The decision to include the European-Iranian Trade Bank (EIH) on the European Union's blacklist "for its role in (Iranian) illegal activities" is expected to be taken by the community's foreign ministers at a meeting on May
23, the official told AFP on condition of anonymity.
"Evidence pointing to the EIH's involvement in (nuclear) proliferation has multiplied and become tangible," the official said, adding that "from the German government's point of view, conditions have been met" for a ban "and
this is also the consensus at the European level."
International sanctions have been slapped on Iran in an attempt to prevent it from developing nuclear weapons. Tehran denies it wants nuclear weapons.
Citing unnamed Western officials, the Wall Street Journal last year said the EIH bank had done more than a billion dollars of business on behalf of firms subject to US, UN and EU sanctions.
The UN Security Council slapped a fourth set of sanctions against Iran in June for refusing to halt its uranium enrichment work, the most sensitive part of Tehran's atomic drive.
These authorise states to conduct high-seas inspections of vessels suspected of ferrying banned items to Iran and added 40 entities to a list of people and groups subject to travel restrictions and financial sanctions.
The Journal said that EIH's business partners include units of Iran's Defense Industries Organization, the Aerospace Industries Organization and the Iranian Revolutionary Guard Corps.
In 2009, EIH appears to have been involved in a broad sanctions-evasion scheme, conducting transactions on behalf of Iran's Bank Sepah that has been
sanctioned for facilitating Iran's weapons trade and proliferation activities, the US paper said.
EIH was founded by a group of Iranian merchants in Hamburg in 1971. It operates openly under the supervision of German bank regulators, but the US Department of Treasury had earlier blacklisted it for alleged illicit business with Iran.