LONDON: The militant Islamic State (IS) group has made more than $500 million trading oil with significant volumes sold to the government of Syrian President Bashar al-Assad and some finding its way to Turkey, a senior United States (US) Treasury official said on Thursday.

The US, France, Britain and Russia have vowed to defeat IS which controls large parts of Syria and Iraq.

A US-led coalition is bombing the militant group, as is Assad's only big-power supporter Russia, in an attempt to kill its leaders and cripple the oil wells which the group uses to finance its rule and attacks abroad.

In one of the most detailed public explanations of IS's oil trade, US Treasury Department official Adam Szubin said militants were selling as much as $40 million a month of oil at the installations which was then spirited on trucks across the battlelines of the Syrian civil war and sometimes further.

"ISIL is selling a great deal of oil to the Assad regime," Szubin, acting under secretary for Terrorism and Financial Intelligence with the Treasury, told an audience at Chatham House in London.

"The two are trying to slaughter each other and they are still engaged in millions and millions of dollars of trade," Szubin said of Assad's government and IS, also known as ISIS or ISIL.

The "far greater amount" of IS oil ends up under Assad's control while some is consumed internally in IS-controlled areas. Some ends up in Kurdish regions and some in Turkey, he said.

"Some is coming across the border into Turkey," Szubin said when asked for details on the money trail.

"Our sense is that ISIL is taking its profits basically at the wellhead and so while you do have ISIL oil ending up in a variety of different places that's not really the pressure we want when it comes to stemming the flow of funding ─ it really comes down to taking down their infrastructure," he said.

Szubin said it was unclear whether the $40 million a month estimate could be multiplied over a year. But in remarks prepared for delivery, he said IS had made more than $500 million from the oil trade, but did not give a more specific time period.

'Secure the Turkish border'

After Turkey downed a Russian fighter jet last month, Russian President Vladimir Putin said he had intelligence that large amounts of oil and petroleum products were moving across the border from IS territories to Turkey.

The son of Turkish President Tayyip Erdogan has denied Russian allegations that he and his family were profiting from the illegal smuggling of oil from IS-held territory.

"There is no question that better security, closing the Turkish border to flows is a key component right now and we are looking to the Turks to do more in that respect," Szubin said.

"It's not just a financial issue ─ it is about foreign terrorist flows, it's about weapons and it's about financing. I think securing that border would pay major dividends in terms of intensifying the pressure and also reducing the threat."

In an attempt to cut militants' links to the global financial system, Szubin said the US had worked with Iraq to close down dozens of bank branches in IS-held territories.

Szubin said militants had looted up to $1 billion from bank vaults in Syria and Iraq, but he said IS's oil trade was the main target.

IS militants claimed responsibility for a Nov 13 attack on Paris that killed 130 people and the Oct 31 downing of a Russian passenger aircraft over Egypt's Sinai region that killed 224.

Iran banking

Szubin sought to soothe concerns about US reaction to what is expected to be a boom in trade with Iran when Western sanctions are lifted as part of a nuclear deal between Tehran and six world powers reached earlier this year.

Many Western companies, including European ones, remain concerned about initiating trade with Iran fearing they could still fall foul of the complex layers of sanctions and potentially face fines or be cut off from the US financial system.

Szubin acknowledged there would be a great deal of "caution and hesitancy" by international banks initially.

In 2014, the US imposed a record fine on French bank BNP Paribas, which agreed to pay almost $9 billion to resolve accusations it violated US sanctions against Sudan, Cuba and Iran.

Without naming any banks, Szubin said there had been some "very bad conduct" going on in the Western banking system in the mid-2000s and before.

"That conduct by and large stopped in 2007, 2008... we haven't seen reputable European banks doing this for close to a decade now," he said.

"If banks are being honest and accurate in describing what they are doing and there's an accidental payment that goes through the US payment system that shouldn't, we are not going to look at the penalty cases, these massive enforcement cases."

He said once global sanctions were lifted, all non-US companies would be able to invest in Iran and trade oil with Iran, though accompanying US sanctions on Iran for supporting terrorism would remain.