US lawmakers are working on legislation that would force European and Asian banks with US accounts to directly report to the US Treasury their transactions with Iranian financial institutions, a lawmaker and congressional aides said on Tuesday.     

Dismayed that the United States Treasury has not yet punished any foreign banks for dealing with Iran's central bank after a first round of US sanctions that went into effect on Wednesday, lawmakers are looking at ways to force the Obama administration to quickly penalise firms who continue to work with Tehran.     

'There is growing suspicion that European and Asian banks are not fully disclosing sanctionable activity and that the Treasury Department may not have enough information available to build the legal case to designate such institutions,' a congressional aide said.     

The first phase of the sanctions, signed into law by President Barack Obama in December as part of US efforts to stop Iran from acquiring nuclear weapons, applies only to foreign banks that use Iran's central bank for business unrelated to the purchase of oil.     

When the Obama administration's second round of sanctions kick in mid-year, countries that do not significantly reduce their reliance on Iranian oil could see their financial institutions blocked from US markets.      

Under the legislation lawmakers are crafting, foreign banks with US accounts would have to regularly submit reports to the US Treasury describing their activities with Iranian companies, including services they have provided and the amount of any funds held for or on behalf of the Iranian company.     

The legislation is being designed to make it easier for the Treasury to determine whether a foreign institution is violating US law.

Currently, the Treasury has the power to ask international companies to hand over documents if they have US accounts, but lawmakers say it has been reluctant to do so.     

'The executive branch has been extremely loath to impose secondary sanctions,' said Democratic Representative Brad Sherman, who is working on the legislation in the House of Representatives.     

Sherman said the pushback from US allies who do not like how US law affects businesses in their countries was 'something that the executive branch cringes at.'     

Sherman said his measure would be similar to legislation being crafted by Republican Senator Mark Kirk, one of the architects behind the December sanctions law.     

Lawmakers are planning to introduce the provision as early as next week as an amendment to another Iran bill in the Senate that targets the country's national oil and shipping companies.     

The US Treasury would not comment on the pending legislation but said its goal has been to cut off designated Iranian banks from the international financial system.      

'We are achieving this goal using a number of tools at our disposal,' a Treasury spokesman said. 'On a number of occasions, the Department of the Treasury has persuaded banks to promptly sever their ties with designated Iranian banks without having to impose sanctions, thus achieving our objectives while maximising foreign counterpart cooperation.' – Reuters