The US Treasury sent Moody's Investors Service a strongly worded letter about its Iran credit rating late last year, requesting information about the decision and warning fines and prison sentences would apply if the rating agency was found in breach of US law.

In an unprecedented move, Moody's on Monday withdrew its sovereign credit rating for Iran, a country named by US President George W. Bush as being a member of the "axis of evil", citing US government concerns that the rating was "inconsistent" with US sanctions on the country.

According to an official familiar with the contents of the letter, it said: "Regulations prohibit US persons from engaging in virtually all direct or indirect commercial, financial or trade transactions with Iran unless authorized to do so by OFAC or exempted of statute."

The letter was sent to Moody's last November even though it first rated the country in June 1999.

Moody's said the rating was unsolicited and the agency was not paid for the service.

The office of Foreign Assets Control is the US Treasury agency that administers and enforces economic and trade sanctions against targeted foreign countries, terrorism-sponsoring organizations and narcotics traffickers.

Criminal penalties for violating these laws range up to 10 years in prison and $500,000 in corporate and $250,000 in individual fines, the letter said. Civil penalties can range up to $11,000 per violation.

The letter than requested Moody's turn over details of all transactions with Iran "under oath" from 1996 relating to all services which "advertise or facilitate" imports, exports or investments between the United States and Iran or third parties and Iran within 20 days of receiving the letter.

Failure to respond to the request "will be the basis for a civil penalty proceeding by this Office", the letter said according to the official who did not want to be named.

A Treasury spokesman, Rob Nichols, said on Tuesday the matter remains under investigation.

A senior Iranian official on Tuesday dismissed Moody's decision, blaming the move on pressure from the United States.

"We are not worried, not at all," Iran's Deputy Foreign Minister Ali Ahani told Reuters during a visit to Ottawa.

"There is a good possibility that this matter has (arisen) because of the position of some political forces in the United States ... and the decision cannot have credibility from a technical and economic viewpoint," he said.

Pulling the rating could stall Iran's plans to borrow in the bond market for the first time since its Islamic Revolution in 1979. The US State Department last week branded the oil-rich country the most active state sponsor of terrorism.

Moody's said the rating withdrawal was unprecedented.