(Adds shares down at open but recover, company statement)
BRASILIA, Sept 27 (Reuters) - Brazilian police on Friday raided the homes of Banco do Brasil managers suspected of involvement in a 200 million reais ($48 million) money laundering scheme, police said, the latest phase of Brazil's massive Car Wash corruption scandal.
According to the Federal Public Prosecutors office, police are investigating allegations that managers at three branches of the state-controlled bank laundered more than 200 million reais between 2011 and 2014, the office said.
Banco do Brasil said in a statement it has launched internal investigations that may result in dismissing suspected employees, adding it is collaborating with authorities.
The bank's shares opened down 1% on news of the probe, but recovered quickly to advance 0.7%.
The money was used to pay bribes by engineering and construction firms for contracts with state-run oil company Petroleo Brasileiro in the vast kickbacks and political bribery scheme uncovered in 2014, the office said.
When informed of the allegations, Banco do Brasil conducted internal investigations that resulted in further evidence being sent to the authorities, according to the prosecutors.
They said the suspects, in return for bribes, allegedly turned off the money laundering detection system for some transactions, blocking the information channel to the Council for Financial Activities Control (COAF), a key tool for flagging suspicious funds moving through the banking system.
The managers under investigation are from three branches in the state of Sao Paulo and police and prosecutors were carrying out seven search and arrest warrants in Sao Paulo city and the one on in the northeastern city of Natal, they said.
Federal police said they area also investigating the role of a money changer who allegedly provided 110 million reais in cash used to pay the bribes. (Reporting by Jamie McGeever and Anthony Boadle in Brasilia, Pedro Fonseca in Rio de Janeiro, Editing by Mark Potter and Nick Zieminski)