A UBS office in Zurich as seen in this file photo.

Brazilian authorities have accused employees of two Swiss banks, UBS and Clariden Leu, of participating in an illegal remittance scheme uncovered by police in Brazil, officials said yesterday.

Brazilian police arrested 20 people on Tuesday, including businessmen, bankers and black-market foreign exchange operators on suspicion of money laundering and making illegal currency remittances.

Police said they transferred money from companies or wealthy individuals without informing the proper authorities.

Two of three banks involved in the scheme are Swiss, federal police said, without naming the banks.

Face 40 years in prison

The 20 people, who are under temporary arrest for five days, will be charged with tax and currency fraud, money laundering and withholding information from the central bank. Each faces a maximum prison sentence of 40 years.

The public prosecutor would present as evidence against them telephone recordings made during 18 months of investigations, police said.

Tax evasion on the transfers may have exceeded 1 billion reais (US$575 million), local newspapers said.

A source close to the secret investigation in Sao Paulo told Reuters that two of the people arrested are UBS managers based in Switzerland.

"They were hunting for wealthy Brazilian customers to deposit money in Switzerland and put them in touch with illegal currency traders to evade taxes," the source said.

UBS said in a statement that one Swiss-based employee was arrested and that it was not "aware that it is the target of any investigation in Brazil."

The business and employees of UBS Pactual, its Brazilian unit, "were not involved in this matter," the statement said.

"We are in contact with the Brazilian authorities," UBS spokesman Douglas Morris told Reuters by telephone from New York.

A spokeswoman for Clariden Leu told Reuters by telephone from Zurich that one of its employees was arrested in Brazil and that the bank was in contact with local authorities.

Clariden Leu is a private bank fully owned by Credit Suisse, a UBS rival.

Brazil's federal police have cracked down on money laundering and other white-collar crimes over the last three years.

Last month, police arrested executives of U.S.-based technology and network company Cisco Systems Inc, accusing them of tax fraud. The company denied any wrongdoing.

- Reuters