Royal Bank of Canada’s wealth-management subsidiary in the Bahamas is caught up in tax fraud and money-laundering allegations involving billionaire international art dealer Guy Wildenstein.

French prosecutor Franck Charon confirmed on Monday that France’s tax-evasion watchdog – Parquet national financer – has recommended to an investigating judge that RBC Trust Company (Bahamas) Ltd. be charged with participating in tax fraud and money laundering activities by Mr. Wildenstein and other family members and advisers.

A second offshore tax haven, Northern Trust in the Guernsey Islands, has also been named in the proceedings.

The prosecutor alleges that RBC Trust Co. held in trust part of the inheritance from the estate of Mr. Wildenstein’s father Daniel, who died in 2001.

Guy Wildenstein’s lawyers have posted a €10-million bond with a French court in connection with allegations he failed to pay hundreds of millions of dollars in inheritance taxes due on his father’s estate and laundered the proceeds.

He is contesting the allegations.

RBC spokeswoman Claire Holland said in an e-mail message Monday the bank is aware of the French prosecutor’s recommendation, “which we strongly contest.”

None of the allegations have been proven in court and no one has been charged in the matter.

“This is a client matter relating to a trust for which RBC Trust Company in the Bahamas serves as trustee,” Ms. Holland said.

“RBC Trust Co. (Bahamas) Limited has a duty of confidentiality and cannot comment on clients even to confirm or deny they are clients.”

The matter will go to trial only if the investigating judge decides to bring charges and he has so far not made a decision, Mr. Charon said.

RBC disclosed the French Public Prosecutor’s recommendation in its first-quarter report last month. The Bahamas unit made a submission to the investigating judge that it should not be not charged, the report said.

“RBC Bahamas believes that its actions did not violate French law. If charges are brought, it intends to contest them in the French court,” the report said.

The Wildenstein family is known as one of the art world’s leading dealers, going back to the Paris founding by Nathan Wildenstein in 1875.

In 2011, a treasure trove of fine-art works believed stolen or lost turned up in a vault at the Wildenstein Institute in Paris, a centre for art-history research.

Guy Wildenstein was charged with concealing about 30 artworks, including a Degas and a Manet. He is fighting the allegations and denied any knowledge of the works’ true status.

Mr. Wildenstein is a friend and financial backer of former French president Nicolas Sarkozy and his UMP party.