The U.S. Treasury Department is looking into JPMorgan Chase (NYSE:JPM)'s relationship with a hedge fund that is said to be a part of Iranian oil trader Hossein Shamkhani's network, Bloomberg News reported on Friday.

Hossein Shamkhani is the son of Ali Shamkhani, a long-time ally of Iran's supreme leader Ayatollah Ali Khamenei and previously the country's top security official.

The U.S. agency is scrutinizing whether JPMorgan complied with all rules and regulations when it took on UAE-based hedge fund Ocean Leonid Investments as a client, the report said, citing people familiar with the matter.

JPMorgan, the Treasury Department, and Ocean Leonid did not immediately respond to Reuters requests for comment. Hossein Shamkhani could not be immediately reached for comment.

The probe, which is at an early stage, is mainly interested in Shamkhani's activities, while also considering the possibility of bank compliance gaps, the report said, adding that JPMorgan was among the banks that offered leverage to the hedge fund.

JPMorgan has no obligation to exit the client relationship because neither Shamkhani nor the company appear on sanctions lists, the report said, citing people familiar with the matter.

Last month, Bloomberg News reported that the Dubai International Financial Center (DIFC) had suspended firms said to be part of Hossein Shamkhani's network amid mounting pressure from international regulators.

U.S. federal law requires financial institutions to monitor for suspicious activity in an effort to prevent illicit funds from flowing through the country.

The Federal Reserve is also looking into Western financial exposure to Shamkhani's network, Bloomberg said.

The Fed declined to comment on the report.

In 2020, the Treasury Department took action against several senior Iranian regime officials including Ali Shamkhani, noting his key role in implementing the supreme leader's domestic and foreign policies.