SAO PAULO, Feb 27 (Reuters) - Brazil's federal

prosecutors have launched an investigation into alleged fund

diversion by a former senior executive at Itau Unibanco ( ITUB )

, set to take a key role at Spanish bank Santander

in coming months.

Latin America's largest bank accused its former Chief

Financial Officer, Alexsandro Broedel Lopes, of misappropriating

funds while working at the bank, in a filing published in

December. The bank later sued Broedel for damages.

Itau alleges that its former executive, hired by Santander

last year, breached internal policies through his involvement in

irregular payments for consultancy reports.

In a regulatory filing, Itau said it investigated the

executive's conduct for several months and concluded he was

involved in improper transactions totaling more than 4.86

million reais ($830,000) between 2019 and 2024.

Broedel's representatives said in a statement that their

client denies any wrongdoing and wonders why suspicions were

raised after he resigned from his position to take on a global

role with one of Itau's main competitors.

A Santander spokesperson said: "Mr. Broedel is a highly

regarded senior executive who until July was Itau CFO. He is due

to take over as (chief accounting officer) later this year and

we are monitoring any developments."

The federal prosecutors office in Sao Paulo said in a

statement that it could not comment on the case because it is

under seal.

As part of its lawsuit targeting Broedel, Itau asked a judge

to register the existence of proceedings against him in the deed

of a house valued at almost $2 million that the executive is

trying to sell. The request is meant to work as a guarantee that

Itau will have access to funds related to any sale if it wins

the case.

On Thursday, a Brazilian judge agreed to the request.

According to Broedel's representative, the executive decided

to sell his house because he is now living in Spain.