UK government orders end to British financial ties with Iranian banks

All British credit and financial institutions had to cease trading with Iran’s banks from this afternoon, Chancellor George Osborne announced.

“We believe that the Iranian regime’s actions pose a significant threat to the UK’s national security and the international community,” he said.

“Today’s announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons.”

Downing Street said the move was expected to be discussed by EU foreign ministers in 10 days’ time and it is hoped other countries could follow the lead and intensify sanctions.

The IAEA’s latest assessment has renewed speculation that the stand-off could result in military strikes against Iran’s nuclear installations.

Mr Hague said that while all options remained on the table, “we are not calling for or advocating military action against Iran”.

The powers invoked by the Chancellor today were introduced as part of the Counter-Terrorism Act 2008 and allow action where it has been called for by the Financial Action Task Force - an international body concerned with combating money laundering and terrorist financing.

In a report last month, the FATF said there was “renewed urgency” behind its call for action against Iran because of its “failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system”.

The Treasury has issued six licences allowing exceptions to the new ban - including humanitarian activities, small-scale remittances to support students and families, and the completion of existing transactions.

The move by the UK - the first use of the power to cut off an entire nation’s banking sector - is part of a wider international effort involving the US and Canada.

Diplomatic tensions were significantly raised last week by the latest assessment by the United Nations’ watchdog.

The International Atomic Energy Agency (IAEA) concluded that some alleged undercover nuclear activities could only relate to weapons production.

Tehran angrily denies its programme is designed to produced anything but civil nuclear fuel but it faces mounting international pressure.

Foreign Secretary William Hague refused earlier to rule out possible military action in future if the stand-off continues.

Under the terms of the crackdown, all UK credit and financial institutions are required “to cease business relationships and transactions with all Iranian banks, including the Central Bank of Iran, and their branches and subsidiaries”.

The Treasury said banks played a “crucial role” in facilitating Iran’s nuclear programme and denying access to London would strike a blow at Tehran’s ambitions.

It would also prevent UK institutions being “unknowingly used by Iranian banks for proliferation-related transactions”, a spokesman said.

Mr Osborne said: “I have today taken action to impose further financial restrictions against Iran. This follows the International Atomic Energy Agency’s report uncovering evidence of Iran’s development of nuclear weapons technology. It is also a response to calls from the Financial Action Task Force for countries to strengthen safeguards to protect their financial sectors from money laundering and financing of terrorism risks emanating from Iran.”

Mr Hague said: “The IAEA’s report last week provided further credible and detailed evidence about the possible military dimensions of the Iranian nuclear programme. Today we have responded resolutely by introducing a set of new sanctions that prohibit all business with Iranian banks.

“We have consistently made clear that until Iran engages meaningfully, it will find itself under increasing pressure from the international community.

“The swift and decisive action today co-ordinated with key international partners is a strong signal of determination to intensify this pressure.”