Swiss private bank Julius Baer could be hit with a fine equivalent to 5 per cent of its capital if it is found to have breached Spanish regulations on the sale of funds invested with US fraudster Bernard Madoff, a Spanish law firm is reported to have said by Reuters.  Julius Baer has vigorously defended itself  in response to the claims.

According to the news agency, an alliance of law firms representing victims of Mr Madoff’s multi-billion dollar Ponzi scheme said at a press briefing that they would make a complaint to the Bank of Spain, along with stock market regulator CNMV, alleging that Julius Baer did not hold the necessary licence for operating in Spain.

In a news release quoted by the news service, the group of law firms said: "This bank's activities in Spain lack the appropriate authorisation, which is a very serious infraction with very serious penalties and important economic sanctions that can amount to up to 5 per cent of the bank's capital."

In responding to the allegations, Julius Baer said in a statement that the claims put forward are unfounded and of a defamatory nature.

Julius Baer is unable to make any comments with regards alleged or real client relationships due to banking confidentiality, but the bank always acts in full compliance with national and local applicable rules and regulations, the statement continued.

With regards Mr Madoff’s staggering fraud, the bank said that it had never had any exposure to the Wall Street financier in its own-branded and distribution investment funds, and had never had any Madoff products on its recommended lists. However, Julius Baer had been the custodian for external asset managers in particular as well as for some self-directed clients, the statement concluded.

Although Mr Madoff has already been sentenced to a 150-year jail term for his elaborate Ponzi scheme fraud, the process of unravelling his investment empire - and financial institutions' involvement in it - is still ongoing. Julius Baer is far from alone in facing legal challenges over the Madoff affair, with a number of financial firms facing investigations and lawsuits focusing on allegations of a lack of due diligence, inadequate regulatory compliance and, in some cases, fraud.