The United States on Friday removed sanctions on an Iraqi bank that was blacklisted last year for helping Iran skirt international financial controls over its nuclear activities.

The US Treasury said it removed the sanctions placed last July on Baghdad-based Elaf Islamic Bank after Elaf acted to freeze assets of the Export Development Bank of Iran and cut its exposure to Iran's financial system.

The sanctions, part of the US effort to isolate Iran from the global economy over its alleged nuclear weapons program, had banned Elaf from any access to the US financial system.

At the time the Treasury said Elaf had knowingly facilitated financial transactions for the EDBI, on which both the US and European Union have placed strict controls for its role in financing the government in Tehran.

"Today we welcome Elaf Islamic Bank back into the US financial system, and we urge other designated individuals and entities around the world to follow its positive example," said Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen.

"As today's delisting demonstrates, our sanctions are flexible and can be lifted if the conduct that led to the sanction terminates," he said in a statement.

On Wednesday Cohen told a US Senate committee that the sanctions on Iran were having an impact, slashing its oil export receipts by $3-5 billion a month, fueling inflation and sharply devaluing the Iranian rial.

Cohen said the US plans to block the sale of gold to Iranians, whether the government or individuals, from July 1, and has already pressed Iran's neighbors Turkey and the United Arab Emirates -- both gold-trading centers -- to implement the measure.

Washington expects that choking off the supply of gold to Iranians will further deflate the currency and undermine the regime.

"They are dumping their rials to buy gold as a way to try to preserve their wealth. That is I think an indication that they recognize that the value of their currency is declining," he told lawmakers.