Iran’s capacity to transport its oil is reliant on service providers based in Malaysia, with oil being transferred near Singapore and throughout the region, a senior US Treasury official told Reuters on Tuesday.

The US Treasury is scrutinising the financing of militant groups throughout South East Asia, investigating fundraising efforts and illicit sales of Iranian oil.

The US official said the Treasury is working to prevent Malaysia from becoming a jurisdiction where Palestinian militant group Hamas could fundraise and move money.

“We are concerned about Hamas' capacity to fundraise in the region, including in Malaysia, so want to have a direct conversation about those concerns,” the official said, according to Reuters.

Iran has made attempts to raise funds through proxies in the region, and even through charities.

“It's appalling that they seek to take advantage of the outpouring of support for the Palestinian people to siphon money for their violent and destabilizing activities,” the official added.

According to the South China Morning Post, a Malaysian “dark fleet” of cargo ships offloads Iranian oil, which is then shipped for sale in China as Malaysian oil, bypassing US sanctions on Tehran.

A US delegation that includes Under-Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson and Treasury General Counsel Neil MacBride is visiting Singapore and Malaysia this week.

The official speaking to Reuters added: “The capacity of Iran to move its oil has relied on sort of these types of service providers that are based in Malaysia. So we want to have direct conversation with Malaysians about that.”

The treasury imposed sanctions on four Malaysia-based companies it accused of being fronts supporting Iran’s production of drones last December.

According to the official, the US sanctions on Russian oil are proving effective, reducing Moscow’s capacity to profit from oil sales while preserving the stability of global energy markets.