Washington's prisoner swap deal with Iran could allow Tehran to divert billions of dollars in unfrozen humanitarian funds to its missile programme and proxy groups, a former senior US intelligence official warned Congress on Thursday.

The deal would free five American citizens from Iran in return for the US releasing five Iranians. Washington will also unfreeze $6 billion in Iranian funds currently being held in South Korea to banks in Qatar, which Tehran will have access to for humanitarian purposes.

But Norman Roule, who worked on the Iran file at the Office of the Director of National Intelligence from 2008 until 2017, said Tehran could easily exploit the arrangement.

“The deal's financial relief allows Iran to divert resources previously intended for humanitarian purchases to its security forces, missile programmes, proxy groups and terrorism,” Mr Roule, now a senior adviser at the Centre for Strategic and International Studies, told a Republican-majority subcommittee hearing on the Middle East and North Africa.

The panel's senior Democrat, Dean Phillips, defended the deal.

“We need a new approach … We've tried a lot of sticks. I believe this new initiative, which I know is distasteful on the surface to many, is a bit of a carrot,” Mr Phillips argued.

House Foreign Affairs Committee chairman Mike McCaul made a surprise appearance at the Thursday hearing to reinforce Republican condemnations of the deal.

“The Americans held by Iran are innocent hostages, they must be released immediately and unconditionally,” Mr McCaul said.

“But paying ransom to release hostages creates a direct incentive for America's adversaries to conduct more hostage taking. Iran is bragging about receiving this payment.”

The White House has denied claims that unfreezing the funds constitutes a “ransom” payment.

State Department spokesman Matthew Miller said all of the money that Iran would gain access to under the terms of the deal are funds that already belong to Tehran.

“Under the terms of arrangement that would allow the release of five American citizens, Iran would only have access to these funds for humanitarian purposes,” Mr Miller said. “So for the purposes of food, medicine and other things that do, in fact, benefit the Iranian people and not the regime.”

John Kirby, the White House National Security spokesman, echoed Mr Miller's sentiments and added that Iran would have to submit requests to withdraw the funds from banks in Qatar.

“This is not a payment of any kind, this is not ransom,” Mr Kirby told journalists during at a Wednesday news briefing.

Updated: September 14, 2023, 6:44 PM