UBS AG's dispute with the Internal Revenue Service has made some Switzerland banks wary of working with U.S. clients, prompting some to stop taking money from Americans altogether and endangering the country's image as a private banking center.

The ranks of financial firms implementing extra measures in dealing with clients living in the United States or even taking the unusual step of refusing American money outright are growing, several confirmed Monday.

Spurring the moves is UBS' ongoing battle with the IRS, which wants access to 52,000 client accounts in order to root out possible tax fraud, potentially breaching Switzerland's own banking secrecy laws in the process.

Analysts expect UBS to pay a hefty settlement to resolve the matter before it goes to court.

But no matter the outcome, some Swiss banks now regard clients in the United States as an expensive liability.

Zuercher Kantonalbank, a Zurich retail bank, no longer accepts business from U.S. clients, a spokesman for the state-controlled bank confirmed. A spokesman for Bank Sarasin & Cie, a Basel company that focuses on wealthy clients, said it no longer takes U.S. money, in part because of the U.S. pursuit of offshore funds.

Others, such as cooperative Raiffeisen Group, and Migros Bank, owned by Switzerland's largest retailer, Migros-Genossenschafts-Bund, still accept U.S. funds but recently instituted tougher measures for their dealings with them.

Raiffeisen demands a power-of-attorney and correspondence address outside the United States, while Migros refuses to correspond with clients on U.S. soil.

The banks declined to specify how much in U.S. funds they manage, except for ZKB, which said U.S. money accounts for only 1% of its overall $114 billion of assets. Many banks are hesitant to take U.S. money until UBS' court case with the IRS is resolved, a spokesman for Switzerland's banking lobby said. "All uncertainty is due to the high-profile IRS-UBS case, which has created so much uncertainty and confusion among clients and banks, and emphasizes the importance of reaching a reasonable solution," Swiss banking lobby spokesman James Nason said.

Though the banks in limbo on U.S. funds are tiny institutions in a country dominated by the private banking giants UBS and Credit Suisse Group, the moves underscore how high the IRS' pursuit of UBS client data has sent tensions in Switzerland.

As fear over further U.S. moves spreads, the Swiss-American Chamber of Commerce in Zurich said efforts are under way to find a solution short of a blanket ban of U.S. business.

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