Iranian banks are operating in Dubai despite UN sanctions and authorities should keep a close eye on them, a US official involved in tracking suspicious financial activity said.

The United States is holding discussions with the UAE which include issues important for Dubai if it is to become a trusted financial centre, said Stuart Levey, US Treasury undersecretary for terrorism and financial intelligence.

"There is a challenge in the (United Arab Emirates) especially because of deep commercial ties between the UAE and Iran," he said.

The United States and other Western countries have urged more international vigilance against Iranian banks, saying they are trying to skirt UN sanctions imposed over Tehran's disputed nuclear plans. Iranian lenders such as Bank Saderat and Bank Melli operate in the UAE.

"These banks are an issue of concern and they are deserving of scrutiny because of their track record," Levey said.

US policy on sanctions against Iran will likely continue during the presidency of Barack Obama, he said.

"There's one area in US continuity -- rigorous enforcement of UN Security Council resolutions and protection of the international financial system," he said.

Levey criticised cooperation by Russia and Qatar with Iran on gas development. "We are watching. We think it is not a good time to pursue businesses with Iran," he said.

Iran, Russia and Qatar, the world's three leading gas producers, agreed to boost coordination last month. - Reuters