The Dubai-based Noor Islamic Bank has taken "pre-emptive action" to end its business relationships with Iranian banks licensed in the United Arab Emirates amid mounting efforts by the U.S. to pressure Tehran over its nuclear programme.

The Noor Islamic Bank said it severed ties with Iranian banks in December last year. "As a UAE bank, we comply with all UAE Central Bank and UAE government directives and international regulations, including those emanating from the UN regarding sanctions on Iran. When we became aware in December 2011 that unilateral US sanctions were to be applied against a number of Iranian banks, we took pre-emptive action to end our business relationships with Iranian banks licensed in the UAE," said a Noor Islamic Bank spokesman in a statement on Wednesday.

The news that the Noor Islamic Bank had halted dealings with Iran was first reported by the Wall Street Journal. Citing people briefed on the operation, the newspaper reported that Noor Islamic Bank, chaired by the son of Dubai's ruler, had facilitated as much as 60 percent of Iran's foreign oil sales - estimated at $80 billion - by late last year.  

A source familiar with the matter told The Brief that the bank had not violated any laws in its relationship with Iran. "There's no legal issue here. At most, someone might object on a PR level," he said.  “This issue is something that is historic in nature. It talks about something that happened before December of last year. The bank is complying with all laws and resolutions. To imply that the bank was doing anything wrong through its dealing with Iran is erroneous.”

The Noor Islamic Bank, partly-owned by the emirate of Dubai, appears to be the first financial institution in Dubai to be singled out for doing business with Iran. The UAE central bank stepped up the monitoring of banks' dealings with Iran in the past three months, sources told Reuters earlier this month.

The United Nations and Western countries have imposed a series of economic sanctions on Iran during the past five years over what they say are efforts by Tehran to develop nuclear weapons. Iran denies the charges.  Last June, the U.S. Treasury adopted a law allowing the president to punish foreign banks that carry out financial transactions "for the purchase of petroleum or petroleum products from Iran" provided several conditions are met. 

International bank HSBC Holdings disclosed in a regulatory filing in the U.S. that it may be facing criminal or civil charges stemming from an expanding investigation into its ties to allegedly illegal money transactions, including some tied to Iran. According to the filing, HSBC said investigations are being conducted by the Justice Department, the district attorney in Manhattan, two Treasury department agencies and the Federal Reserve. It said those inquiries were examining "historical transactions involving Iranian parties and other parties subject to" U.S. economic sanctions.

Within the UAE, the Noor Islamic Bank has been the only financial institution to be targeted so far, an official at the UAE Ministry for Economic Affairs told Reuters.  "Of course, as the UAE government, we will comply with the U.N. resolutions," Khalid al-Ghaith, the assistant minister for economic affairs, told Reuters at a conference in Abu Dhabi.

He said officials were in contact with the Americans to try to reduce any possible harm to the UAE banking system or companies. As the United Nations and Western countries have imposed increasingly tougher sanctions, the commercial hub of Dubai - 150 km (100 miles) across the Gulf - has seen more business through its financial institutions.  Dubai has long been a major trading partner with Iran, with a sizeable Iranian expatriate population and traditional wooden dhows transporting goods across Gulf waters every day.

The UAE government took the concerns very seriously and was helpful in resolving the Noor Islamic Bank case, an official told the Wall Street Journal. Reuters/The Brief

(Additional reporting by Martina Fuchs and Dinesh Nair at Reuters)