The Senate Permanent Subcommittee on Investigations on Wednesday published a report summing up the results of its six month probe into UBS and Liechtestein's LGT bank, launched in the wake of revelations that the latter bank had helped wealthy Germans to conceal income, thereby illegally reducing their tax bills.

The scandal first broke in February, after it emerged that the home of Klaus Zumwinkel, Chief Executive of Deutsche Post, one of Germany's largest companies, had been raided by police as part of a tax evasion investigation. He was accused of hiding about EUR1 million from German tax collectors in Liechtenstein.

The raid followed the delivery of information about hundreds of wealthy German clients to the intelligence services by a former employee of LGT.

The informant is said to have handed over a disc to the German intelligence service, the BND, containing confidential information on more than 1,000 clients. The BND is believed to have paid the informant a sum of between EUR4 and EUR5 million for the disk - a sum which the German government regarded as a sound investment, considering the potential pay off if the tax evasion allegations were confirmed.

The scandal prompted other governments, including the US authorities, to launch examinations into whether their citizens had evaded taxes in this way.

Commenting ahead of a Thursday hearing on the matter, Senator Carl Levin (D-Michigan), chairman of the subcommittee was predictably shrill on the matter, arguing, according to an Associated Press report, that:

"The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States. Congress needs to enact strong penalties on tax haven banks that help US taxpayers avoid paying taxes to Uncle Sam."

In addition to condemning UBS for its "aggressive" marketing of its offshore banking products, whilst acknowledging that it had not technically violated reporting requirements under the US Qualified Intermediary Program, the subcommittee made several recommendations in its report, including the imposition of tougher rules on foreign banks operating in the US, and more stringent IRS reporting requirements for such institutions, coupled with heavier penalties for failures to provide such information.