The raids at 44 sites in four states were part of a clampdown by Brazilian authorities on tax evasion that last month led to raids on the local offices of U.S. network-equipment maker Cisco Systems Inc.
Two Swiss nationals were taken into custody Tuesday. One of them was a Swiss-based employee of UBS AG, Switzerland's largest bank, the company said. Authorities were seeking the arrest of another foreigner currently outside of Brazil, but did not disclose that person's nationality.
Detectives also seized over $4 million in Brazilian and U.S. currency, said Ricardo Saadi, the federal police detective in charge of the investigation.
He declined to name the banks under investigation, but federal judge Fausto Martin de Sanctis in a statement identified the financial institutions under investigation as UBS, Credit Suisse, AIG and Clariden, a unit of Credit Suisse.
"We're still gathering information and can't provide specific comment right now," said AIG spokesman Chris Winans in New York.
Messages left seeking comment with UBS and Credit Suisse were not immediately returned, though a UBS spokeswoman acknowledged before the judge identified the banks that the employee had been detained.
Saadi said the alleged scheme may have involved the movement of as much as $4.1 million a month out of Brazil for big companies seeking to avoid taxes.
The Brazilian companies, which Saadi declined to name because of secrecy laws, deposited the funds into overseas accounts via black-market money changers with accounts in Brazil and abroad. The companies used the money hidden abroad to buy merchandise in the United States and China that was then shipped to Brazil, he said.
Saadi estimated that the companies may have avoided as much as $588 million in taxes over the last 18 months.
UBS spokeswoman Rebeca Garcia declined to identify the detained employee, but said he works for the company's wealth management and business banking division. Zurich-based UBS is trying to find out why he was detained in Sao Paulo during a business trip to Brazil, said Garcia, who declined to comment further.
Saadi said those arrested Tuesday have not been charged but can be detained for at least five days while authorities continue investigating and prosecutors evaluate the case. The 19 arrested Tuesday included the two Swiss nationals and 17 Brazilians ranging from company owners and executives to money changers, he said.
Tax evasion in Brazil has enormous economic impact that is now becoming a government priority.
"There's been capital flight out of Brazil for a long time, but the Brazilians are absolutely starting to pay attention to this," said Keith Prager, who specializes in investigations in the Latin American financial services sector for the U.S.-based Corporate Resolutions Inc.
Saadi said the investigation into the banks began after seven Credit Suisse executives were detained last year in Brazil in a money laundering probe.
The earlier investigation, known as "Operation Switzerland," focused on whether the executives illegally transferred large sums of money overseas for Brazilian clients. Saadi did not provide an update on the probe involving Credit Suisse Group.
Tuesday's detentions came three weeks after federal agents and tax authorities raided the Sao Paulo and Rio de Janeiro offices of Cisco, alleging the U.S. company benefited from a scheme to avoid duties on products shipped from tax havens to Brazil.
Four Cisco employees were detained, then released. Cisco denied it acted inappropriately, saying it does not import products directly into Brazil.