Comoros has sold citizenship to nearly 52,000 foreigners since 2009, the government said in the first official statement on the scale of a passports-for-cash deal with Gulf states.
Most of the documents had been sold under an approved scheme but there had been abuses that led to some Iranians buying passports, which had sparked tensions with Gulf allies, the country's foreign minister said.
Comoros struck a deal with the UAE in 2008 to sell economic citizenship to stateless Bidoon people living in the Gulf in exchange for cash for the poor Indian Ocean nation. However, the Comoros parliament is investigating complaints of corruption and procedures not being followed.
The previously undisclosed tally for the number of passports sold means Comoros — a nation of some 800,000 people — should have received more than $260 million (Dh954.9m) in revenues, a sum equivalent to over 40 per cent of its gross domestic product.
However, Comoros investigators say large amounts of cash cannot be accounted for.
A Reuters report last month detailed how some passports had been sold to foreigners outside the original accord, including people alleged to have broken sanctions on Iran.
Comoros interior minister Mohammed Daoudou said the sale of further passports and renewal of existing documents held by foreigners were on hold pending the parliamentary inquiry and investigations into sales to people outside official agreements.
The government says it has sought help from Interpol and US government investigators.
US and Interpol officials contacted not confirm whether an official request had been made.
Some Comoros and Western officials fear that the scheme was hijacked by people looking to bypass sanctions on Iran.
"The vast majority of people who secured passports [outside the official programme] are of Iranian origin or are working for Iran," foreign minister Souef Mohammed El Amine said on Friday.
"This situation has created problems for Comoros with regard to our partners in the Gulf, especially Saudi Arabia and the United Arab Emirates."
Under former president Ahmed Abdallah Mohammed Sambi, who was in power from 2006-2011, Comoros had a close relationship with Tehran. However, Moroni cut ties with Iran in early 2016 and is now an ally of Saudi Arabia.
Comoros recently cancelled 170 passports that the government said had been improperly issued to foreigners, including many people born in Iran.