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WASHINGTON, Nov 6 (Reuters) - The U.S. Treasury on Thursday moved to close off one of Iran's last available entry points into the U.S. financial system by revoking its license for "U-turn" bank transfers, which briefly enter the United States before being sent to offshore banks.
The Treasury said the action was aimed at increasing financial pressure on Tehran to end alleged support of terrorist groups as well as nuclear and missile proliferation.
The move bans U.S.-licensed banks from handling such transfers made on behalf of Iranian entities by non-Iranian offshore banks.
"This regulatory action will close the last general entry point for Iran to the U.S. financial system," the Treasury said in a statement.
The U-turn exception was started after the United States imposed general trade sanctions on Iran in 1979 to allow certain dollar-based Iranian transactions to proceed.
But Stuart Levey, the Treasury's Undersecretary for Terrorism and Financial Intelligence, said Tehran was abusing the loophole to skirt sanctions on a number of Iranian banks and other entities.
By processing the payments through the United States, Iran was able to lure foreign banks into handling transactions on its behalf.
"Given Iran's conduct, it is necessary to close even this indirect access," Levey said.
At a news conference, he declined to estimate how much money was transferred through the U-turn loophole, but noted that such transactions have declined in recent years as sanctions on Iran have been stepped up.
Banks from all over the world, including Europe, the Middle East and Asia, were handling such transactions, Levey said.
The United States already prohibits U-turn transactions by Iranian state-owned banks Melli, Mellat, Sepah, Future Bank and the Export Development Bank under previous sanctions that prohibit all transactions by U.S. banks.
Thursday's action will end the exception for all remaining Iranian banks, both state-owned and private, including Iran's central bank, Treasury said.
However, the Treasury will allow U.S. banks to handle indirect fund transfers on behalf of the Iranian government or persons to send funds to family members, for humanitarian relief purposes, for travel-related remittances and other transactions that have special permission from the Treasury. (Reporting by David Lawder; editing by Gary Crosse)