Weil is currently the chief executive officer of Reuss Private Group, a Swiss firm that has about $4.5 billion under its management.
The company said Weil was arrested during a private trip to Italy.
He has been working at Reuss since 2010, The Financial Times reported Monday.
While at UBS, however, he assisted American clients hiding about $20 billion in assets from the IRS, U.S. authorities allege in a 2008 indictment.
Italian police said it was up to the United States to file to have Weil extradited. His name in Italy appeared on a list of at-large suspects, the Times reported.
Currently, police said, Weil, 54, is being housed in a prison in Bologna.
Although Weil was declared a fugitive in 2009 by U.S. authorities, Reuss said there was no reason he could not work as the head of a Swiss money management firm.
"There was nothing against him in Switzerland. He was fully transparent about his situation, and there was no reason not to appoint him as chief executive," the company said.
"When Raoul Weil was indicted in 2008 he was immediately released from all his duties at the bank. UBS reached a final settlement concerning the U.S. cross-border issue in 2010," UBS said in a statement, referring to a $780 million settlement with the U.S. Justice Department to settle charges of aiding clients with tax evasion.
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