PARIS, Oct 18 (Reuters)

A global dirty money watchdog said on Friday it had given Iran a final deadline of February 2020 to comply with international norms after which it would urge all its members to apply counter-measures.

The Paris-based FATF said in the meantime that it was asking members to demand scrutiny of transactions with Iran and tougher external auditing of financing firms operating in the country.

"If before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, then the FATF will fully lift the suspension of counter-measures and call on its members and urge all jurisdictions to apply effective counter-measures, in line with recommendation 19," it said in a statement.

Foreign businesses say Iran's compliance with Financial Action Task Force (FATF) rules is key if Tehran wants to attract investors, especially after the United States re-imposed sanctions on Iran last year.

France, Britain and Germany have tied Iran's compliance and removal from the FATF blacklist to a new channel for non-dollar trade with Iran designed to avert U.S. sanctions.

Iran's leaders are however divided over complying with the FATF. Supporters say it could ease foreign trade with Europe and Asia when the country's economy is targeted by U.S. penalties aimed at its isolation.

Hardline opponents argue that passing legislation toward joining the FATF, could hamper Iran's support for its allies, including Lebanon's Hezbollah.

The chances of Iranian compliance within four months appeared slim. Its own action plan to meet with the FATF requirements, implemented in 2016, expired in January 2018.

"The FATF expresses its disappointment that the Action Plan remains outstanding," it said. "The FATF expects Iran to proceed swiftly in the reform path to ensure that it addresses all of the remaining items by completing and implementing the necessary Anti-Money Laundering and Counter-Terrorist Financing reforms."