NEW YORK, May 12 (Reuters) - American victims of bombings and rocket attacks in Israel have sued Swiss bank UBS AG for more than $500 million, accusing the bank of helping fund the militants behind the attacks through dealings with Iran.

The lawsuit seeks damages from Switzerland's largest bank for more than 50 U.S. citizens hurt or relatives of those killed in bombings in Israel between 1997 and 2006 that it said were carried out by militant groups Hezbollah, Hamas and the Palestinian Islamic Jihad.

UBS AG broke several 1996 U.S. laws that prohibit persons and companies from engaging with state sponsors of terrorism and were designed to impede Iran's access to foreign capital, the suit said.

The lawsuit, filed on Friday in federal court in New York, cited U.S. government reports that conclude Iran has been the main sponsor of Hezbollah and Hamas since 1996, including providing tens of millions of cash annually. The U.S. government considers Hamas and Hezbollah terrorist organizations.

"UBS knew full well that the cash dollars it was providing to a state-sponsor of terrorism such as Iran would be used to cause and facilitate terrorist attacks by Iranian-sponsored terrorist organizations such as Hamas, Hezbollah and PIJ," the lawsuit said.

UBS spokeswoman Rohini Pragasam declined to comment on the suit.

In 2004, the United States fined UBS $100 million for transferring dollars to Iran, Cuba and other nations subject to U.S. trade sanctions and then trying to hide the transactions.

Two years later, UBS said it cut ties with all of its clients in Iran.

Because of U.S. sanctions on financial dealings with Hamas and Hezbollah, Iran's financial backing "substantially increased" the militants' ability to carry out bombings, the lawsuit said.

The people named in the suit include U.S. citizens in New York, California and Oregon who are seeking damages for wrongful death, physical and psychological injuries, assault and emotional distress. Several also live in Israel.

The plaintiffs were victims of attacks including a July 30, 1997 Hamas suicide bombing of an outdoor market in Jerusalem that killed 15 people and wounded 168, the lawsuit said. The Hezbollah attacks were part of thousands launched at civilian targets in Northern Israel during July 2006, it said. (Reporting by Christine Kearney; Editing by Doina Chiacu)

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