U.S. says Iran abusing global financial system

BEIJING (Reuters) - U.S. Treasury Secretary Henry Paulson said on Wednesday that Iran was abusing the global financial system and putting its security at risk.

Paulson, speaking at a news conference in Beijing, reiterated a call he made on Saturday for the world's financial leaders to help guard against abuses.

"You can't have a secure financial system, you can't preserve the reputation of a financial system if you let people come in and abuse it, and abuse it for illegal activities of any kind -- WMD proliferation, terrorism," Paulson said, referring to weapons of mass destruction (WMD).

"And Iran is abusing the financial system."

He did not elaborate.

Speaking in Singapore on Saturday after a meeting of Group of Seven financial leaders, Paulson said he had specifically warned other leading powers about the possibility that Iran might exploit banks in order to help finance terror groups or acquire material for nuclear weapons.

The U.S. Treasury said on September 8 that Iran's Bank Saderat was blocked from any dealings with U.S. banks, even through third parties, an action taken as Washington sought sanctions against Iran for its refusal to obey a U.N. order to halt nuclear enrichment activities by August 31.

Paulson said on Wednesday that a program for educating banks on the risks of "misleading" financial devices he said the Iranians had used to infiltrate the financial system was meeting with some success.

"As far as I know, they all were very grateful for the assistance, a number of them learned things, and I think that that will be an important step in helping maintain the integrity of our banking system around the world."

He was talking in Beijing where the United States and China announced the creation of a new high-level dialogue about their long-term economic relationship.

President Bush on Tuesday accused Iran's rulers of squandering their nation's wealth to fund terrorists and nuclear arms research.

With international support uncertain, however, he said he was willing to pursue diplomacy further before resorting to sanctions.