Swift is a financial communication and clearing system that is used by almost all the world’s major banks
BRUSSELS—The European Union confirmed Thursday it was banning any kind of financial transactions with blacklisted Iranian financial firms, but U.S. policy makers made it clear they would keep up the pressure for the EU to go further.
Responding to the measure, the Belgium-based Society for Worldwide Interbank Financial Telecommunication, or Swift, which handles payments for many of the world’s major banks, said it would comply with the order.
An EU statement said the European Council of member states “agreed that no specialized financial messaging shall be provided to those persons and entities subject to an asset freeze.”
The measure, which affects only sanctioned Iranian banks, will be published in the EU’s Official Journal on Friday.
The EU had been expected to make the decision this week, but the ban could still leave some European companies exposed to penalties from legislation being worked on by the U.S. Congress. The proposed U.S. legislation seeks to ban transactions with any Iranian banks, whether or not they are subject to sanctions.
Congress’s plans mean the board and directors of European companies could still face penalties and sanctions even if they fully comply with EU rules. Those sanctions could include banning them from the U.S. financial system, according to congressional aides.
Swift is a financial communication and clearing system that is used by almost all the world’s major banks.
In a statement later Thursday, Swift confirmed it had been instructed to disconnect sanctioned Iranian banks by Saturday.
“This EU decision forces Swift to take action,” said Lazaro Campos, CEO of Swift. “Disconnecting banks is an extraordinary and unprecedented step for Swift. It is a direct result of international and multilateral action to intensify financial sanctions against Iran.”
Swift said it remains in “full compliance” with the sanctions regulations agreed in the various jurisdictions where it operates.
The U.S. Treasury welcomed the EU step and the “prompt” Swift response, saying it would further isolate Iran’s financial sector.
The EU decision reflects the “growing international consensus” on Iran over its nuclear program, said David S. Cohen, Treasury undersecretary for terrorism and financial intelligence. But he also said the U.S. will look to “increase further” the pressure on Iran and “strengthen the impact of our sanctions.”
A spokesperson for Senator Mark Kirk (R., Ill.), who is pushing the tighter Iran legislation in the senate also welcomed the EU and Swift steps but signaled Congress hoped to see further moves.
“We look forward to working with all parties to ensure compliance with pending legislation that will extend sanctions to all Iranian financial institutions,” the spokesperson said.
The U.S. Treasury has blacklisted 23 Iranian banks, the bulk of which are also targeted by the EU. But U.S. lawmakers say Tehran is using more than 20 other banks to finance its nuclear program and support for regional militant groups. The U.S. and a number of EU countries accuse Iran of seeking to develop nuclear weapons, a charge that Tehran denies.
Thursday’s EU step comes at a critical moment for Iran’s relations with the West. Talks on Iran’s nuclear program are expected next month between Tehran and six major powers.
But the U.S. and the EU have also worked in tandem to significantly ratchet up sanctions on Tehran. The EU is imposing a ban on Iranian oil exports and has slapped restrictions on hundreds of other firms and officials. The U.S. also tightened its sanctions on Iran’s central bank.
—Jay Solomon and Jeffrey Sparshott in Washington contributed to this article