Iran continues to enrich uranium and is expanding its program in defiance of a UN Security Council deadline, the UN's nuclear watchdog says in a confidential report.

The Vienna-based International Atomic Energy Agency report, obtained by CBC News Wednesday, also accuses Tehran of blocking its efforts to monitor Iran's nuclear activities.

"Iran has not suspended its enrichment related activities," the report said.

"It should be noted that because the agency has not been receiving, for over a year, information that Iran used to provide, including under the Additional Protocol, the agency's level of knowledge of certain aspects of Iran's nuclear related activities has deteriorated."

In the enrichment process, uranium gas is injected into cascades of thousands of centrifuges, which spin and purify it. If enriched to a low level, the result is fuel for a nuclear reactor. Refined to a much higher level, it can build the material for a nuclear warhead.

The report says the Iranians were running eight 164-machine cascades at its underground site in Natanz, with five more cascades being prepared for operation.

The report's findings could expose Tehran to tougher penalties over its nuclear work, which Western powers have alleged is masking Iran's efforts to obtain nuclear weapons. Iran denies the charges and has said its program is peaceful.

The Security Council imposed a second set of sanctions on Iran in March for its refusal to suspend enrichment programs and set a 60-day deadline for Iran to close down its program.

Iranian officials saidearlier this month thattheir nuclear program is moving ahead as scheduled and the country will not suspend uranium enrichment, despite the threat of a third set of UN sanctions.

With files from the Associated Press