MADRID, Spain (Reuters):

Police raided Spanish offices of Portugal's Banco Espirito Santo on Thursday in an investigation into possible money laundering, a spokesman for the Civil Guard said.

An employee of French bank BNP Paribas said the Civil Guard was also raiding its offices. It was not known if the raids were related, and both banks declined to comment.

A spokeswoman for the Civil Guard said she could not confirm the BNP Paribas raids due to a restriction on information as any investigation would be led by the High Court.

A court spokeswoman declined to comment.

A judicial source said judge Baltasar Garzon, famed for his cases against former Chilean dictator Augusto Pinochet and Al Qaeda, was leading the investigation.

Commenting on the BES raid, a source familiar with the situation said: "These raids are only related to some of BES' clients in Spain and are not directly linked to the bank. They have no relation to the Portuguese market."

Shares in BES, Portugal's number two listed bank, dipped on news of the raids but climbed back to stand 1.1 per cent lower at 12.33 euros at 1340 GMT. BNP Paribas stock was down 1.4 per cent.

The DJ Stoxx European banking sector index was down 0.6 per cent.

A BES employee told Reuters that police had come into the building and were not letting anybody out. "We don't know what they are investigating nor which department it affects," he said.

Last year, police raided BES's headquarters in Lisbon in an investigation that involved several other banks into possible tax fraud and money laundering.

'These raids are only related to some of BES' clients in Spain and are not directly linked to the bank.'

Taken from the Financial Gleaner, Friday, November 3, 2006