US Senators Frank Lautenberg, D-NJ, and Hillary Clinton, D-NY, introduced a bill that would sanction subsidiaries of US companies doing business with Iran.

Current law prohibits US companies from operating in Iran, but a loophole allows subsidiaries registered outside the US to continue conducting such business.

The proposed legislation is part of a raft of bills Congress has introduced in an effort to tighten an economic noose around Iran to encourage the country to abandon its alleged nuclear-enrichment activities, which Western officials say are a precursor to a nuclear-weapons program.

“We cannot knowingly allow US companies to do business with terrorist states like Iran. Period,” said Lautenberg. “We cannot allow companies to put corporate profits ahead of our national security.”

“We should not let US companies subvert U.S sanctions against Iran by using foreign subsidiaries. This legislation makes clear to companies that if you want to do business in the US, you cannot continue to pursue profit in Iran,” co-sponsor Clinton said.

The bill would strengthen existing sanction provisions in the International Emergency Economic Powers Act, which prohibits US companies from conducting business with nations that sponsor terrorism. The senators said some US companies, such as Halliburton (HAL), have exploited a loophole in the law by creating foreign subsidiaries to do business with Iran. These “shell” foreign subsidiaries often form and incorporate overseas for the specific purpose of bypassing US sanctions, the senators said.

Halliburton owns a foreign subsidiary called Halliburton Products and Services, Ltd., which is registered in the Cayman Islands and has offices in Dubai and Tehran. The subsidiary has provided Iran with oil-drilling equipment and services.

Monday, the Senate Interstate Commerce, Trade and Tourism Subcommittee will hold a hearing on the legislation.

Lautenberg spokesman Scott Mulhauser said the Senators’ proposal wasn’t part of the bill, HR 1400, that House Foreign Affairs Committee Chairman Tom Lantos, D-CA, had introduced that would target corporate investments in Iran.

But, “this is too important to be ignored and will likely be picked up by the House,” Mulhauser said.

Lantos, Ileana Ros-Lehtinen, R-FL (the ranking Republican on the House Foreign Affairs Committee) and Brad Sherman, D-CA (the chairman of the US House Subcommittee on Terrorism, Non-Proliferation and Trade) both collectively and by themselves have introduced several different proposals that seek to force companies, pension funds and portfolio managers to divest out of Iran. (Dow Jones & Company, Inc.)