ZURICH (Reuters) - U.S. prosecutors are expanding their investigation into whether UBS AG helped tens of thousands of Americans avoid paying taxes, the Wall Street Journal said, citing several people involved in the case.

A Swiss flag is seen in front of an UBS logo on Swiss bank UBS headquarters in Zurich in this November 15, 2008 file photo. REUTERS/Christian Hartmann/Files

U.S. tax investigators believe the number of American clients that the Swiss bank helped to avoid taxes could be much higher than the previously disclosed estimate of about 17,000, the people told the paper.

Investigators are also looking into whether other parts of UBS besides the wealth-management unit were involved in helping clients avoid U.S. taxes, the paper said, citing the people.

By 1000 GMT, UBS shares traded up 2.3 percent at 14.30 Swiss francs, underperforming a 3.2 percent rise in the DJ Stoxx European banks index.

UBS is in a round of talks with the U.S. Justice Department to avert a possible felony indictment by admitting to criminal conduct and paying a penalty in the range of $1.2 billion, the people told the paper.

A Justice Department declined to comment to the paper.

The Justice Department could not be immediately reached for comment by Reuters. A UBS spokesperson told Reuters the bank would not comment on the issues raised in the article.

The spokesperson noted that UBS has admitted “publicly, and on several occasions” that employees in the U.S. cross border business had breached compliance practices, and expressed regret for the conduct of these employees.

Earlier this month, analysts had said UBS was likely to seek a swift deal with U.S. authorities to end the tax probe.

RBS global banking and markets analyst Tom Jenkins said he did not expect the financial impact on UBS to be significant.

UBS said in November it had discovered a few cases of tax fraud as part of the U.S. inquiry into whether it helped Americans dodge taxes through accounts in Switzerland.