The French unit of UBS has been fined 10m euros (£8.5m; $13m) by regulators for failing to tighten proper controls on money-laundering and tax evasion, reports the BBC.
UBS and its French branch are being formally investigated for allegedly helping wealthy clients open undeclared bank accounts in Switzerland.
The bank rejected the "contentious nature" of the decision and said it was considering lodging an appeal.
Regulators said the measures taken by UBS had been "lax".
UBS and UBS France earlier this month were placed under formal investigation over suspected "complicity in illegal sales practices". Investigators are examining whether UBS staff broke a French law against "illicit solicitation" by actively approaching potential clients in France.
Paris prosecutors, who are leading the investigations, are also looking into whether UBS set up a shadow accounting system that masked transfers between French and Swiss bank accounts.
The ACP, the Bank of France's regulatory arm, on Wednesday said that the bank had waited more than 18 months after receiving final warnings in 2007 by authorities to "rectify trans-border activity" amid "serious" suspicions of tax evasion and illegal sales practices.
It also said that the bank had failed to prevent UBS headquarters from authorising staff to transmit lists of prospective clients interested in opening undeclared overseas accounts.
A statement by UBS said: "We disagree with many of the disciplinary commission's conclusions. UBS will further analyze the decision by the commission and will consider whether to appeal at the appropriate time."
Read more of this report from the BBC.
Read Mediapart's coverage of the background to the story here and here.