ZURICH (Reuters) - Swiss banks should come clean to U.S. officials conducting a tax probe before an end-of-year deadline and face up to resultant penalties, or risk more costly prosecution later, Switzerland's financial regulator warned on Friday.
Both the United States and Switzerland are eager to draw a line under probes into undeclared money wealthy Americans have stowed in tax havens. But a government-brokered program, open to a host of second-tier Swiss banks, lapses next month.
Under the deal, banks are expected to disclose previously hidden information and face penalties of up to 50 percent of the value of the assets they managed on behalf of Americans.
"Further sanctions by U.S. authorities must be feared" for any banks which choose to shirk the U.S. program, wrote Patrick Raaflaub, head of regulator FINMA, in an article published by Neue Zuercher Zeitung on Friday.
"This would be more expensive in the long run and would provide considerably less certainty to the firms, their employees, and clients than the option of a rapid conclusion to this legal dispute," Raaflaub wrote.
The matter remains a priority for U.S. officials, who are investigating Swiss banks with a view to seeking criminal charges for those which don't come clean, according to the head of the U.S. Justice Department's tax division.
The timing of FINMA's comments, shortly before the deadline, raises the question of whether fewer banks than expected are preparing to come clean.
The Swiss government said in a statement it had given various banks authorization to cooperate with the U.S. authorities, without giving details on their number and identity.
"The Federal Council encouraged the Swiss banks to give serious consideration to their participation in the program and to make their decisions in this regard in a timely manner," the government said in a statement following its weekly meeting.
Earlier this week, the former head of private banking at UBS, which paid $780 million in 2009 and handed over thousands of files on clients to settle its probe, agreed to be extradited to the United States to face tax charges.
The Swiss-U.S. deal does not cover banks already under U.S. criminal investigation, which include some of Switzerland's biggest private banks such as Credit Suisse and Julius Baer.
Editing by Elaine Hardcastle and David Holmes