Gulf banks including Dubai's largest lender Emirates NBD (ENBD) are already meeting prospective clients and taking legal advice about entering Iran's financial system now that many international sanctions have been lifted.

European banks are more cautious with some, including Deutsche Bank, remembering past fines from regulators for breaking sanctions, though Commerzbank said it was reviewing its policy of not doing business in Iran.

For many banks there are concerns about being caught up in ongoing US sanctions. Many international sanctions relating to Iran's nuclear programme were lifted but most involving US players remain in place.

Non-US banks may trade with Iran without fear of punishment in the United States but US banks may not do so, directly or indirectly.

Other sanctions prevent US persons from trading with Iran and also prohibit Iran trades in US dollars from being processed through the US financial system via the New York Federal Reserve. This is a significant complication given the dollar's role as the world's main business currency.

Regional banks are likely to lead the way on business deals. Banks from the UAE, Oman, Qatar and Kuwait have spent months drawing up plans for entering the Iranian market, two sources familiar with the matter said.

"Regional institutions will test the water and other foreign banks will watch to see what happens," said Stuart Jones Jr., an executive director at EY and a former US Treasury attaché to the Middle East.

"There are certain regional institutions taking legal advice to manage very real risks associated with doing business with Iran."

ENBD, Dubai's largest lender, has in recent months met with the Iranian business community in Dubai and discussed potential banking opportunities involving Iran once sanctions lifted, the two sources said.

The bank said its lawyers were reviewing the sanctions changes but would not be making any changes to its policies yet.

"Any re-engagement with Iran will take place in several stages and will require updates to policies, procedures, systems and controls as well as ongoing communication with regulators and correspondent banks," the bank said in a statement, adding it did not currently have any material assets or liabilities in Iran.

ENBD and Qatar National Bank (QNB), the Middle East's largest bank, have representative offices in Tehran, but ENBD has not been operational since 2008. The status of QNB's office is unclear and the bank did not respond to a request to comment on its Iran plans.

The UAE is Iran's fourth largest trading partner, home to a large number of ethnic Iranians and a channel for consumer goods imports into that country. But that relationship has been dented by sanctions and a spat between Iran and Saudi Arabia.

State Bank of India also has an Iran representative office, according to its website, although calls to the branch were unanswered.

Aside from trade finance, wealth management and project finance are seen as potential sweet spots for banks entering Iran, though some banks will be wary of their chequered history of Iranian business dealings.

Commerzbank and Deutsche Bank are among several international banks fined in the past for violating US sanctions.

Commerzbank is nevertheless looking into Iran.

"Commerzbank is monitoring the development very closely and is reviewing a possible adjustment of its policy (of doing business with Iran)," a spokeswoman said.

Other Western lenders are more cautious though.

"Deutsche Bank will, for the time being, stick to its decision of withholding from doing business connected to Iran," a spokesman said.

Standard Chartered was fined $667 million in 2012 for breaking US sanctions and branded a "rogue institution" by New York's banking regulator at that time, and threatened with loss of its state licence.

A spokeswoman for the Asia-focused bank said it would not undertake any new transactions involving Iran.

Foreign banks considering establishing a subsidiary in Iran will in most cases require a partnership with a local entity unless they set up in one of a handful of free zones, said Nicholas Gilani, senior partner at Arjan Capital, a consultancy advising on Iran business.

Since Saturday's deal, many Iranian banks are in the process of being switched back into the SWIFT financial message system, a key to them re-entering the international financial network.

But some Iranian banks remain on the sanctions list, a potential obstacle for any foreign bank seeking a partner. Swift said in a statement it "remains prohibited from providing specialized financial messaging services to the EU-sanctioned Iranian banks that remain listed under EU Regulation".

The Dubai office of consultancy Promontory Financial Group, which advised several global banks on sanctions compliance, has received a flood of enquiries from lenders since Sunday including from the Gulf, Lebanon and Turkey.

"They are very interested, but very cautious," said Walid Alameddine, Promontory boss for the Middle East and Turkey.

Another complication is that banks and businesses will not be able to use US correspondent banks for clearing or settling any Iranian business deals.

Iran will instead have to secure dollars through non-US banks, money changers or convert other currency reserves into dollars.

In turn, for those banks to maintain relationships with US clearing banks, they will have to find ways to demarcate their dollar business from their Iran dealings. Some Gulf lenders have already been taking legal advice on how to facilitate such a move, a legal source said.

There are other potential risks.

Sanctions remain in place for Iran's hardline elite Islamic Revolutionary Guard Corps (IRGC) and companies and entities linked to it. Banks or other entities found to be trading with the IRGC or affiliates faces being fined or frozen out of the US financial system or even sanctioned themselves.

"One of my biggest concerns is the possibility of snap back. What happens if the US turns around in, say, six months and says Iran has reneged on its commitments," said a sanctions manager at a major UK-based bank.

"I don't think any of the banks will want to be seen as the 'go to' bank - at least for now."-Reuters