London (CNN) -- Britain cut all financial ties Monday with Iran over concerns about Iran's nuclear program, the first time it has ever cut an entire country's banking sector off from British finance, the British Treasury announced.
The move comes days after an International Atomic Energy Agency report highlighted new concerns about "the possible military dimensions of Iran's nuclear program," the Treasury statement said Monday.
The IAEA's governors approved a resolution last week expressing "deep and increasing concern about the unresolved issues regarding the Iranian nuclear program.
Iran insists its nuclear program is peaceful and has called the U.N. watchdog's report "unbalanced" and "politically motivated."
"The IAEA's report last week provided further credible and detailed evidence about the possible military dimensions of the Iranian nuclear program," British Foreign Secretary William Hague said in a statement. "Today we have responded resolutely by introducing a set of new sanctions that prohibit all business with Iranian banks."
U.S. Secretary of State Hillary Clinton and Treasury Secretary Tim Geithner will "outline new steps the United States is taking to increase pressure on Iran" on Monday afternoon in Washington, the State Department said.
The United States will name Iran, as well as its central bank, as a "primary money-laundering concern" but will not place sanctions directly on the central bank, a senior Treasury Department official told CNN.
The Obama administration plans to impose fresh sanctions against Iran's petrochemical industry, diplomatic sources familiar with the plans said Friday. U.S. sanctions already prohibit American companies from doing business with Iran.
The British sanctions underline "the severity of the government's concerns about Iran's activities," the statement issued by Britain's chancellor of the exchequer said.
All British credit and financial institutions must end their business relationships and transactions with all Iranian banks, their branches and subsidiaries by Monday afternoon, it said.
"Iran's activities that facilitate the development or production of a nuclear weapon pose a significant risk to the national interests of the UK and countries across the region," it said. "Iranian banks play a crucial role in providing financial services to individuals and entities within Iran's nuclear and ballistic missile programs, as companies carrying out proliferation activities require banking services."
The chancellor's statement said other "partner countries" will make similar announcements about banking sanctions against Iran.
"We believe that the Iranian regime's actions pose a significant threat to the UK's national security and the international community," Chancellor George Osborne said. "Today's announcement is a further step to preventing the Iranian regime from acquiring nuclear weapons."
CNN's Alex Felton, Jill Dougherty and Elise Labott contributed to this report.