that with all Iranian banks."

Sherman also warned that Congress is moving forward with several bills that would force a tougher U.S. approach on Iran, including legislation that would require the administration to enforce the Iran Sanctions Act, which would penalize foreign-based companies that invest $20 million or more in Iran's energy sector.

Deputy Assistant Treasury Secretary Daniel Glaser said the financial pressure on Iran and North Korea was effective in hampering their nuclear weapons activities.

"By cutting off Sepah from the U.S. and international financial systems, we have commercially isolated Bank Sepah and may have made it more difficult for Iran to finance some of its proliferation-related activities," Glaser said.

"Our use of targeted financial measures to safeguard the U.S. financial system, along with outreach to the private sector, are indeed having an impact, particularly on the ability of Iran and North Korea to misuse the financial system to carry out their dangerous activities," Glaser said.

Rep. Edward Royce of California, the panel's ranking Republican, said he thought the Treasury's ban on Sepah and Saderat should be extended to the country's four largest state-owned banks given "the attitude of this regime" and its determination to acquire nuclear weapons.

Glaser and Adam Szubin, head of the Treasury's Office of Foreign Assets Control, said the two designations so far were based on a clear chain of evidence and violation of UN resolutions, but promised to keep up the pressure on Iran.

"You'll see that we will continue to focus on the Iranian financial system, we will continue to try to squeeze it," Glaser said.

The financial sanctions have been effective because foreign financial institutions have voluntarily complied with Treasury sanctions that ban American firms from doing business with designated North Korean and Iranian entities.

North Korea was "virtually excommunicated" from the global financial system through the Treasury's designation of Banco Delta Asia as a primary money laundering concern in 2005, Szubin said.

A full Treasury ban against the Macau bank took effect on Wednesday, even though North Korean accounts at the bank containing $25 million were recently unfrozen.

(Additional reporting by Glenn Somerville in Washington)