European banks are holding back from business with Iran partly due to worries they might breach remaining sanctions, despite assurances from US and European politicians that they can legally resume ties, officials said.

International measures against Iran - including banking restrictions - were lifted in January as part of the deal with world powers under which Tehran curbed its nuclear programme.

But the Islamic Republic is struggling to access financing from abroad as many large banks fear breaking the remaining US restrictions, which prohibit trade with Iran in dollars or Iranian access to New York's financial system.

The banking industry has been left cautious over fines incurred for sanctions breaches in recent years.

US Secretary of State John Kerry told Europe's top banks last week they have nothing to fear from resuming business with Iran, as long as they make proper checks on accepted trade partners.

Justine Walker, director of financial crime with the British Bankers' Association (BBA), which represents the industry, said the session with Kerry and UK officials, including Foreign Secretary Philip Hammond, had enabled bankers to express their concerns.

"There was no document provided which gave indemnity, but we hadn't expected this. However, there was an agreement to continue the dialogue to try and address in more detail those issues that were raised," she told Reuters on the sidelines of a Euromoney Iran conference in London.

"The issue for the European banks is just the reality of carving out a non-US nexus, which is incredibly complex. How do you do international business without accessing the major international payment platform? For banks, it is a pretty complex one."

Iran's Central Bank Governor Valiollah Seif told the conference there was fear among banks that even if they received assurances from the US Treasury, prosecutors and regulators "might adopt a different and stricter interpretation of the rules".

"It is a moral and contractual obligation of the West to deliver on what they committed themselves in the JCPOA (nuclear deal), even if it means helping banks with revised regulations, guidelines and policies."

In a separate interview, Seif said Iran's slowed re-entry to international capital markets was stalling efforts to unify its official and market exchange rates.

Another worry for banks is the lack of enough transparency and other risks within Iran's banking system.

In February, FATF, a global group of government anti-money-laundering agencies, said it remained "particularly and exceptionally concerned about Iran's failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system."

BBA's Walker said banks were monitoring FATF meetings, scheduled in June and October, to see whether there would be any updated statements on Iran, which "will be critical".

"It is fairly irresponsible for officials to just expect banks to rush back in without considering these things. That does take time and due diligence," she said.

Walker said banks were also watching the outcome of the U.S presidential election - looking to see if there would be any change in policy direction from the new administration.

BANKING CHANNELS

Damian Hinds, exchequer secretary to the UK's finance ministry, said "re-establishing banking channels" was a top priority for the UK government and it would continue to work to "give the industry clarity".

"Some banks have started to offer their services to existing customers," Hinds told the conference.

"Banks and companies are right of course to care about whether they are meeting their obligations under remaining sanctions. Indeed, we expect them to do so. But this should not stand in the way of legitimate business."

Gerry Regan, deputy head of the sanctions policy division with the European Union's diplomatic service, told the conference that so far banks from countries including Germany, Italy, Britain, Switzerland and Japan were reported to have established banking relations with counterparts in Iran.

"Some of these banks may not be in position to facilitate complex and substantial financial transactions," he said.

He said banks would likely find it easier as time went on.

"We expect to see banks and financial institutions becoming gradually more comfortable with the situation as they start to be more familiar with the new rules and practices (since January)," Regan said.

"This may not be immediate for the large banks with a significant US presence and exposure," he said. - Reuters